Category: Czech Republic

On 1 June 2021 a new Act No. 37/2021 Coll., on Registration of Ultimate Beneficial Owners (the “Act”), which significantly changes the rules for identifying and registering ultimate beneficial owners, will become effective. These changes are a result of EU harmonisation in the field of anti-money laundering based on the Fifth AML Directive (Directive (EU) 2018/843 of the European Parliament and of the Council).

Who does the obligation to register an ultimate beneficial owner apply to?

With a few exceptions concerning mostly state companies, the obligation to register an ultimate beneficial owner in the Register of Ultimate Beneficial Owners applies to all companies registered in the Czech Commercial Register and trust funds registered in the Czech Register of Trust Funds.

What is the new definition of an ultimate beneficial owner?

The Act introduces some new terminology with respect to the identification of an ultimate beneficial owner. Under the Act, an ultimate beneficial owner is each individual (natural person) that is an ultimate recipient or person with ultimate control.

An ultimate recipient is a person who can directly or indirectly gain more than 25 % of the overall beneficial interest of the company (i.e. in the form of a share in profit, other equity or proceeds of liquidation) and does not pass it on further.

A person with ultimate control is any individual considered as a controlling person under the Business Corporations Act. That an individual is a person with ultimate control is indicated by its direct or indirect share in voting rights that significantly exceeds the share in voting rights of other persons (in particular if the share is bigger than 25 %).

Who will newly be registered if no ultimate beneficial owner can be identified?

If no ultimate beneficial owner exists or can be identified based on the above-mentioned indicators or presumptions, the company is newly obliged to register as ultimate beneficial owners all natural persons in the top management (i.e. usually statutory bodies) of the last parent company in the group’s structure.

On the contrary, the current legislation effective until 1 June 2021 in such a case prescribes the obligation to register the members of the statutory body of the registering company.

What documentation is necessary for the registration?

The registration is performed based on the application submitted on a special form provided by the Ministry of Justice.

The following documents are to be submitted with the application:

• documents supporting the identity of the ultimate beneficial owner in case of foreign nationals (e.g. a copy of an identification card or passport, or an excerpt from the foreign register of inhabitants or an excerpt from the foreign register of ultimate beneficial owners);

• documents supporting the position of the ultimate beneficial owner or structure of the relations (e.g. a shareholders list, decision on the payment of profit, excerpt from the foreign commercial register or foreign register of beneficial owners, etc.); only provide that these information cannot be supported by other means, the documents can be substituted by an affidavit of the registering company or the ultimate beneficial owner.

In addition to the above documents, we also recommend submitting an overview of the structure of the relations (e.g. in the form of an organisational structure).

What are the possible sanctions in case of non-compliance with these obligations?

Contrary to the previous legislation, the Act introduces significant sanctions for non-compliance with new registration obligations. We believe it is important to draw your attention to:

• the fine of up to CZK 500,000 (approx. EUR 19,000), which may be imposed on a company for non-compliance with the registration obligation, and possibly also on its ultimate beneficial owner for failure to cooperate with the registration procedure; and

• the inability to pay out the company’s profit and exercise voting rights at the company’s general meeting.

By when must the ultimate beneficial owner be registered under the Act?

The registration must be performed without undue delay after 1 June 2021. It is also possible to do it now, however, and taking into account the lengthiness of the process of receiving all the necessary documentation (especially for companies with a complicated ownership structure), we recommend starting to prepare for the registration as soon as possible.

Companies that registered their ultimate beneficial owners in line with the deadlines in the current legislation and whose registration does not comply with the requirements of the Act, have a prolonged deadline for registration of their ultimate beneficial owner until 1 December 2021. It is recommended that these companies verify as soon as possible if the registered information complies with the new requirements.

For the sake of completeness, we also point out the possibility of so-called automatic registration for some companies, i.e. automatic transfer of information to the Register of Ultimate Beneficial Owners from another public register (especially the Czech Commercial Register). Automatic registration will apply to companies whose ultimate beneficial owner can be clearly determined from the Czech Commercial Register (typically joint stock companies with one shareholder who is a natural person or limited liability companies with shareholders who are natural persons with a share exceeding 25 %).

Conclusion

The Act introduces significant changes not only with respect to the identification of ultimate beneficial owners but also with respect to the sanctions that can be imposed for non-compliance with the registration obligations. Due to the relatively strict financial sanctions and possible legal consequences in the form of restrictions on paying out profit or exercising voting rights, we recommend that all companies familiarise themselves with the new legislation and secure that the registration complies with the requirements of the Act.

By Monika Voldanova, Attorney at Law, and Rudolf Bicek, Attorney at Law, Schoenherr

Havel & Partners has advised shareholders Tomas Rutrle, Martin Lips, Yvona Parmova, Martin Slama, and Libor Malek on their sale of IT company Komix to the Cleverlance Group, a subsidiary of the Aricoma Group. Dunovska & Partners advised the buyers on the deal.

Komix will continue with the participation of its existing management team.

Havel & Partners’ team included Partner Vaclav Audes, Counsel Pavel Nemecek, Senior Associates Tomas Navratil and Roman Svetnicky, and Associate Josef Bouchal.

Dunovska & Partners’ team included Partner David Urbanec and Attorneys Michal Konuch and Jindrich Busa.

Dentons has appointed Petr Zakoucky as Czech Republic Managing Partner, replacing outgoing MP Michal Hink, who is leaving Dentons to become Investment General Counsel at the Heimstaden real estate company.

Zakoucky, who has been a partner at Dentons since 2017, will continue to lead the firm’s Prague Energy and Corporate and M&A practices. According to the firm, he has 15 years of experience advising on M&A transactions, competition, regulatory, and litigation matters, primarily in the energy, oil and gas, mining, and infrastructure sectors. He is a graduate of the Charles University in Prague and has LL.M.s from the Eberhar-Karls-Universitat, in Tubingen and Pallas, in Amsterdam. Prior to joining Dentons, he spent over a year with White & Case and over 11 years with Clifford Chance.

“I am excited to take the helm and help Dentons solidify its position as a top law firm on the Czech market,” Zakoucky said. “Our priority will be to maintain and build quality client relationships in our established practice areas, while also investing in expanding our capabilities in capital markets, litigation and technology, media and telecommunications. Given Dentons’ unmatched global coverage, we are well prepared to help our booming Prague-based clientele with their global expansion, as well as international companies with their cross-border transactions and operations.”

“Our Prague office, which is among the leading international law firms in the Czech market, is a source of pride to us at Dentons,” said Tomasz Dabrowski, CEO of Dentons Europe. “I am confident that under Petr’s very capable leadership, the office will continue to grow and thrive. I would also like to thank Michal Hink for his immense contribution to our Firm and our clients over the last 17 years. We wish him all the best, and hope to continue working with him as a valued client.”

CMS has advised a consortium of Vinci and Meridiam on its public-private partnership contract for the construction of the D4 motorway in the Czech Republic, the country’s first road PPP. Vinci and Meridiam each have a 50% stake in the project, and EUR 474 million of financing has been obtained.

According to CMS, “the consortium won the 28-year contract in December 2020, which was then signed with the Czech Transport Ministry in February 2021. The project entails designing, financing, building, operating, and maintaining a new 32-kilometer motorway and the widening of an existing 16-kilometer section of road to two lanes in each direction. The new motorway will provide an improved road connection between Prague and rural South Bohemia.”

CMS’s team included, in Prague, Partners Lukas Janicek, Pavla Kreckova, Senior Associates Lenka Krutakova, Marketa Frankova, and Associates Lukas Vymola, Lenka Kucerova, Hana Ricankova, and Jan Gerych, and in London, Partner Robert Gray, Counsel Stephanie Flynn, and Senior Associate Toby Commander.

Editor’s note: After this article was published, Kinstellar announced that it and Linklaters advised lenders Ceskoslovenska Obchodni Banka, KfW IPEX, DZ Bank, NordLB, MEAG, SMBC, Siemens Bank, UniCredit, and Societe Generale on the deal. Kinstellar’s team in Prague consisted of Partner Kamil Blazek, Counsels Martina Brezinova and Jan Lehky, Managing Associate Michal Forytek, and Junior Associates Alice Radvanovska, Denisa Simanska, and Igor Sebo.

The Linklaters team consisted of, in London, Partner Ian Andrews and Managing Associate Ryan Ayrton, and in Paris, Partner Francois April and Managing Associate Nathanael Caillard.

In addition, Clifford Chance announced that it had advised Meridiam and Vinci on the financing aspects of this deal. Clifford Chance’s team included Partner Daniel Zerbib, Counsels Chloe Desreumaux and Fabien Jacquemard, and Associates Sophie Laporte and Nina Yoshida.

White & Case advised the Czech Ministry of Transport. That firm’s team included, in Prague, Partner Vit Stehlik and Associates David Wilhelm, Renata Ryglova, and Jan Voborsky; in Bratislava, Partner Of Counsel Marek Staron and Counsel Peter Hodal; and in London, Partner Caroline Miller Smith.

Weinhold Legal, working alongside global counsel Kirkland & Ellis, has advised Lionbridge AI on the Czech legal aspects of its USD 935 million sale to Canadian telecom company Telus. Shearman & Sterling was global counsel to Telus.

Lionbridge is a global provider of marketing, testing, and globalization services. The company is headquartered in Waltham, Massachusetts, and operates a network of more than 500,000 experts in over 5,000 cities around the world.

Weinhold Legal’s team included Managing Partner Daniel Weinhold and Attorneys-At-Law Tomas Cermak and Eva Prochazkova.

Kirkland & Ellis’s team was led by Los Angeles-based Transactional Partners Tana Ryan and Michele Cumpston, Chicago-based Tax Partner Lee Morlock, and Los Angeles-based Tax PartnerJosh McLane.

Shearman & Sterling’s US-based team consisted of Partners Scott Petepiece, Jessica Delbaum, Alan Goudiss, Sean Skiffington, John Beahn, Lona Nallengara, Mallory Brennan, Doreen Lilienfeld, and Jordan Altman, Counsels Jonathan Cheng and Sara Ashall, and Associates Andreas Piepers, Melisa Brower, Noni Nelson, Sonia Khandekar, and Maeve Wilson.

Havel & Partners, acting on behalf of T-Mobile Czech Republic, has persuaded the Regional Court in Brno to annul a decision of the Czech Competition Authority regarding T-Mobile Czech Republic’s entrance into interconnection agreements with other mobile operators.

According to Havel & Partners, the Czech Competition Authority found the agreements to be anti-competitive. However, according to the firm, the court annulled the Competition Authority’s decision, thus ending a twenty-year-long dispute.

Havel & Partners’ team included Partner Robert Neruda, Counsel Ivo Simecek, and Associate Petra Pipkova.

Clifford Chance has advised the Film Servis Festival Karlovy Vary, which organizes the Czech Republic’s annual Karlovy Vary International Film Festival, on a strategic investment into the entity by the Rockaway Capital Group.

According to Clifford Change, “the partnership follows up on previous cooperation of KVIFF and online television MALL.tv (the producer of the first Czech series to receive an Emmy Award), [which belongs] to the Rockaway portfolio, and] which has been a partner of the festival for four years already.” According to the firm, “the organizers of the KVIFF now want to focus on developing the KVIFF.TV platform, which will feature art films and exclusive content during the festival. They also want to broaden existing distribution activity through a strategic partnership with Aerofilms and develop projects and programs focused on providing young and talented creators with a base for their growth as filmmakers. At the same time, they want to utilize the potential of Karlovy Vary and the entire region to produce other cultural and social projects and events.”

Clifford Chance’s team was led by Prague Partner David Kolacek and Counsel Aneta Disman, supported primarily by Junior Lawyer Ondrej Dolensky.

On June 10th, 2020, the so-called big conceptual amendment to the Labor Code was passed. The amendment transposes European law (the directive concerning the posting of workers in the framework of the provision of services) into the Czech legal order, primarily aiming at facilitating the establishment of employment relationships. One of the major changes introduced by the amendment, which will affect virtually every employee, with effect from 1.1.2021, is the new leave entitlement concept. This concept of leave calculation in the future should be fairer on employees, especially on those whose working hours are unevenly scheduled into shifts.

So how will leave be calculated now? If an employee works for an employer for the whole year, i.e. 52 weeks, he/she will be entitled to leave amounting to fixed weekly working hours multiplied by the length of leave to which the employee is entitled by the employer. If the employee does not work full-time for the employer, but a shorter weekly working time is agreed, he/she will be entitled to hours of leave corresponding to shorter weekly working hours (i.e. having agreed a 30-hour working week, with entitlement to 5-week leave, the employee can take 30 x 5 = 150 hours of leave).

Since the calculation of leave should now be based on weeks worked, not months worked, an employee that starts working in the middle of the calendar month, after fulfilling the condition of working for 4 working weeks for the employer, will be entitled to 1/52 of leave for each week during which he/she has worked for the agreed weekly working time.

Similarly, if the employee’s length of fixed weekly working time is changed during the calendar year, he/she is entitled in that year to leave equal to the length of individual periods with different lengths of agreed weekly working time or with shorter weekly working time (meaning that having worked 26 weeks with 40-hour weekly working time and 26 weeks with 30-hour weekly working time, the employee is entitled to 40 (hours weekly) / 52 (weeks in a year) x 26 (weeks worked) x 5 (weeks of leave) = 99,95 hours for the first half of the year, and 30 (hours weekly) / 52 (weeks in a year) x 26 (weeks worked) x 5 (weeks of leave) = 74,95 hours for the second half of the year, i.e. in total 174,9 hours (rounded up to 175 complete hours) of leave for the given year.

Be careful of reductions of leave! Thus far, employees’ leave could be reduced by 1/12 for the first 100 shifts missed due to obstacles to work, which for the purposes of leave calculation were not counted as the performance of work. However, the amended wording of the Act now recognizes only one reason for reducing an employee’s leave – the unexcused missing of a shift.

The changes brought about by the amendment will also concern the transfer of leave. All leave and the taking of leave to which the employee will be entitled until the Labor Code Amendment comes into force (i.e. leave for the year 2020 and unused leave from previous years) is to be governed by the current legislation even in the year 2021. Thus, in essence the employee must take leave during the same calendar year in which he/she became entitled to it. Due to obstacles on the part of employee, or, as the case may be, due to urgent operational reasons, it is possible to transfer unused leave to the next calendar year, but this should only happen under exceptional circumstances. The unused leave for 2020 is to be taken as before, in days, if transferred to 2021. Only after all the remaining unused leave transferred to 2021 is taken may the employee take leave to which he/she becomes entitled in 2021. The latter is to be taken in hours. From 2021 to 2022, employees will continue to transfer unused hours of leave on the basis of written requests and taking into account their legitimate interests. Only the additional leave to which they are entitled in the given calendar year can be transferred at their request, namely the leave exceeding the legal period of 4 weeks, or 6 weeks in the case of pedagogical and academic staff.

By Martin Murad, Senior Associate, Adela Uhrinova, Junior Lawyer, and Zuzana Jurova, Paralegal, Rowan Legal

Allen & Overy has advised Cordiant Digital Infrastructure Limited on the acquisition of Ceske Radiokomunikace a.s., a telecommunications, media, and technology infrastructure and services provider in the Czech Republic, from funds managed by Macquarie Asset Management. White & Case reportedly advised the sellers on the deal.

According to Allen & Overy, “the transaction is the first acquisition by CDIL, which has been established to invest in the core infrastructure of the digital economy – data centers, fibre-optic networks, and broadcast and telecommunication towers.” According to the firm, “it follows on [the] IPO of CDIL which occurred in February this year.”

Allen & Overy’s team was led by London-based Partner Richard Evans and Counsel Jan Skuhravy and Prague-based Partner Prokop Verner. The firm’s team also included Czech-based Senior Associates Jakub Cech, Jana Vydrova, and Ivana Halamova Dobiskova and Lawyers Jan Spousta, Kristyna Tranova, and Lucie Cerna, London-based Senior Associate Mark Spinney and Trainee Juliette Aliker, and Brussels-based Counsel Charles Pommies.

As of January 1, 2022, a deposit system for disposable beverage packaging will be introduced in Slovakia. Some disposable beverage packaging manufacturers and distributors will therefore have new obligations.

On December 1, 2019, Act No. 302/2019 Coll. on the deposit for non-refillable beverage containers (the “Deposit System Act”) partially entered into force. So far, only the provisions on establishing the deposit system are effective. Provisions on materially introducing the deposit system come into force on January 1, 2022.

Which Disposable Beverage Containers are Subject to the Deposit?

The deposit system will apply to single-use beverage containers placed on the market in the Slovak Republic. The following single-use beverage containers will be subject to the new deposit system rules: plastic packaging (bottles) with a filling volume between 0.1 and 3 liters; and metal packaging (cans) with a filling volume of between 0.1 and 3 liters.

Administrator of the Deposit System

In December 2020, the Slovak Ministry of Environment appointed a deposit system administrator to coordinate the functioning and financing of the system. Prior to implementing the deposit system, the deposit system administrator will enter into a performance contract with single-use beverage packaging manufacturers and distributors. The Deposit System Act regulates which single-use beverage packaging distributors are required to enter into performance contracts with the deposit system administrator (i.e., not every such distributor has to enter into a contract). Disposable beverage packaging distributors who do not have this obligation can voluntarily register with the deposit system (see below).

Obligations of Single-Use Beverage Packaging Manufacturers and Distributors

The deposit system entails new obligations for single-use beverage packaging producers and distributors. Each non-refillable beverage packaging manufacturer and distributor must, in principle, add the deposit to the beverage packaging and retain the deposit amount determined by the administrator. Further, they should keep separate accounting records of the price of the goods (the sales price) and the amount of the deposit, as well as of the beverage packaging. This recorded data must then be reported to the administrator. In addition, each single-use beverage packaging producer must register the beverage containers with the administrator and reimburse the administrator for the deposit and costs associated with participation in the deposit system.

Single-use beverage packaging distributors selling beverages subject to the deposit system on a sales area of at least 300 square meters have additional obligations. For example, they must register with the administrator as a packaging collection point, collect packaging waste at their premises or within 150 meters of their premises, and repay the deposit to end users when they return the pledged beverage packaging. However, distributors who sell beverages in addition to their main products (e.g., drugstores) are not subject to these obligations. Such distributors and distributors with a smaller sales area can, however, voluntarily join the deposit system.

The obligations arising from the deposit system also apply to foreign companies that place beverages in non-refillable packaging on the Slovak market or transport them – or have them transported – across the state border of the Slovak Republic in order to place the beverages on the market or distribute them in the Slovak Republic. These foreign companies have the same obligations as Slovak companies if they place beverage products on the Slovak market.

Related Costs

Disposable beverage packaging manufacturers and distributors face new costs, including the following:

Labelling Beverage Packaging: Since only properly labelled beverage packaging can be registered with the deposit system administrator and placed on the market, single-use beverage packaging manufacturers must adapt production to the new legal requirements.

Construction Changes: Disposable beverage packaging distributors must provide a special place for beverage packaging to be collected in accordance with hygiene requirements as well as occupational health and safety requirements. Conversion work will be necessary in many business premises, which represents an additional financial burden.

Collecting Machines and Their Maintenance: The obligations of single-use beverage packaging distributors do not end with securing a place for packaging collection. Another burden will be purchasing and maintaining collection machines.

Further Administrative Work: In addition, single-use beverage packaging distributors will also face new administrative costs related to the new registration and record-keeping requirements.

As mentioned in the introduction, the new obligations will come into force on January 1, 2022. The Deposit System Act sets forth a range of fines for violations of individual obligations, with amounts depending on the specific violation. We therefore recommend preparing for these obligations in good time.

By Lukas Syrovy, Partner, Havel & Partners

This Article was originally published in Issue 8.2 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.