Register of Public Sector Partners (abbr. RPSP) is a publicly accessible information system of public administration established by the Act No. 315/2016 Coll. on Register of Public Sector Partners, better known as the “Anti-Letterbox Act” (the “Act”). The main purpose of the Act is to specify requirements for entities receiving public money and to increase transparency in contractual relationships by revealing ownership and corporate structures of these entities as well as ultimate beneficial owners, i.e. actual owners of companies and persons ultimately benefitting from doing business with the state.

Entry in this register is obligatory for those entities – public sector partners that enter in legal relations with the public sector and receive public funds based on such relations, including property beyond statutory limits. A public sector partner cannot carry out the registration in the register directly, on its own; it has to do so through an authorised person, and, pursuant to the Act, the authorised person must be either an attorney, notary, bank, branch of foreign bank, auditor or tax advisor with a registered office or place of business activity in the territory of the Slovak Republic. Public sector partner must conclude a written agreement on fulfilment of obligations of an authorised person for a public sector partner with the authorised person, based on which the authorised person serves the public sector partner and represents it in relation to the Register of Public Sector Partners. 

From the moment the Act took effect and was applied in actual practice, it has been struggling with many practical issues and ambiguities regarding its interpretation which have caused a great deal of application-related problems in practice. Authorised persons often turned to the Ministry of Justice for guidance, however, an opinion of the Ministry cannot be considered binding. Therefore, over time, adoption of an amendment of the Act became necessary whereby the Ministry of Justice seeks to eliminate deficiencies causing problems in application practice and to lift the administrative burden where possible. The amendment comes into effect as of 1 September 2019; in relation to selected provisions as of 1 November 2019. 

In the light of the adopted amendment, we provide an overview of major changes.

Definition of a state-owned enterprise

The amendment narrows the definition of the “public sector” to legal entities wherein a state, municipality, higher territorial unit or legal entity established by law, except for a chamber established by law, severally or jointly has an exclusive, i.e. 100% direct or indirect participation. Meaning that the obligation to register in the Register of Public Sector Partners only arises if the property interest in the contractual partner is 100%. 

Clearer definition of a public sector partner

One of the goals of the amendment was a new definition of the term “public sector partner”, aimed at clearer identification of entities covered by the Act. The amendment excludes those entities that enter in contractual relations with public enterprises within ordinary course of business and main economic activity of these public enterprises, or other entities specified by the Act. As it is, public enterprises often operate within competitive environment where the obligation to register in the Register of Public Sector Partner may cause an unequal position of the competitors on the market.

As far as subcontractors are concerned, the registration obligation was also bound to the subcontractor´s knowledge that the performance delivered by the subcontractor is being executed in relation to a contract concluded between a public sector partner and the state. Statutory condition of the knowledge aspect of the subcontractor as a public sector partner expressed by “knows or is supposed to know” is amended by the amendment so that the subcontractor is obliged to register only if it “knows or, given the circumstances, is supposed to know” that performances it delivers are intended for the public sector partner and that through its performance it participates in a public contract.

In practice, also the issue of evaluation of receipt of funds from the European Agricultural Guarantee Fund became controversial which led to establishment of an exception from the obligation to register in the register set forth in the amendment for the receipt of monies from this fund beyond the limits specified in the Act. Therefore, based on the said exception, the obligation to register shall not apply to persons receiving a so called direct payment from the European Agricultural Guarantee Fund. Also, the terms “European structural and investment funds” were replaced by a single term European funds, i.e. a natural person or legal entity receiving funds from any European Union fund (except for the above European Agricultural Guarantee Fund) shall also be considered a public sector partner.

Change in registered data

Given the application problems caused by the fact that the legislation did not distinguish between a natural person as a “non-business entity” and natural person as a business entity, an explicit legislation was adopted that typologically recognises three types of public sector partners, they are natural persons, natural persons as business entities and legal entities. At the same time, to increase transparency and to introduce a possibility of the public engaging in pending proceedings on qualified motion under the Act, the amendment introduces an obligation to disclose in the Register of Public Sector Partners the commencement date of the proceedings and the file number of the proceedings on qualified motion against the public sector partner. The said data will be publicly accessible on the website of the Register of Public Sector Partners. 

Change in registration of top management as an ultimate beneficial owner

By adoption of the amendment, also the Act No. 297/2008 Coll. on Protection against Money Laundering and Terrorist Financing was amended, specifically, the definition of top management. Unlike the previous legislation, where in case of registration of the so called fictitious ultimate beneficial owner a wide range of persons from the public sector partner´s management structure (authorised representative, members of the authorised governing body, proctors and senior employees with executive powers of the authorised representative, or authorised governing body, as the case may be) were registered as top management, the amendment stipulates that only the authorised representative or member of the authorised governing body shall be registered in the event of registration of top management, i.e. proctors and senior employees with executive powers of the authorised representative, or authorised governing body, as the case may be, are no longer considered members of top management. Partners of public sector are obliged to ensure compliance of the data on members of top management registered instead of the ultimate beneficial owner with the new wording of the Act by 29.02.2020 at latest.

Introduction of interpretation rules of contract evaluation

One of the evaluated criteria as regards the obligation of an entity to register in the Register of Public Sector Partners is also the value of benefits from contract performance. The legislation being introduced will function as interpretation rules or principles of contract evaluation, or evaluation of performance specified in contracts forming the basis for fulfilment of the criterion of the value of a de minimis performance which is one of the conditions for registration in the Register of Public Sector Partners. The said rules apply to contracts with repeated as well as single performance. They are specific questions that arose from application practice over the duration of the Act and until now were resolved by interpretation provided by the ministry or relevant bodies. Financial limits remain the same, i.e. those that are to be receive a single contract performance not exceeding EUR 100 000 or those that are to receive several partial or repeated contract performances altogether not exceeding EUR 250 000 shall not be public sector partners. However, unlike the previous legislation, value of a contract with a subject-matter consisting of repeated performance is calculated over the whole contract duration, and not only over one calendar year as it was the case until now.

Optional verification of ultimate beneficial owners

To make the authorised person´s work in verification of an ultimate beneficial owner easier, the amendment brings possibility to verify the ultimate beneficial owner whenever and not only in statutory required cases. It means that a public sector partner will not have to perform separate verification for each concluded contract, change thereof or performance thereunder, if it performs verification of the ultimate beneficial owner twice a year, on a half-year basis. However, the obligation to initiate a change control in case there is a change of registered data over this period (e.g. change of registered data on an ultimate beneficial owner or public sector partner) remains thereby unaffected; these changes need to be reported separately to a registering court and verified by a current verification document.

Identification of an ultimate beneficial owner as at 31.12. of the calendar year

The amendment introduces a deadline for identification and verification of an ultimate beneficial owner as at 31.12. of the calendar year, i.e. an obligation to send a notice on identification and verification of the ultimate beneficial owner as at 31.12. of the calendar year by 28.02. of the following calendar year. Previous legislation did not provide the deadline for the end-of-year verification. Also, within the two-month period set for performance of the verification, the contractual partner representing the public sector cannot suspend performance it is supposed to render in January and February due to the obligation of verification as at the end of the year not being fulfilled. 

If the authorised person finds out in the end-of-year identification and verification of an ultimate beneficial owner that there has been a change of the ultimate beneficial owner, it is obliged to initiate a change control and notify the registered court of such change. Registration of the change of the ultimate beneficial owner´s data in the period from 01.01. to 28.02. of the calendar year replaces the obligation to perform the end-of-year identification and verification of the ultimate beneficial owner. In practice, it resolves the situation when the authorised person found out, while performing identification and verification of the ultimate beneficial owner, that the ultimate beneficial owner changed and it was not clear whether it is sufficient to perform a change control in such case, which itself requires identification and verification of the ultimate beneficial owner, or it is necessary to fulfil also another statutory duty, i.e. to send a notice of identification and verification of the ultimate beneficial owner as at 31.12 to the court. 

Introduction of a disqualification period for a public sector partner after removal from the register

As a sanction, a disqualification period is introduced in removal of a public sector partner from the register when the public sector partner removed cannot register back in the Register of Public Sector Partners for 2 years since the date of removal. In the event of voluntary removal, the disqualification period shall not apply. Previous legislation did not provide for prohibition of repeated registration, i.e. allowed the repeated registration in the Register of Public Sector Partners without any limitations.

Action in concert or common action 

The amendment also strengthens legal certainty as far as determination of acting in concert and common acting are concerned. A rebuttable presumption is expressed that such common action is always the case in relationships between close relatives, or between long-term business partners and their close relatives, and the opposite must be proved by the authorised person. In other cases, on the contrary, burden of proof to determine common action is transferred to the authorised person.

Concept of a so called “material corrective”

The so called “material corrective” introduced by the amendment is supposed to protect parties to proceedings against the registering court´s formalistic decision-making on the imposed sanction in case there has been a violation of law, however, seriousness of such action is negligible. In such case, the court rules “guilty”, however, does not impose sanctions for violation of the law (removal from the register, fine). Negligible seriousness means obvious errors and inaccuracies in registration of an ultimate beneficial owner (for example, different property registration number in the permanent residence address, mistake in the name of the ultimate beneficial owner, etc.). However, negligible seriousness does not mean such error in registration of the ultimate beneficial owner when this entity is incorrectly identified (instead of the ultimate beneficial owner X, the ultimate beneficial owner Y is registered, or there are more or less ultimate beneficial owners registered than there should be). In such case, the said concept cannot be applied.

Disclosure of permanent residence of ultimate beneficial owners

According to the amendment, instead of providing the permanent residence address of the ultimate beneficial owner, there is a possibility to enter the address of the registered seat or place of business activity in the register if the authorised person provides justification for such action and proves that there are objectively justified circumstances due to which the disclosure of the ultimate beneficial owner´s permanent residence could jeopardise safety of the ultimate beneficial owner or interfere with the ultimate beneficial owner´s rights to personality protection and rights to protection of personality of the ultimate beneficial owner´s close relatives. Justification of such registration is not required with the partners of public sector that are issuers of securities admitted for trading on a regulated market or companies exclusively owned or directly or indirectly managed by such issuer.

Liability of members of the company authorised governing body

According to the old legislation, each member of the authorised governing body individually was liable for submission of inaccurate data in the Register of Public Sector Partners and the fine in the amount from EUR 10 000 to EUR 100 000 could be imposed on each individual member of the authorised governing body which seemed inadequate given the level of seriousness of the statutory duty violation and also given the other sanctions. The amendment renders the system of fines imposed on the authorised governing body less strict as the registering body must heed in imposing fines on members of the authorised governing body that the amount of the fines imposed on the members of the authorised governing body for a specific violation not exceed the ceiling of EUR 100 000. The amendment also introduces solidarity liability of members of the authorised governing body for payment of a fine imposed on the authorised governing body.

Ex offo proceedings or proceedings on qualified motion

To determine the moment for assessment of legal aspects and facts of a case inspected by the registering court in proceedings on qualified motion, it is explicitly introduced for reasons of legal certainty that decisive are the legal aspects and facts of the case at the time the proceedings on qualified motion were initiated while additional elimination of violations or data completion must not result in the court not being able to impose a sanction or in the proceedings being discontinued.

Law firm Lysina & Partneri has been providing advice on matters of the Register of Public Sector Partners as well as services of an authorised person relating to registration in the Register of Public Sector Partners since its introduction. We have considerable experience in drafting of the necessary documentation and identification of an ultimate beneficial owner and we are ready to provide our services to you, execute registration of your company and act as an authorised person for you in relation to the Register of Public Sector Partners.