JŠK Legal Flash
Class actions: EU Council approves draft directive, amended bill submitted to the Czech government
The EU Council approved an amended version of the draft EU Directive on Class Actions at the end of November. The process will most likely be completed in the course of 2020. Although the directive may undergo further amendments, it is already evident that more discretion will be handed over to the Member States than previously anticipated. In that respect, the ongoing Czech legislative process on the Class Action Act, an amended version of which was submitted to the government on 28 November, will be of more significance. The directive provides for both opt-in and opt-out mechanisms in individual Member States. While the Czech bill in its current form also anticipates both these approaches, the stricter opt-out should be available only in cases of small claims, usually under CZK 3,000.
Modifying cross-border transformations in the EU
A new Directive on cross-border mergers, demergers and divisions related to limited liability companies has been adopted by the Council of the EU. The legislation broadens the scope of the existing regulation and addresses certain social and tax concerns by (i) increasing the protection of the stakeholders and employees, (ii) introducing a stricter pre-operation assessment and anti-abuse control (the procedure will likely become longer and more uncertain), (iii) reflecting current ambiguities and practice, and (iv) introducing the possibility to use digital tools and processes.
The Directive will have to be transposed within three years.
The duty to register the ultimate beneficial owner in the Slovak Commercial Register is approaching. What about the Czech Republic?
By 31 December 2019 most legal entities registered in the Slovak Commercial Register must file for the registration of their ultimate beneficial owner (i.e. an individual holding at least a 25% direct or indirect share in the voting rights, economic benefits or registered capital of the legal entity or otherwise controlling such entity). If such an individual cannot be identified, the legal entity's top management will be deemed to be the UBOs. The registered data are currently not accessible to the public, but only to public administration subjects (including courts and tax offices).
In the Czech Republic the deadline for registration of UBOs expired on 1 January 2019, but there are no direct sanctions for non-compliance with these rules. This should change with the new bill on the register of UBOs, which should introduce not only penalties of up to CZK 500,000, but also prohibit unregistered UBOs from exercising their voting rights and participating in dividends or other distributions. The draft bill is currently in the early stages of the legislative process.