Disclosure Requirements - Czech Republic
Disclosure Category 2
Upon request from the regulator, CBL may fall under the obligation to disclose the identity and holdings of final beneficial owners.
Consent
In order to comply with the legislation as mentioned below, customers entering into transactions in the Czech market must consent and are hereby deemed to consent to disclosure. Such consent includes the appointment of the requestor (for example, the issuer or its agent) as attorney-in-fact of such customers, under power of attorney, to collect from CBL such information as is required to be disclosed. Customers not willing to give this consent cannot hold such securities and/or financial instruments in their account with CBL.
Background and legal basis
Disclosure requirements related to general meeting of shareholders of a Czech bank derives from Article 20a par. 3 of the Czech Act No. 21/1992 Coll., on Banks, as amended.
The obligation to report threshold crossings derives from Article 122 of the Czech Act on Conducting Business in the Capital Markets (256/2004), as amended, and falls on the final beneficial owner.
Directive (EU) 2017/828 of 17 May 2017 amending Directive 2007/36/EC with regard to the encouragement of long-term shareholder engagement (the second shareholder’s rights directive “SRD II”) has been transposed by Act No. 204/2019 Coll. mainly into Act No. 256/2004, on Capital Market Business (ZPKT) coming into effect on 1 October 2019 (SDR II Law).
Disclosure requirements related to general meeting of shareholders of a Czech bank
In the case of holdings in Czech bank shares, CBL can be under an obligation to disclose to banks in their capacity as issuers or to the Czech National Bank in its capacity as regulator, or being asked to disclose the identity of beneficial owners holding such securities in the following situations:
- Before each general meeting of shareholders of a Czech bank, a bank shall submit to the Czech National Bank an extract of all shareholders from the bank’s share issue seven days before the day preceding the date of the general meeting.
- The Czech National Bank shall approve the list of shareholders or indicate in a written opinion those shareholders whose shareholder rights have been suspended or whose shareholder rights it has newly found reason to suspend, and it shall return the extract, together with its opinion, to the bank.
CBL may thus be requested by the bank or its agent to provide a list of final beneficial owners holding such securities.
Obligation to report threshold crossings
With respect to holdings in Czech companies whose shares are admitted for trading on public markets in the Czech Republic or on any stock exchange in any EU member state, any acquisition that causes the holding to cross the 1% (for companies with registered capital higher than CZK 500 million (or equivalent in foreign currency), 3% (if the registered capital of the issuer exceeds CZK 100 million), 5%, 10%, 20%, 25%, 30%, 40%, 50% or 75% threshold of the total voting rights must be reported to the issuer and to the Czech National Bank (CNB) within four business days after the date on which the voting rights in question were acquired and on which this fact was known or could have been known by the final beneficial owner. The calculation of voting rights includes call options embedded into existing securities.
Note: If a final beneficial owner fails to make disclosure in a due and timely manner, then he cannot formally acquire additional equity in the company. Although such a purchase is not invalid, any acquired voting rights should not be exercised until the situation has been remedied.
If such a final beneficial owner were to exercise the said voting rights, the company would be exposed to the risk of an action being brought against it to invalidate any resolutions adopted by the respective general meeting of shareholders, and the final beneficial owner himself would be liable for any damage incurred by the company through such action being brought.
Sanctions
Disclosure requirements related to general meeting of shareholders of a Czech bank
The bank in its capacity as issuer shall not permit any person indicated as not entitled by the Czech National Bank in its opinion on the extract from the bank’s share issue or any person not stated in the extract from the bank’s share issue or attorneys of those persons to attend the general meeting of the bank.
Obligation to report threshold crossings
Any person that does not fulfill their disclosure obligations may be fined up to CZK 300 million (approx. EUR 11.1 million), 5% of the total annual net revenues or twice the benefit gained from the violation by the Czech National Bank.
Shareholder identification as set out in the SRD II Law
The SRD II Law provides for the right for issuers to identify their shareholders.
Issuers can request intermediaries at each level of a custody chain to promptly provide relevant information to facilitate such identification.
In accordance with the SDR II Law as amended, an intermediary (in this case CBL) shall, upon receipt of the shareholder identification disclosure request, transmit a similar request to the next intermediaries in the custody chain (that is, CBL customers with holdings in the requested securities). A response to the shareholder identification disclosure request shall be sent by every intermediary in the custody chain directly to the recipient's address defined in the request and without delay. CBL will generate the response as required, with information regarding shareholder's identity, limited to CBL books only.