REGISTER OF PUBLIC SECTOR PARTNERS

REGISTER OF PUBLIC SECTOR PARTNERS

What is the Register of Public Sector Partners?

Act no. 315/2016 Coll. has established a new Register of Public Sector Partners (hereinafter only as „Register“). The main purpose for the adoption of this new law is the attempt of the government to fight letterbox companies that receive public money or are in other contact with public money (for more information please see below).

Until now, this area of law was only partially regulated in regards to public procurement. With the adoption of the new law, the regulation extends to all entities that receive money from any public entity (even outside of the area of public procurement) such as for instance state aid grants etc.

Who is a Public Sector Partner?

Public sector partner (hereinafter only as “Partner”) can potentially be any private entity, which:

  1. Receives funds from (i) the state budget, (ii) public body budget, (iii) municipal budget, (iv) higher territorial unit budget, (iv) European Structural Investment Funds, (v) from a legal person established by law, (vi) from a legal person, wholly or mainly financed by the state, municipality, higher territorial unit or a legal person established by law, which is controlled by the state, municipality, higher territorial unit or a legal entity established by law or in which the state, municipality, higher territorial unit or from a legal person established by law appoints or votes more than half of the members of its management or supervisory body, (vii) from the health insurance company or (viii) receives state aid or investment aid;
  2. Receives property, property rights or any other property rights of (i) a state, (ii) public body, (iii) municipality, (iv) higher territorial unit, (v) legal persons established by law or of (vi) a legal person, who is wholly or mainly financed by the state, municipality, higher territorial unit or legal person established by law, who is supervised by the state, municipality, higher territorial unit or legal person established by law in which the state, municipality, higher territorial unit or legal person established by law appoints or votes more than half members of its management or supervisory body or of (vii) a health insurance company;
  3. Concludes an agreement, a framework agreement or a concession agreement within a public procurement;
  4. Is a health care provider, who has concluded a health care agreement with health insurance company;
  5. Is obliged to be registered under a special regulation (for example Act No. 581/2004 Coll. on health insurance companies);
  6. Was assigned or otherwise acquires a receivable against the state, state fund, public body, municipality, higher territorial unit or a legal person established by law; or
  7. Directly or through a third provides supplies to entities stated above in points 1 to 5 goods or services or acquires property, rights to property or other property rights from such entities and, at the same time, knows or should know that provided goods or services or acquiring of property, rights to property or other property rights are related to agreement referred to in point 1. above or agreement referred to in point 2. above.

However, in order to be considered a Partner, the transaction falling into the above categories needs to exceed the threshold of EUR 100,000 for a single payment of financial funds or exceed the total of EUR 250,000 per year in case of multiple payments of financial funds.

How is the Partner registered?

The registration process begins with disclosure of required data by the Partner to the authorized person (described below) of his choice.

The Partner then cooperates with the authorized person in order to obtain all official documentation that will be necessary for the authorized person to perform verification of the disclosed information. Authorized person then performs the verification, identifies UBOs and submits the registration to the Registry.

Who can act as the Authorized Person?

Any Slovak attorney, public notary, auditor, tax advisor or a bank can act as authorized person of the Partner.

However, the authorized person (i) must be separate from the Partner, (ii) cannot be the UBO of the Partner, (iii) cannot have the same UBO as the Partner and (iv) cannot be personally or materially connected to the Partner.

What does the Authorized Person do?

Authorized person serves as an intermediary that authenticates the data provided by the Partner and manages the registration of the Partner in the Registry.

Considering that the authorized person must be independent from the Partner, the law assumes a high level of cooperation between the Partner and the authorized person. The law entitles the authorized person to immediately terminate their relationship from the engagement contract, if the Partner does not cooperate sufficiently.

Authentication of data by the authorized person is performed by comparing the data submitted to the authorized person by a Partner with the data available through public registers and originals of public documents obtained either by the authorized person or the Partner. Authorized person guarantees the accuracy of verification.

What data is registered in the Registry?

Partner needs to submit its application to the Register through the authorized person. The information that is subject to registration duty is:

  1. Identification of the Partner (name, seat, legal form, ID number);
  2. List of Ultimate beneficiary owners (hereinafter referred to as “UBO”); 
  3. List of persons in the ownership structure of the owner who are at the same time public officials in Slovak Republic; 
  4. Identification of the authorized person.

All the above information is included in the so-called verification document that is prepared by the authorized person. The verification document must comprise also the description of ownership and managerial structure of the Partner.

 

What are the on-going duties of the Public Sector Partner?

A Partner that has fulfilled his initial registration duties with the Register must maintain his registration correct and up to date. In case there is a change in the registered information, the Partner must immediately inform the authorized person on the change and provide all required cooperation.

In case there is a verification event (further explained below), the Partner have to provide all cooperation as required by the authorized person.

What is a verification event?

Verification event is the moment when the authorized person must perform further verification and identification of the UBO. Once the Partner is registered with the Registry and his UBOs have been duly identified, verification of UBOs must be performed also at/upon:

  1. Initial registration of an authorized person of a Partner (this is applicable when the Partner replaced original authorized person with another authorized person);
  2. 31 December of each year;
  3. Entering by the Partner into an agreement or amendment of agreement that relate to transfer of financial funds or property from a public entity to a Partner;
  4. Payment under the agreement, which transfers finances or property from a public entity to a Partner in the amount of more than EUR 1,000,000 within 30 days.

Who is an UBO?

This act contains the same definition of UBO as provided by the EU’s anti-money loundering directive, i.e. an UBO is a person that in reality controls the entrepreneur or a person for whose benefit the entrepreneur performs its activity. As UBO will always be considered a person, who (in short):

  1. Is at least 25% direct or indirect shareholder of an entrepreneur (company, fund, etc.);
  2. Has a right to appoint or revoke the statutory body of an entrepreneur (company, fund, etc.);
  3. Has a part of at least 25% on the profits of the entrepreneur; or
  4. Exercises control over an entrepreneur in a different manner.

If no person can be identified as meeting the above UBO criteria (which will for instance usually be the case of listed companies), it does not mean that such Partner does not need to be registered in the Registry. In such situation, the Partner will still have to be registered and instead of the UBO, members of his statutory organ and top management will be registered in the Registry.

 

 

What are the potential sanctions?

In case the data related to the UBO or the person in public function registered in the Register is incorrect or uncomplete or in case the Partner missed the deadline for registration of changes in the UBO identification, the registration authority may impose on the Partner a fine in the amount corresponding to the whole economic profit gained from the transaction or a fine up to EUR 1,000,000, if the economic profit is undeterminable.

In addition, the registration authority can also fine the entire statutory organ (i.e. all executives or all members of the board of directors) of the Partner for an amount up to EUR 100,000.

The authorized person serves as guarantor of the payment of the fine imposed on the management of the Partner, unless the authorized person proves that she has acted with due care.

Finally, an unregistered UBO can be penalized in the amount of up to 10 000 EUR, in case he does not inform the Partner and the authorized person on becoming the UBO of the Partner. 

Are there any other legal consequences?

Apart of the fines as outlined above, in case the data related to the UBO or the person in public function registered in the Register is incorrect or uncomplete, the public-sector entity is entitled to immediately terminate the contract and to stop any payments to the Partner. Consequences of the termination of such contract are subject to private law assessment and may include mutual return of the economic profit gained from the contract or transaction.

Finally, in case the Partner is deleted by the registration authority from the Registry mainly due to wrong or incomplete information about his UBO, members of the statutory body of the Partner are considered to be barred from being members of statutory body of the Partner (and other Slovak companies, if applicable), needs to de-register in the Commercial Registry from all companies where he acts as member of statutory body (all of this for three years or for a period stated in the decision of the court). 

When does a Partner need to register?

In case the Partner was already registered in the Register of Ultimate Beneficiary Owners (Register konečných užívateľov výhod) under the Public Procurement Act, the registration is automatically transferred to the Registry. However, such Partner must re-register himself until 31 July 2017 at the latest or he will be de-registered.

If the Partner has not been registered in the Registry of Ultimate Beneficiary Owners, such Partner needs to manage for a registration before conclusion of a public contract or receipt of public funds.

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The above information is not a legal memorandum or opinion. For legal advice relating to duties resulting from the Act on Registry of Public Sector Partners and/or for information about our activity of the Authorized Person, please contact our law firm.