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A step forward in the fight against shell corporations in public procurement

News in the public procurement law - Register of final beneficiaries of subjects.

An amendment to the public procurement law (the Law), effective as of 01 November 2015, abolishes Section 26a of the Law on public procurement, i. e. the obligation to establish an assets and liabilities structure, and replaces it with a Register of final beneficiaries of subjects which are awarded procurement contracts. The register will include data on final beneficiaries, i.e. natural persons who are the actual owners of subjects participating in public procurement. The amendment aims at more effective and transparent disposal of public funds through procurement contracts.

Section 12a introduces the term “final beneficiary”. According to the new regulation, the contracting authority cannot enter into a procurement contract with a bidder whose final beneficiaries are not registered in the Register of final beneficiaries. The obligation to have their actual owners registered also applies to subcontractors (if they participate in performing an agreement to at least 30 % of its value in the case of procurement contracts exceeding the limit, or to at least 50 % in the case of other procurement contracts, while these obligations apply to tenders without use of the electronic marketplace) and to persons through which the bidder establishes its financial or economic background or technical or professional capability.

Bidders, subcontractors and other persons as above identify their final beneficiaries through an affidavit where they also state whether the final beneficiary holds public office. The Register of final beneficiaries is available on the website of the Office for Public Procurement (“Office”). Entries in the Register of final beneficiaries are free of administrative fees.

For non-compliance with this duty or for untrue or incomplete data the Office will use the existing system of sanctions, such as fees, prohibiting participation in public procurement or applying for nullification of the agreement. The Law gives the contracting authority the chance to withdraw from an agreement with a bidder whose final beneficiaries were not registered in the Register of final beneficiaries at the time of entering into the agreement.