Acting in concert and acting jointly are important legal institutions in the entire process of identifying and verifying the beneficial owner (hereinafter referred to as “BO”) of a specific entity (in our case, the identification of the beneficial owner of a public sector partner by an authorized person) within the meaning of Act No. 315/2016 Coll. on the Register of Public Sector Partners and on amendments to certain acts (hereinafter also referred to as the “Register Act”), in particular when assessing whether a specific natural person is or is not the KUV of a public sector partner on the basis of facts other than those clearly identifiable in proceedings conducted with professional care.
However, neither of these institutions is widely understood, even among experts. Their interpretation and application in practice often cause considerable complications or misunderstandings. At the same time, both are often the subject of legal debate. For this reason, the purpose of our article is to clarify these institutions so that the public can understand them, assess them, and apply them to the specific actions of the entity concerned.
The definition of the term KUV and the definition of the facts that establish the status of KUV of a specific entity – a public sector partner – are not directly contained in the Act on the Register, but are regulated in a separate regulation, namely Act No. 297/2008 Coll. on the protection against the legalization of proceeds from criminal activity and on the protection against terrorist financing and on amendments to certain acts, as amended (hereinafter referred to as the “AML Act”).
Within the meaning of Section 6a of the AML Act, quote:
"(1) The ultimate beneficiary is any natural person who effectively controls or supervises a legal entity, a natural person who is an entrepreneur, or an association of assets, and any natural person for whose benefit these entities carry out their activities or business; ultimate beneficiaries include, in particular,
a) in the case of a legal entity that is not an association of assets or an issuer of securities admitted to trading on a regulated market subject to disclosure requirements under a specific regulation, equivalent legislation of a Member State of the European Union or another state, which is a party to the Agreement on the European Economic Area (hereinafter referred to as a “Member State”) or equivalent international standards, a natural person who
1. has a direct or indirect share or a total of at least 25% of the voting rights in a legal entity or its registered capital, including bearer shares,
2. has the right to appoint, otherwise establish or dismiss the statutory body, management body, supervisory body or control body of a legal entity or any of its members,
3. controls a legal entity in a manner other than that referred to in points 1 and 2,
4. has the right to economic benefits of at least 25% from the business of the legal entity or from its other activities,
b) in the case of a natural person who is an entrepreneur, a natural person who has the right to economic benefits of at least 25% from the business of the natural person who is an entrepreneur or from its other activities,
c) in the case of an association of assets, a natural person who
1. is the founder or establisher of the association of assets; if the founder or establisher is a legal entity, a natural person under point a),
2. has the right to appoint, otherwise designate or dismiss the statutory body, management body, supervisory body or control body of the property association or a member thereof, or is a member of a body that has the right to appoint, otherwise designate or dismiss these bodies or their members,
3. is a statutory body, management body, supervisory body, control body or member of these bodies,
4. is the recipient of at least 25% of the funds provided by the asset association, if the future recipients of these funds have been determined; if the future recipients of the asset association's funds have not been determined, the group of persons who have a significant benefit from the establishment or operation of the asset association shall be considered the ultimate beneficiaries.
(2) If no natural person meets the criteria set out in paragraph 1(a), the members of the senior management of that person shall be considered the ultimate beneficiaries; a member of the senior management shall be considered to be a statutory body or members of a statutory body.
(3) The ultimate beneficiary is also a natural person who does not meet the criteria under paragraph 1(a), (b) or (c) of the second and fourth points, but who, together with another person acting in concert or in concert with them, meets at least some of these criteria.
In accordance with the above provision of Section 6a(3) of the AML Act, the ultimate beneficiary is also a natural person who does not meet the criteria under paragraph 1(a), (b) or (c) of the second and fourth points of the cited Section 6a of the AML Act, but together with another person acting in concert or in concert with that person, meets at least some of the following criteria.
The authorized person in the process of identifying KUV, as well as in the process of verifying the identification of KUV of a public sector partner, is therefore obliged to verify and assess whether there is any other natural person (other than the persons identified within the meaning of Section 6a(1) and (2) of the AML Act) who does not meet the criteria for identification of KUV (e.g. has a share in voting rights of less than 25%), but who, together with another person acting in concert or in concert with them, meets at least some of these criteria. 1 and 2 of the AML Act) who does not in itself meet the definition criteria for KUV identification (e.g. has less than 25% of the voting rights), but by acting in concert or jointly with another person meets at least some of the criteria for KUV identification.
Acting in concert may be considered to be an act within the meaning of Section 66b of Act No. 513/1991 Coll. Commercial Code (hereinafter also referred to as the “Commercial Code”), which defines it as an act aimed at achieving the same objective carried out between:
- a legal entity and its partners or members, statutory body, members of the statutory body, members of the supervisory body, employees of the legal entity who are under the direct management of the statutory body or its member, proxy, liquidator, the bankruptcy trustee, the liquidator of this legal entity and persons close to them, or between any of the above persons,
- persons who have concluded an agreement on the exercise of voting rights in one company in matters relating to its management,
- the controlling entity and the controlled entity or between entities controlled directly or indirectly by the same controlling entity.
In relation to the identification of KUV in a public sector partner in connection with the provisions of Section 66b(a) of the Commercial Code, this shall refer to a relationship between partners in a commercial company who have concluded a partnership agreement which is enshrined in the provisions of Section 66c of the Commercial Code. In this case, it will therefore be any written agreement between the partners of the company establishing the manner and conditions for the exercise of rights related to participation in the company, the manner of exercising rights related to the management and administration of the company, the conditions and scope of participation in changes to the registered capital, and ancillary agreements related to the transfer of participation in the company (e.g., rights and obligations in the event of joint sale – the so-called “TAG ALONG RIGHT”). As this is a demonstrative list, such agreements may also cover other rights and obligations of the partners arising from their participation in the company, provided that they do not conflict with the legal order or good morals. However, the relevant provisions in the shareholders' agreement must always be of a nature aimed at achieving the same objective; the agreement itself, without fulfilling this condition, does not constitute concerted action. This point does not apply to the exercise of voting rights under Section 66b(b) of the Commercial Code.
In relation to the identification of KUV in a public sector partner in connection with the provisions of Section 66b(b) of the Commercial Code, this will be a relationship between partners in a commercial company who have concluded a written agreement on the uniform exercise of voting rights in a public sector partner. Due to the fact that the legislator has regulated the exercise of voting rights separately in the relevant point, it follows that only the relationship itself (e.g. the property participation of partners in the controlling company of the public sector partner) between the persons expressly listed in letter a) does not constitute concerted action. Conduct in concert must always be accompanied by other legal conditions required by law.
In relation to the identification of KUV in a public sector partner in conjunction with the provisions of Section 66b(c) of the Commercial Code, the point in question is not applicable. It is assumed that the controlled entity within the meaning of this point should be a public sector partner, and therefore the point in question is irrelevant.
Conduct in concert must therefore always be understood as conduct that is clearly and unambiguously aimed at achieving the same objective on the basis of a written agreement, and always between the entities exhaustively listed in the legal regulation.
Acting in concert is defined in the Interpretative Opinion of the Public Procurement Office No. 1/2016 as the conduct of natural persons who, although they do not individually meet the criteria for determining the final beneficiary under Section 6a(1) of Act No. 297/2008 Coll. However, on the basis of, for example, an agreement or contract on joint action, these two or more persons have a joint position in the business, management or control of a legal entity or natural person (entrepreneur) to the extent that a natural person meets the criteria for the final beneficiary specified in Section 6a(1) 1 (see Explanatory Memorandum to Act No. 241/2019 Coll.)
Such joint action by two or more natural persons has the same effect as if they were a single natural person who is the ultimate beneficiary pursuant to Section 6a(1) of the AML Act. This situation arises, for example, if six natural persons who individually do not meet the criteria of the ultimate beneficiary specified in Section 6a(1) 1) of the AML Act, but under the condition that there is an agreement on their joint action, exercise their voting rights in this legal entity in an agreed manner, and the total share of these six natural persons (the sum of all their direct or indirect shares) in the voting rights of the legal entity is at least 25%. The public sector partner shall therefore also enter these six natural persons in the public sector register. However, contrary to the aforementioned interpretative opinion, the number of such persons acting jointly is not limited to 10, i.e. there may be more than 10 persons acting jointly. Joint action will occur, for example, in cases where several persons are represented by one person, but the mere participation of persons in a single company that controls a public sector partner as a controlling person does not automatically constitute such action. Such an interpretation would be contrary to the purpose of examining the structure of a public sector partner and would also cause a number of application problems. This also follows from the fact that the Commercial Code, for example in Section 186a, prohibits agreements "by which a shareholder undertakes to the company or one of its bodies, or a member of its bodies to comply with the instructions of the company or one of its bodies on how to vote, to vote in favor of proposals submitted by the company's bodies, or to exercise the right to vote in a certain manner, or not to vote in return for advantages provided by the company." The exercise of the rights of a partner or shareholder is independent, unless there is another agreement on joint action by the persons concerned or another form of property participation from which economic benefits arise, such as a standard commercial company (e.g. a trust fund under Sections 1448-1474 of the Czech Civil Code).
Joint action will be taken in particular in the case of representation of several partners or shareholders on the basis of a joint agreement or in the form of a permanent power of attorney resulting in joint action (e.g. a special purpose company for the purpose of joint investment with the simultaneous existence of an agreement on the representation of the persons concerned, so-called crowdfunding, or also, for example, an agreement on power of attorney on the basis of which several persons are jointly represented by one person). Joint action also occurs in cases of joint business shares (the term joint business share is understood as a business share belonging to several natural and legal persons. In this case, the business share cannot be divided. Each of the co-owners of a joint business share participates in the exercise of the rights and obligations that belong to them according to the size of their share in the company).
Joint action must therefore always be understood as action where the joint exercise of rights by several entities is clearly and unambiguously recorded in a demonstrable form, through one or more persons, while fulfilling the condition that the joint action through the joint exercise of rights by several entities must be of a permanent nature.
