The Czech parliament recently passed the New UBO Act. Effective from 1 June 2021, the Act requires all companies to register their ultimate beneficial owners (UBOs) in the Czech UBO Register. The Act introduces crucial changes to the legal framework regulating the Register and significant sanctions for non-compliance.
The Act:
- Prohibits a company from distributing profits (directly or indirectly) to any UBO not registered in the UBO Register
- Prohibits a company from distributing profits to any shareholder that has not registered its UBO
- Prohibits a UBO either directly or indirectly from exercising its voting rights at general meetings or pass resolutions as a sole shareholder if it is not registered in the Register
- Prohibits any shareholder that has failed to register its UBO(s) either directly or indirectly from exercising their voting rights at general meetings or pass resolutions as a sole shareholder
- Decrees that the state will not enforce the rights and obligations arising from legal actions designed to conceal the identity of a UBO and which began during the period when the UBO was not registered in the Register.
All statutory bodies must adhere to the above-listed rules.
Companies that registered their UBOs under the current legislation must review their registrations for compliance with the New UBO Act and make any necessary amendments by the end of November 2021.
Companies that have not yet registered their UBOs can still do so under the existing legal framework. If the UBO is registered after 1 June 2021, the registration must be undertaken following the New UBO Act and without undue delay.
Penalties for non-compliance
The New UBO Act introduces new direct sanctions, including fines of up to CZK 500,000 (approx. EUR 19,000). More importantly, failure to comply with UBO registration requirements significantly impacts the corporate governance of companies and exposes statutory bodies to new risks and liabilities.
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