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25 September 20226 minute read

Changes to Czech Beneficial Owners Registration Act

On 1 October 2022, an amendment to the Beneficial Owners Registration Act will come into force. The amendment will bring several changes that have been adopted to align Czech law with European regulations. Main changes include a new definition of beneficial owner and an extension of scope of the Act to include other organisations such as churches, political parties and associations of unit owners.

Current legislation

The current wording of the Czech law considers beneficial owners to be natural persons who are the ultimate beneficiaries of the profits generated by the corporation or who control the corporation through their ultimate influence.

In the current wording:

  • The ultimate beneficiary is any natural person who can directly or indirectly acquire more than a 25% share in a property benefit created by a legal person. The scope is quite broad. For example, the spouse of a shareholder of a corporation with a relatively large shareholding can become a beneficial owner. As a result of the community property, the other spouse can acquire the property value of the share belonging to the community.
  • A person with ultimate influence is any natural person who controls the business corporation. The indicator of such influence is considered to be a direct or indirect share in the voting rights, in particular if it is greater than 25%. The existing legislation is based on the reasoning that a certain size of the share is in principle indicative of the position of beneficial owner. But the person holding such a share does not have to be the beneficial owner: a person who holds a share in voting rights exceeding 25% does not have to be the beneficial owner if they do not control such legal person.

The Act in its current wording aims to identify individuals with actual decisive influence and those people who benefit to a significant extent from the legal entity. The amendment changes this concept.

Revised concept of legislation

A united definition of beneficial owner will now apply and the division between “ultimate beneficiaries” and “ultimate influencers” will be abolished. Under the new regulation, the beneficial owner of a corporation will be any natural person who directly or indirectly through another person or legal arrangement:

  • has an interest in the corporation or a voting interest of more than 25%,
  • has a right to a share of more than 25% of the profits, other their own resources or liquidation balance,
  • exercises a controlling influence in a corporation or corporations which, individually or jointly, have an interest in that corporation of more than 25%; or
  • exercises decisive influence in the corporation by other means.

It is still the case that the concept of beneficial owner is linked only to a natural person. Equally, there may be more than one beneficial owner. The element of finality of beneficial ownership is also preserved. The fundamental change is the introduction of a single characteristic of a beneficial owner, which is that the beneficial owner owns or controls the legal person or legal arrangement.

The range of persons that previously met the definition of final beneficiary is narrowed under the new definition. The beneficial owner will be only those persons who are entitled to a share of the profits more than 25%, not those who may have acquired such a share. The cases described above of the inclusion of the other spouse among the beneficial owners can no longer occur, as they have no right against the company directly or indirectly. Although the profits paid out form part of the community property, that does not, even by inference, give the other spouse a right to claim payment of those profits.

As for the former status of persons with ultimate influence, this circle is potentially expanding. In fact, the former concept of control is essentially divided into two separate conditions, i.e. holding a share of a certain size on the one hand, and exercising decisive influence on the other. It’s now sufficient for a person to hold a shareholding above 25%, without it being necessary to fulfil the material condition of control. So, any shareholding above the 25% threshold is sufficient to establish the position of beneficial owner.

Decisive influence means the ability of a person to control the decision-making of the highest body of the corporation, regardless of whether and based on what legal fact, directly or indirectly. This person is always the controlling person and may also be the person who can appoint or remove most of persons who are members of the statutory body of the corporation. So, like before, the possibility of exercising decisive influence is sufficient for the position of a material beneficial owner. Whether or not the exercise of decisive influence takes place is irrelevant.

Decisive influence will also play a significant role in indirect share ownership, and particularly in cases where shares in a corporation are held by several other corporations. It will now be necessary to identify the person exercising decisive influence in each corporation that holds a stake of more than 25% in a corporation further down the chain. To illustrate, consider Company A, in which Company B holds a 40% interest and Companies C and D each hold a 30% interest. Previously, only the beneficial owner of Company A would be the beneficial owner of Company B, by virtue of the presumption of control. Under the new arrangement, the beneficial owners of Company A will be those persons who exercise decisive influence in Companies B, C and D.

If the beneficial owner cannot be determined on the basis of the above criteria, or if the decisive influence is exercised by a legal entity that does not have a beneficial owner (e.g. the state), like before, any person in the top management of the corporation will be considered a beneficial owner. If a corporation has a substitute beneficial owner so designated, this (substitute) beneficial owner is also the beneficial owner of corporations in a subordinate relationship structure. And for these corporations a separate substitute beneficial owner is no longer designated. In practice a subsidiary will designate persons who are in the senior management of its parent company as its beneficial owners.

Extension of scope

The amendment aims, among other things, to increase transparency. The scope of the Act will be extended to entities that have not had a beneficial owner so far. These include churches, political parties and movements, branch organisations or associations of unit owners. A natural person who is entered in the register of persons as a member of their statutory body or a natural person in a similar position will automatically be entered in the register of beneficial owners as the beneficial owner of these legal entities. The exception will continue to apply to public legal entities such as schools, institutes or state-owned enterprises.


Despite the undeniable benefits of the amendment arising from clearer criteria and coverage of a wider scope of entities, the amendment will also result in a more formalised approach that automatically assigns the position of beneficial owner to certain persons, regardless of whether they can actually control or materially benefit from the legal entity.