On 1 February 2017, Act No. 315/2016 Coll. on the Register of Public Sector Partners (hereinafter the "Act") entered into force. Under the Act, every legal or natural person that enters into a legal relationship with the state, receives funds, acquires assets or other property values from the state, or (rather) supplies services or resources to the state or state authorities must register in the Register of Public Sector Partners (hereinafter the "RPVS"). The Act also applies to the subcontractors of those persons who are public sector partners. Subcontractors, too, are public sector partners and are obliged to register in the register through authorised persons and to keep these entries up to date. The RPVS replaces the former register of ultimate beneficial owners, which played a significant role in public procurement.
Who is not obliged to register
The Act not only lays down who is obliged to register in the RPVS, but also defines who has no such obligation. Such entities are partners whose business dealings with the state do not exceed a value of EUR 100,000 or, in aggregate where several transactions are involved, a value of EUR 250,000, or (rather) where the value of the assets acquired from the state does not exceed EUR 100,000, or where it is a non-profit organisation, a bank, or a branch of a foreign bank.
The essence of the Register of Public Sector Partners
The Register of Public Sector Partners is a public register whose purpose is, in particular, to reveal the ownership structure of companies that will do, or already do, business with the state (hereinafter a "public sector partner") and thus to identify the ultimate beneficial owner, as well as to reveal in which companies public officials are involved.
Who is the ultimate beneficial owner?
Pursuant to § 6a par. 1 letter a) of Act No. 297/2008 Coll. on protection against the legalisation of proceeds of crime and on protection against the financing of terrorism and on amendments to certain acts: "The ultimate beneficial owner is any natural person who actually controls or exercises control over a legal person, a natural person – entrepreneur or an association of assets, and any natural person for whose benefit those entities carry out their activity or business; the ultimate beneficial owners include in particular, in the case of a legal person that is neither an association of assets nor an issuer of securities admitted to trading on a regulated market that is subject to disclosure requirements under a special regulation, an equivalent legal regulation of a Member State or equivalent international standards, a natural person who
1. holds a direct or indirect interest, or the sum thereof, of at least 25 % of the voting rights in the legal person or of its registered capital, including bearer shares,
2. has the right to appoint, otherwise install or remove the statutory body, the managing body, the supervisory body or the control body in the legal person, or any member thereof,
3. controls the legal person by a means other than that set out in the first and second points,
4. has the right to an economic benefit of at least 25 % of the legal person's business or of its other activity."
How to process registration in the Register of Public Sector Partners?
Registration may be carried out only by an authorised person, for example an attorney, an auditor or a tax adviser, who is obliged to reliably identify the ultimate beneficial owner and to carry out the registration in the RPVS. Anyone who therefore wishes to "do business with the state" will have to have a contract concluded for registration in the RPVS, e.g. with an attorney. The authorised person is responsible for identifying the ultimate beneficial owner not only upon the first entry in the register, but also for its subsequent verification at the intervals and deadlines laid down by law. At the same time, the Act expressly states that the authorised person's conduct in the registration must meet the requirements of conduct with professional care.
The operator of the RPVS is the Ministry of Justice of the Slovak Republic, while the registration is carried out by the District Court Žilina. Registration takes place exclusively electronically.
The following data are entered in the RPVS: data on the person who is to be a partner, data on the ultimate beneficial owner and, where a public official is also a member of the ownership structure, data on the public official as well. The RPVS carries out, or (rather) refuses, the entry of a partner within 5 working days of the filing of the application. Objections may be lodged against a refusal to carry out the entry. Exceptionally, an entry in the RPVS is not subject to court fees.
The sanction mechanism
Responsibility for the accuracy of the data set out in the RPVS lies not only with the public sector partner, but also with the authorised person. Where false or incomplete information is provided, not only about the public sector partner and the ultimate beneficial owner, but also about public officials, the registering authority is entitled to impose a fine of EUR 10,000 to EUR 1,000,000, taking into account in particular the nature, seriousness, manner and consequences of the breach of obligations. If the fine is not paid, the registry court will delete the public sector partner from the RPVS and, at the same time, the statutory body of the public sector partner will be excluded, for a period of 3 years from the date on which the decision becomes final, from the office of member of the statutory or supervisory body of all companies in which it is involved, or (rather) will not be able to hold these offices at all during such a period. A consequence of the deletion of a public sector partner from the RPVS is also the state's right to withdraw from the contract, or (rather) the option not to perform the contract, whereby the state, as a contracting party, will not fall into default.
The question arises here as to what happens if a situation occurs in which a public sector partner is deleted from the RPVS but, after the appointment of a new statutory body and payment of the sanction, wishes to be re-entered in the RPVS. The Act does not regulate the situation of re-entry, from which it could follow that, once the shortcomings have been remedied and the ultimate beneficial owner identified, such a company should be re-entered in the RPVS. On the other hand, there is a view as to whether the legislator did not intend deletion from the RPVS to be understood as an absolute sanction and thus to bar from participation in public contracts even those entities that will not fulfil, or (rather) did not fulfil, their statutory obligations. However, we find no answer to this issue even in the explanatory memorandum to the Act, and so it is up to the legislator, in the interest of clarity of the legislation, to define its intentions in this respect.
Since the RPVS replaces the register of ultimate beneficial owners, entities registered in that register are indeed regarded as public sector partners; however, they are obliged to carry out verification of the ultimate beneficial owner and to bring the entry in the RPVS into line through an authorised person by 31 July 2017.
The obligations of a public sector partner do not end with its entry in the RPVS, since the authorised person (i.e. e.g. an attorney) is obliged to carry out verification of the ultimate beneficial owner at least once a year, always as at 31 December.