Discrepancies in the entries for beneficial owners in the Commercial Register and the Public Sector Partner Register can have significant legal and practical consequences for the entities concerned. In our practice, we are increasingly encountering situations where entrepreneurs and organizations are unsure who is currently registered as their beneficial owner, or they discover discrepancies between the data in the Commercial Register and the Public Sector Partners Register. This article builds on our previous post about the differences between these registers and provides practical answers to questions such as why these discrepancies arise, what their consequences are, and how to effectively resolve them.
In our previous article, we explained the difference between registering the ultimate beneficial owner in the Commercial Register and in the Public Sector Partner Register (see https://www.legalfirm.sk/sk/partner-verejneho-sektora/clanok/konecny-uzivatel-vyhod-v-akych-pripadoch-sa-identifikuje-a-registruje).
In our professional practice, however, we are increasingly encountering cases where an entity does not know (or does not know where and how to find this information) which individuals are registered as beneficial owners for that entity in the Commercial Register, or is unable to make a change to the beneficial owner’s entry in the Commercial Register, or discovers that a different beneficial owner is listed in the Commercial Register than in the Public Sector Partners Register, if the entity is also registered in the Public Sector Partners Register. Naturally, this raises the question of how such a situation could have arisen, what its potential consequences are, and, most importantly, how to resolve these discrepancies in the beneficial owner’s entry. The purpose of this article is to provide answers to these questions and offer practical advice on resolving these discrepancies.
In this context, it is also necessary to emphasize that, in our legal opinion, the obligations regarding the registration (and identification) of beneficial owners may often appear ambiguous and complicated in terms of time and cost, and, last but not least, they create an unpleasant administrative burden. However, it is important to take into account the fact that the obligation to identify beneficial owners and register them stems from European legislation governing the prevention of money laundering and the fight against terrorism, and provides a framework for transparency not only in business relationships.
General Obligation to Identify the Beneficial Owner
Act No. 297/2008 Coll. on the Prevention of Money Laundering and the Financing of Terrorism and on Amendments to Certain Acts (hereinafter also referred to as the “AML Act”) , Section 10a(1) defines the obligation that every legal entity that is not a public administration entity and a special-purpose association of assets without legal personality are required to identify their beneficial owner and to maintain and continuously update, in paper or electronic form, the identification data of the beneficial owner to the extent pursuant to Section 7(3) of the AML Act, data establishing the status of the beneficial owner pursuant to Section 6a(1) of the AML Act and data proving the status of the beneficial owner, if such data are not part of the verification document in the Public Sector Partners Register.”
This provision thus requires every entity concerned to identify (know) its beneficial owner and, at the same time, to maintain and continuously update identification data regarding that beneficial owner (this applies to entities required to be registered in the Commercial Register, as well as foundations, non-investment funds, and non-profit organizations providing services of general interest).
Legal basis for the registration of the beneficial owner
The legal framework governing the obligation to register the beneficial owner of a specific entity is contained in several legal acts:
- in Act No. 530/2003 Coll., the Act on the Commercial Register and on Amendments to Certain Acts (hereinafter also referred to as the “Commercial Register Act”)
- in Act No. 315/2016 Coll., the Act on the Register of Public Sector Partners and on Amendments to Certain Acts (hereinafter also referred to as the “Act on the RPSP”)
- in legal regulations governing the status of foundations, non-investment funds, and non-profit organizations providing services of general interest (however, for the purposes of this article, we will not address these regulations)
- Act No. 272/2015 Coll. on the Register of Legal Entities, entrepreneurs, and public authorities and on amendments to certain laws (however, active cooperation is not required here for the registration of the ultimate beneficial owner of the entity being registered)
Registration of the beneficial owner in the Commercial Register
The obligation to register the beneficial owner in the Commercial Register is established by the Commercial Register Act, specifically in Section 2(3) of the Commercial Register Act, which provides that that In the case of a legal entity that is neither a public administration entity nor an issuer of securities admitted to trading on a regulated market subject to disclosure requirements under a special regulation, an equivalent legal regulation of a Member State of the European Union or equivalent international standards, nor an entity registered in the register of public sector partners, the identification data of the ultimate beneficial owner shall also be entered in the Commercial Register, including the name, surname, birth number or date of birth if a birth number has not been assigned, permanent address or other residence address, nationality, and type and number of identity document, as well as data establishing the status of beneficial owner under a special regulation; Information regarding the type and number of the identity document is not entered in the Commercial Register if the person is a citizen of the Slovak Republic. The entry pursuant to the first sentence does not replace the obligation to enter the beneficial owner of a public sector partner in the register pursuant to a special regulation.
It follows from the above that the aforementioned registration obligation applies to every entity registered in the Commercial Register—with the exception of public administration entities, issuers of securities admitted to trading on a regulated market, and currently also excluding entities registered in the register of public sector partners.
Original Amendment
This obligation was introduced into the Commercial Register Act in 2019 through an amendment—Act No. 52/2018 Coll., amending Act No. 297/2008 Coll. on the
Prevention of Money Laundering and the Prevention
of Terrorist Financing and on Amendments to Certain Acts, as amended, and amending certain acts, which, in Article VII, amended the Commercial Register Act by adding paragraph 3 to the aforementioned Section 2 as follows: In the case of a legal entity that is neither a public administration entity nor an issuer of securities admitted to trading on a regulated market subject to disclosure requirements under a special regulation, an equivalent legal regulation of a Member State of the European Union, or equivalent international standards, the identification data of the ultimate beneficial owner shall also be entered in the Commercial Register, including the first name, last name, personal identification number or date of birth if no personal identification number has been assigned, permanent address or other residence address, nationality, and type and number of identity document, as well as data establishing the status of beneficial owner pursuant to a special regulation. The entry pursuant to the first sentence does not replace the obligation to register the ultimate beneficial owner of a public sector partner in the register pursuant to a special regulation .
It was also stipulated that legal entities referred to in Section 2(3) of the Commercial Register Act, as amended effective November 1, 2018, and entered in the Commercial Register by October 31, October 2018, are required to file an application for the registration of beneficial owner information by 31 December 2019 in accordance with Section 2(3) as amended effective 1 November 2018. Every entity registered in the Commercial Register was thus required to fulfill the obligation to register beneficial owners in the Commercial Register by September 30, 2019, and later, following a further amendment, by December 31, 2019.
Failure to register the ultimate beneficial owner in the Commercial Register within the statutory deadline, or incorrect or incomplete identification of the ultimate beneficial owner, was (and remains) subject to a fine of up to €3,310.
Further Amendment
However, it followed from the above that this obligation also had to be fulfilled by entities that already had the ultimate beneficial owner registered in the Public Sector Partners Register. This registration requirement was thus administratively burdensome for these entities (those that had already fulfilled their obligation to register in the public sector partner registry), which is why a wave of discontent arose against this legal provision, or rather the double registration of the ultimate beneficial owner. The legislature subsequently proceeded to amend the Commercial Code once again, specifically through Act No. 373/2018, amending Act No. 371/2014 Coll. on the resolution of crisis situations in the financial market and on amendments to certain laws, as amended, and amending certain laws of December 5, 2018, which inserted the words “nor entities registered in the register of public sector partners” after the word “standards” in Section 2(3) of the Act on Public Procurement. The amendment in this regard took effect on January 1, 2019.
It thus follows from the above that, in addition to public administration entities and issuers of securities admitted to trading on a regulated market, entities whose beneficial owners are registered in the Public Sector Partners Register.
However, prior to this amendment taking effect, the obligation to register beneficial owners in the Commercial Register also applied to entities registered in the RPVS from November 1, 2018, to January 1, 2019.
The Consequences of Two Amendments: Why Is It Becoming Complicated?
It follows from the above that two categories of situations, or two groups of entities registered in the Public Sector Partners Register, could arise with regard to the fulfillment of their obligation to register beneficial owners in the Commercial Register:
- entities that are registered in the Public Sector Partners Register and fulfilled the obligation to register the ultimate beneficial owner in the Commercial Register at the time when this obligation was established by Act No. 52/2018 Coll.
- entities that are registered in the public sector partner registry and have not registered their beneficial owners in the commercial register, as this obligation no longer applied to them as of January 1, 2019
regardless of the fact that the obligation to register the ultimate beneficial owner in the Commercial Register had to be fulfilled by December 31, 2019, and later within the extended deadline of December 31, 2020.
In light of the practical issues arising after a longer period of time has elapsed, we are now encountering the following problems:
- an entity has terminated its registration in the Public Sector Partners Register, yet does not have a beneficial owner registered in the Commercial Register, as this obligation did not apply to it, and subsequently failed to fulfill the obligation to register the ultimate beneficial owner in the Commercial Register after being removed from the Public Sector Partners Register (as a rule, the entity receives a notice regarding non-compliance with this obligation, e.g., from a bank, etc., or even from the Commercial Register when making another change in the Commercial Register) and needs to register the beneficial owner in the Commercial Register
- the entity does not know who is registered as the beneficial owner in the Commercial Register (it has not retained this information or it is not available to them for a specific reason, e.g., it cannot find it in its electronic mailbox, or it does not match publicly available data, e.g., from the Register of Legal Entities) and needs to record changes to the registered data on the beneficial owner in the Commercial Register
Change of beneficial owner upon a change in the registered data in the Commercial Register
If the entity has not fulfilled its beneficial owner obligations in the Commercial Register or the entry is not up to date or is incorrect, e.g., due to a change in the ownership structure (e.g., transfer of a business share, transfer of shares, or other changes in the company’s ownership or management structure), it is always necessary to consider the entry or harmonization of the entry in the Commercial Register and the identification of the beneficial owner, in light of the applicable obligation set forth in Section 10a of the AML Act. During the existence of a business entity, it often happens that changes made must also be recorded in the Commercial Register—e.g., a change in the business name, a change in the registered office, a change in the managing director, or a change in a partner. Some of these changes also result in a change in the beneficial owner, which must also be recorded in the Commercial Register. The situation is complicated by the fact that these changes in the company cannot be recorded in a single filing — changes to the registered information about the company must be made using the change form, and changes to the beneficial owner must be made using the change form for the beneficial owner. Furthermore, the entry of the beneficial owner in the Commercial Register is not public; and the identity of the entity registered as the beneficial owner, as well as the basis for such registration, can only be seen in the confirmation of the change registration; this information cannot be obtained from an extract from the Commercial Register (some data is visible in the Register of Legal Entities—however, this reflects only data from so-called source registers).
Our law firm is ready to provide you with comprehensive legal advice and assistance in registering beneficial owners in the Commercial Register and the Public Sector Partners Register. When resolving discrepancies and addressing administrative issues related to the registration of beneficial owners, our experts will work with you on an individual basis to help ensure compliance with all legal regulations.
