Beneficial Owners in the Czech Republic

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The beneficial owner (hereinafter referred to as "BO") in the Czech Republic is particularly significant in the fight against money laundering. Generally, the purpose of identifying a BO is to enhance the transparency of legal entities. Beneficial owners are primarily scrutinized in connection with public procurement, subsidies, or the granting of various licenses.

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Who is a beneficial owner in the Czech Republic? 

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A BO is any natural person who directly or indirectly owns or controls a legal entity. A beneficial owner is defined as any natural person who directly or indirectly:

• owns more than 25% of:
  • the share capital; or
  • voting rights in the company; or
• is entitled to a share of profits exceeding 25%; or
• exercises ultimate control in a corporation that owns more than a 25% stake in the given legal entity; or
• exercises ultimate control over the company for other reasons. Other reasons may arise, for example, from the articles of association.

It is therefore possible for a legal entity to have more than one beneficial owner – including persons who are "important" (in terms of a significant stake) but do not exercise effective control in practice.

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What does ultimate/effective control mean?

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Ultimate control (or influence) is exercised by a natural person who:

• acts at their own discretion to ensure that the company's decision-making aligns with their will, i.e., makes fundamental strategic decisions affecting the business,
• makes significant decisions, including those concerning cash flows, assets, the appointment and removal of persons deciding on these matters – especially members of the statutory body – profit distribution, approval of transfers, etc.,
• is able to appoint or dismiss the majority of persons who are members of the statutory body of a legal entity or achieve their replacement,
• is able to block certain decisions (i.e., negative exercise of will).

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Substitute Beneficial Owner

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If all options for identifying the beneficial owner according to the law have been exhausted and there is no suspicion of inaccuracy, the members of the statutory body of the ultimate parent company shall be registered as a substitute solution.

The Substitute Beneficial Owner ensures the day-to-day or strategic management of the ultimate parent company's activities.

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Register of Beneficial Owners

The register is available on the Ministry of Justice website.

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Who has access to the Register of Beneficial Owners of the Czech Republic?

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Publicly available data include:

• name, address, and date of birth (month, year),
• specification of the beneficial owner's status,
• information on direct or indirect interest,
• date of acquisition of status.

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Full data can be obtained by the following individuals and institutions:

• the beneficial owner in person,
• the applicant for registration,
• a notary,
• grant providers,
• authorities performing AML checks,
• the tax office, banks, and other institutions.

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What is the deadline for registering beneficial owners in the Czech Republic? 

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Registration or data update must be carried out without undue delay (usually within 15 days) in the following cases:

• the company has not yet registered the beneficial owner,
• beneficial owner data has changed,
• the ownership structure has changed,
• a new company is being registered in the commercial register.

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What are the consequences of incorrect or missing registration in the BO register? 

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Proceedings for Discrepancies:

These are conducted by the registry court, and their purpose is not punishment, but the correction of errors in the register. This procedure can be initiated by a public authority or, for example, a bank or an auditor. If a note about a discrepancy is published, it reduces the company's credibility.

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Sanctions and Penalties: 

A fine of up to CZK 500,000 may be imposed for failing to register the UBO or for providing outdated UBO data.

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Private Law Consequences: 

These consequences arise regardless of court proceedings, specifically if: 1. the ultimate beneficial owner is not registered at all, or 2. the wrong person is registered.

These consequences include:

1. Invalidity of contracts aimed at hidden company management
2. Suspension of dividend payments
3. Loss of shareholders' voting rights

If voting rights were exercised despite this, the decisions made are invalid.

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Other Consequences:

• inability to conclude certain contracts,
• banks may refuse a loan or block an account,
• inability to participate in public procurement,
• loss of credibility.

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