An overview of the creation and purpose of the Public Sector Partners Register and the 2018 amendment to the Commercial Register Act, which introduced the requirement to record beneficial owner information in the Commercial Register as well. Find out how the two registers operate in parallel and why their interconnection is desirable.
Back in 2016, the National Council of the Slovak Republic approved a new so-called anti-shell company law. Act No. 315/2016 Coll. on the Register of Public Sector Partners (hereinafter referred to as the “Act on the Register of Partners”) entered into force together with the Act on Reminder Proceedings on February 1, 2017.
The primary purpose of this Act was to establish the Register of Public Sector Partners (hereinafter the “RPVS”), through which it is possible to determine who is the so-called ultimate beneficiary of an entity registered in the RPVS. Entities that do business with the state, subcontractors of such entities, or entities that receive funds from the state in various forms, e.g., in the form of subsidies or European Structural and Investment Funds. Simply put, these are entities that come into contact with funds from public sources. The minimum amount of these funds is set by law at more than 100,000 euros (one-time payment) or a total exceeding 250,000 euros in a calendar year (recurring payments). All entities that receive funds from public sources or apply for such funds must disclose their ownership structure through the RPVS down to the level of the ultimate beneficial owner.
The Act on the Register of Partners does not itself contain a legal definition of the term “ultimate beneficial owner,” but the provision of Section 2(1)(c) refers to a separate regulation. This regulation is Act No. 297/2008 Coll. on the Prevention of Money Laundering and the Prevention of Terrorist Financing and on Amendments to Certain Acts (hereinafter referred to as the “Act on the Legalization of Proceeds from Criminal Activity”). According to the first sentence of Section 6a(1) of the aforementioned Act, the beneficial owner is any natural person who actually controls or exercises control over a legal entity, a natural person—entrepreneur, or an asset pool, and any natural person for whose benefit these entities conduct their activities or business. In layman’s terms, the beneficial owner of a specific entity is a natural person who holds a statutory share in the entity’s capital, profits, or voting rights, or who otherwise controls the entity. It would be very difficult—or, in the worst case, impossible—to identify who the beneficial owner is if the RPVS did not exist.
In 2018, another—in our view, fundamental—change is taking place in the field of identifying the beneficial owner. On February 1, 2018, Parliament approved a government bill amending the Act on the Legalization of Proceeds from Criminal Activity and certain other laws. The main objective of the proposed bill is the transposition of Directive 2015/849 of the European Parliament and of the Council of the European Union of May 20, 2015 (hereinafter referred to as the “4th AML Directive”). The purpose of this Directive is, among other things, to prevent the use of the financial system for money laundering.
One of the amended laws is Act No. 530/2003 Coll. on the Commercial Register and on Amendments to Certain Acts. A new paragraph 3 is inserted after § 2(2) (the current paragraphs 3 through 8 will be renumbered 4 through 9 upon the amendment’s entry into force). The text of the newly inserted paragraph is 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 following identification data regarding the ultimate beneficial owner shall also be entered: first name, last name, birth number or date of birth if no birth number has been assigned, permanent address or other residence address, nationality, and type and number of identity document, as well as information establishing the status of beneficial owner pursuant to a special regulation. 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.”
In this provision, the term “beneficial owner” is understood within the meaning of Section 6a of the Act on the Legalization of Proceeds from Criminal Activity, and the “special regulation” referred to in the last sentence in fine refers to the Act on the Register of Partners.
In view of the new information to be entered in the Commercial Register, the rules for filing an application for entry in the Commercial Register are also amended, whereby a new second sentence is inserted after the first sentence of Section 5(2) of the Commercial Register Act. The wording of the amended paragraph will be as follows:
“An application for registration shall be filed on a form prescribed by a special regulation and must be accompanied by documents containing the information to be entered in the Commercial Register, and by documents evidencing the facts to be verified under this Act. Information on the ultimate beneficial owner pursuant to Section 2(3) shall be provided on the form prescribed by a separate regulation and shall not be supported by documents as referred to in the first sentence. If the applicant lists multiple business activities or operations in the application for initial registration, the applicant shall list first the business activity or operation that the applicant considers to be the principal one.”
Information on the beneficial owner entered in the Commercial Register shall not be disclosed, thereby amending the provision of Section 10(5) of the Commercial Register Act, which addresses the non-disclosure of a natural person’s birth number as information entered in the Commercial Register.
It follows from the above that when legal entities are entered into the Commercial Register, an additional piece of information will be recorded, namely information on the ultimate beneficial owner under the conditions and within the meaning of the cited provision and the Act on the Legalization of Proceeds from Criminal Activity. In effect, both registers—the Commercial Register and the RPVS—will operate in parallel, with both recording information on the ultimate beneficial owner.
The explanatory memorandum to the amending law states that this amendment creates the conditions for a legal bridge between source registers and the register of legal entities, entrepreneurs, and public authorities for the purpose of ensuring transparency of ownership of legal entities and storing information on the beneficial owner in a central register, as required by the 4th AML Directive.
The amendment to the Act takes effect on March 15, 2018; however, Article VII, which concerns the entry of data on the beneficial owner of legal entities into the Commercial Register, will not take effect until November 1, 2018. Finally, it should be noted that legal entities listed in the amended Section 2(3) of the Commercial Register Act and entered in this register by October 31, 2018, are required to file an application for the registration of beneficial owner information by the end of 2019.
In our opinion, it would be appropriate to link both registers (the Public Sector Partners Register and the Commercial Register) so that for entities already registered in the RPVS (and
for which the beneficial owner has already been identified), information on the beneficial owner is automatically transferred to the Commercial Register as well. This would not only prevent an administrative burden on the Commercial Register, but such a linkage of the registers would also result in cost savings regarding the identification and registration of the beneficial owner, as an entry in the RPVS would suffice.
