Act no. 90 2012 Coll. On Business Corporations in Czechia

As of 1 January 2014, the act no. 90/2012 Coll., on Business Corporations and Cooperatives (the Act on Business Corporations) sets (among others) two important obligations to all business corporations

As of 1 January 2014, the act no. 90/2012 Coll., on Business Corporations and Cooperatives (the Act on Business Corporations) sets (among others) two important obligations to all business corporations, in particular:

  • to edit their corporate documents so that there is no breach of any peremptory rule of the Act on Business Corporations, and
  • to file an application to edit their information in the Czech Commercial Register according to the Act on Business Corporations till 30 June 2014 at the latest.

Please note that the respective court may decide on dissolution of a corporation in case one is in breach of these obligations.

 

Moreover, under the Act on Business Corporations, any corporation established under the former act no. 513/1991 Coll., the Commercial Code (i. e. before 1 January 2014) may:

  • decide on so called “opt-in”, i. e. subordination of the corporation to the Act on Business Corporations and existence fully under the new regime of the Act of Business Corporations, or
  • not to opt-in, i. e. to exist under both old and new legal regimes and be bound not only by the new Act on Business Corporations, but also, partially, by some of the rules of the old Commercial Code.

 

There are many advantages of choosing the opt-in option, such as:

  • a corporation operates under one legal regime of the Act on Business Companies without any conflict of application the Act on Business Companies and partial ambiguous application of the old Commercial Code;
  • a corporation has substantially more contractual freedom for setting up rights and obligations of participants in corporate documents;
  • participants have much looser conditions when disposing of shares;
  • a corporation has an option to reduce and distribute the funds from the registered capital (up to CZK 1 registered capital);
  • a corporation has an option to decide on cancelation of the reserve fund and on distribution of the funds from the reserve fund;
  • a corporation (a limited liability company) may set out various types of shares

 

To accept the opt-in option, a corporation shall decide on amendment to corporate documents in front of the notary and file respective registration forms with the Commercial Register up to 31 December 2015.

The Act on Business Corporations limits the option of corporations to decide on the opt-in up to 31 December 2015 at the latest. There is a prevailing view, that decisions on the opt-in option will still be possible after 1 January 2016. However, there is a serious risk that Czech courts might accept a restrictive interpretation of the law and the opt-in option will no longer be possible after 31 December 2015.

Please note that we do not recommend a long-term operation under ambiguous regimes of the old Commercial Code and the Act on Business Corporations since this might lead to serious legal unpredictability and many practical complications.

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