The Czech Supreme Court recently published two important decisions in the area of legal regulation of the beneficial owner registry, namely case ref. no. 27 Cdo 1368/2024 dated 25 August 2025 and case ref. no. 27 Cdo 1548/2024 dated 26 August 2025, thus opening a new chapter in the interpretation of Act No. 37/2021 Coll., on the registration of beneficial owners (hereinafter as the “ESM Act”).
Both decisions of the Supreme Court are closely related and together form a judicial framework that fundamentally limits the state’s ability to enforce the registration of ultimate beneficial owners, thereby indirectly suspending the functioning of the basic sanction mechanisms on which sanctions under the ESM Act are based.
Beneficial owner registry
The beneficial owner registry is a public register that collects data on natural persons who control or benefit from legal entities or trust funds.
The registry is intended to ensure the transparency of ownership structures, which are often very complex and would be virtually impossible to trace without the registry.
The registry also helps prevent the abuse of the financial system for money laundering and tax evasion. With the amendment to the ESM Act in 2021, which responded to Directive 2018/843/EU (hereinafter as the “AML Directive”), the legislator gave the general public free access to certain personal data of persons listed in the registry.
Conflict between the obligation to register the ultimate beneficial owner and the fundamental rights of beneficial owners
In the first decision (27 Cdo 1368/2024), the Supreme Court dealt with a dispute in which the person responsible for registration failed to correct a discrepancy consisting in the fact that no ultimate beneficial owner was entered in the register.
The company argued that, under the applicable legislation, the registration would lead to a violation of the fundamental rights of the ultimate beneficial owners. The Supreme Court agreed with this interpretation and based its decision on the judgment of the Grand Chamber of the Court of Justice of the European Union of November 22, 2022, in the WM and Sovim case (hereinafter as the “CJEU judgment”).
It was this decision that stated that the extent to which the AML Directive required Member States to make the beneficial owner registry available to the general public interfered with the rights of ultimate beneficial owners to protection of their private and family life and with the rights to protection of personal data guaranteed by Articles 7 and 8 of the Charter of Fundamental Rights of the European Union.
However, the Czech legislator has not yet responded to the CJEU judgment, and the national provision in Section 14(1) of the ESM Act continues to allow anyone to access selected personal data of ultimate beneficial owners via the internet.
The Supreme Court emphasized that such an arrangement leads to an irresolvable conflict.
The obligation to register the ultimate beneficial owner is not an isolated administrative act, as the Supreme Administrative Court already stated in its judgment ref. no. 4 As 219/2024 dated 12 March 2025, but is directly linked to its disclosure to the general public pursuant to Section 14(1) of the ESM Act. This interferes with the rights guaranteed by Articles 7 and 8 of the Charter of Fundamental Rights of the European Union. The person responsible for registration thus finds themselves in a paradoxical situation in which, in order to fulfill their legal obligation, they must violate the fundamental rights of the registered persons.
The Supreme Court therefore concluded that such an obligation cannot be enforced by the state, and it is not possible to hold the registering persons responsible for not registering their ultimate beneficial owner.
Unregistered ultimate beneficial owner and exercise of voting rights
The day after this decision was issued, the Supreme Court issued another decision (27 Cdo 1548/2024) addressing the question of the validity of a resolution of a joint-stock company’s general meeting in relation to the suspension of the exercise of voting rights by shareholders who are not registered as ultimate beneficial owners in the beneficial owner registry.
The motion to declare invalidity of the resolution was based on the claim that the ultimate beneficial owner of the company was not registered in the beneficial owner registry and therefore should not have exercised voting rights.
The Supreme Court rejected the appeal, stating that the conclusions expressed in the previous decision (27 Cdo 1368/2024) also apply to this situation.
If the state cannot enforce the registration obligation, it cannot infer the legal consequences of non-compliance. In other words, the absence of registration of the ultimate beneficial owner does not lead to a restriction of his rights at the general meeting, as provided for in Section 54(1) of the ESM Act.
What impact will the Supreme Court’s conclusion have on practice?
The common denominator of both decisions is the recognition of an unacceptable conflict between the obligation to register the ultimate beneficial owner in the beneficial owner registry and the protection of the fundamental rights of ultimate beneficial owners. The Supreme Court has clearly confirmed that since Czech legislation contradicts the conclusions of the Court of Justice of the European Union and leads to an unacceptable interference with fundamental rights, the courts must refrain from applying it.
The consequences for practice are extremely significant. As a result of these decisions of the Supreme Court, legal entities should not fear sanctions for failing to register the beneficial owner and the ultimate beneficial owners cannot be denied participation or voting rights due to the absence of registration.
At the same time, however, this means a practical “freeze” of part of the legal regulation of the beneficial owner registry, as its key mechanisms cannot now be applied.
This creates a legislative vacuum that needs to be remedied by amending the ESM Act to reflect the current wording of European AML legislation.
The expert debate will therefore have to focus on finding a new balance between two values – the transparency of ownership structures, which is necessary for the effective fight against money laundering and terrorist financing, and the protection of the fundamental rights of individuals. The Supreme Court essentially called on the Czech Parliament to create a legal framework that would respect the conclusions of both EU and national case law and at the same time ensure the functionality of the system for registering ultimate beneficial owners.
Decisions 27 Cdo 1368/2024 and 27 Cdo 1548/2024 are therefore not just isolated judgments, but a clear statement by the Supreme Court on the issue of ultimate beneficial owner registration. At the same time, they hold up a mirror to legislators and make it clear to them that a swift legislative response is essential.
Mgr. Jakub Málek, managing partner – malek@plegal.cz
Mgr. Kateřina Musilová, advokátní koncipientka – musilova@plegal.cz
11. 9. 2025