This Register will replace the current Register of Beneficial Owners, which is limited to public procurement. The new legislation will be of general application and a public sector partner, according to this legislation, can essentially be any natural or legal person receiving funds, assets or other property rights from public resources, including EU funds.
Like the current Register, also the new one shall contain data primarily concerning the beneficial owners of public sector partners. A beneficial owner can be any natural person, who actually controls a person doing business with the state and any natural person, in favour of which such entity carries on business or trade. In simple terms, these shall be the natural persons, who actually own the companies doing business with the State. The law will include an exhaustive list of persons, who are deemed to be beneficial owners. If this cannot be determined, beneficial owners will be considered members of senior management. Among them will be a statutory body, a member of the statutory body, a holder of procuration and a manager directly reporting to the statutory body.
Besides the general application of the new Register, an extremely important change is the fact that the underlying document for entry into the Register will no longer be only an affirmation of the beneficial owner, but a so-called verification document issued by an authorised person. Its release will be preceded by an identification and verification process of the beneficial owner.
The authorised person will be an important element in the process of registration, as only such authorised person will be able to initiate the registration procedure. At the same time, however, this person will be held accountable for the proper identification of beneficial owners. The authorised persons may include lawyers, notaries, banks including branches of foreign banks, auditors and tax advisors based in the Slovak Republic. The authorised person will be required to identify the beneficial owner for the first entry into the Register, and thereafter to verify their identity in connection with any change in the beneficial owner, and also every year as of December 31 of the calendar year. The obligation to verify identification will cover, inter alia, also the case of contract awards, the content of which will be performance covered by public funds, if there was no identification of beneficial owners in the last six months before the contract was signed.
The registration body will be the District Court in Žilina. The Register itself will be publicly available on the website of the Ministry of Justice of the Slovak Republic. Non-compliance with the obligations under the new Act will result in severe sanctions. If, for example, a public sector partner indicated in his application for registration false data regarding the beneficial owner, or fails to meet his obligation to apply for registration of changes in the relevant data, the court shall impose a fine in the amount of economic benefit. If this cannot be determined, the fine will range from € 10,000 up to € 1,000,000. For infringements of the law, the fines imposed on the statutory bodies of companies may be up to € 100,000 and on the beneficial owners, up to € 10,000. The authorised person entered in the Register at the time of breach will be the guarantor for fines imposed on the statutory body. The decision on the fine for the above stated reasons will also be a decision to exclude, which in practice means that the statutory body will not be able to work as a member of a statutory body or a member of a supervisory body of a company for a period of three years. This decision also gives the right to the party to the contract, who provides funds or assets to the public sector partner, to withdraw from the contract. Accuracy of data entered in the Register can be challenged by anyone through a qualified suggestion, and such a person will also have access to the file of the verification procedure, which in such case will be conducted by the registration body.
The Act will include exemptions for lower value transactions; while public sector partners may not include a person who should receive one-time funding not exceeding the amount of € 100,000 or in the aggregate not exceeding the amount of € 250,000 per calendar year, in case of repetitive performance. A public sector partner, for example, shall not be a person, who will acquire assets, property rights or other proprietary rights in a one-off transaction, the aggregate value of which does not exceed the amount of € 100,000.
Natural and legal persons registered in the current Register of beneficial owners will be automatically considered as public sector partners. These entities will be required to provide verification of the beneficial owner according to the new Act by 31 July 2017. Failure to comply with this obligation will be reason for removal from the Register. Persons, who are currently parties to a contract, based on which they receive funds or assets from the state budget, from the budget of a local self-government or public institution, and which meet conditions for entry into the Register, will be required to ensure registration by 31 July 2017. If this requirement is not met, the public sector entity, who is the other party to the contract, will not be in delay, if for this reason that party will not perform according to the contract and at the same time will have the right to withdraw.
JUDr. Ján Azud, Partner, Ružička Csekes s.r.o. in association with members of CMS
JUDr. Ivan Šafranko, Senior Consultant, Ružička Csekes s.r.o. in association with members of CMS
1. Dec 2016 at 9:00