This article provides an overview of the most significant changes in Czech legislation that approach in 2018. In part one of this article we concentrate our attention on Czech Civil and Commercial law.
I. Civil and Commercial law
- A. The so-called technical amendment of the Civil Code (Act No. 460/2016 Coll., by which the Act No. 89/2012 Coll., the Civil Code, and other related acts are amended): this amendment became effective as a whole as of February 2017, nevertheless certain important legal concepts became effective as of 1 January 2018 and that as follows:
Re-introduction of pre-emptive right
- As of 1 January 2018, the Czech civil law re-introduced the pre-emptive right of co-owners which shall be applied in case of a transfer of a co-owner’s share in real estate (excluding a transfer between relatives and other close persons). If the co-owners do not achieve an agreement on exercise of the pre-emptive right, they have a legal right to buy out a share proportionate to the size of their existing share.
- The pre-emptive right shall be also applied in case of gratuitous transfers of shares. In such case the co-owners are entitled to buy out the share for a market price.
- A co-owner may waive his pre-emptive right with legal effects also for his legal successors. Such waiver has to be registered in the Cadastral Register (new provision Sec. 23 (1) (zb) of the Act No. 256/2013 Coll., on Cadastral Register).
Mandatory registration of trust funds
- As of 1 January 2018, the Czech Civil Code distinguishes between the foundation and the establishment of a trust fund. According to the new legal regulation, a trust is founded when a trustee accepts the authorisation to administer it and subsequently is established by its registration in the Trusts Register (except for cases when the trust is founded by making of will or testament, then the trust is established at the time of a decease of the testator and is registered subsequently).
- The new Trusts Register has been incorporated in the amended Act No. 304/2013 Coll., on Public Registers of legal entities and natural persons.
- Application for the trust registration shall be submitted by the trustee. The scope of registered data shall include: the name of the trust, its purpose, identification number, the date of its establishment and the date of its termination, details of the founder/s and of the trustee/s, and also number of the trustees and way of representation of the trust. The act also requires details of the beneficiary or how the beneficiary shall be determined. All above data shall form part of the trust statute.
- Existing trusts, established before 1 January 2018, must be registered within six months from the effective date of the new legal regulation, i.e. by 1 July 2018 at the latest. If the registration application is not filed until this date, the trust administration will be cancelled.
- A part of the amendment of AML-Act (Act No. 368/2016 Coll., by which the Act No. 253/2008 Coll., on the prevention of money laundering and terrorist financing, is amended), became effective as of 1 January 2018, specifically the part relating to the Register of the beneficial owners of legal entities.Register of the beneficial owners
- The amendment of the AML-Act also amends the Act No. 304/2013 Coll., on Public Registers of legal entities and natural persons, which introduced the Register of beneficial owners of legal entities and trust funds with effectiveness as of 1 January 2018.
- The new Register of beneficial owners shall be administered by the relevant register court, and that in respect of each registered legal entity and each registered trust fund.
- An application to register a beneficial owner shall be filed without any undue delay after becoming the beneficial owner.
- Data concerning the beneficial owner will not be open to the public, i.e. they will be kept in the non-public section of the Register. The data will be accessible only to the respective registered entity and via Internet also to the state authorities/persons determined by the Act (e.g., to Czech courts or criminal authorities and prosecutor’s offices).
- (v) Legal entities incorporated in the Commercial Register are obliged to register in the Register the relevant data about the beneficial owner within 1 year from the date of the effectiveness of the new legal regulation, i.e. till 1 January 2019. Legal entities incorporated in other Public Registers, including trust funds registered in the Trusts Register, have to register their beneficial owner in the Register of beneficial owners within 3 years from the effectiveness of the new legal regulation, i.e. by 1 January 2021. Direct sanctions for breach of this obligation are not set forth by the Act.
- Further, the Act No. 303/2017 Coll., which amends certain other acts in connection with cancellation of the public beneficial status, became effective as of 1 January 2018.
This Act also amends the Act No. 89/2012 Coll., Civil Code, and cancels the mandatory registration of the public beneficial status in the Public Register.
Therefore pursuant to the new legal regulation, legal entities are not obliged to register the public beneficial status in a Public Register.