Records of true ownership of legal entities

An amendment was adopted to the AML Act and the Act on Public Registers within the on-going effort to combat money laundering that requires all legal entities registered in a public register to report their real owners to the pertinent court of registration. Legal entities registered in the commercial register, i.e. commercial corporations and associations, must report their real owners by 1 January 2019, while other legal entities registered in public registers, including trust funds registered in trust fund records are subject to the same registration by 1 January 2021. Unfortunately we have to say that the legislative definition of these new obligations is once again a bit convoluted, something which we’ve gotten used to saying over the past 5 years.

In fulfilling these obligations, the primary aspect to be resolved is who is the real owner of a legal entity. The real owner must always be a natural person, but they may not necessarily be entered or recorded in the relevant register. The same applies to the natural person who actually exercises decisive influence. If no such natural person can be identified using all lawful means, then the natural person who is a member of its statutory body or a representative of the legal entity in such body or a natural person with similar standing to such member of a statutory body stands in for such real owner. A typical example of such a situation is a Czech joint-stock company, with a shareholder that is an American company traded on an American stock exchange.

Records of true ownership are not published. Remote access to these records will be granted to specific state authorities (such as the tax office and police) and other entities under conditions specified in the AML Act (such as banks). Data from these records may be obtained via a request filed by anyone who demonstrates a legal interest in preventing specific crimes (such as laundering the proceeds of criminal activity).

The courts of registration perform the actual entries into the records based on petitions filed by the respective legal entities. Notaries are also authorised to make direct entries into these records.

It is necessary to emphasise that the records are not connected to other databases (such as the register of addresses), which makes it impossible, at least for the time being, to use data already provided to the state. On the other hand, there are specific risks associated with connecting the state’s databases, for instance under the EU Data Protection Regulation (GDPR).

If the real owners are not reported, the court may call on such legal entity to fulfil this obligation or may dissolve the company if it fails to remedy the situation.