A company’s key legal obligations: What are the focal points?
We have prepared a brief overview of the key legal obligations that you need to keep in mind so that your business can run properly. You can check quickly and easily whether everything is in order in your company and there is no unpleasant backlog in sight.
Organisation of the General Meeting:
The company’s statutory representative is obliged to convene the General Meeting at least once a year (unless the company’s Memorandum of Association provides otherwise). The General Meeting must be held within six months from the last day of the previous fiscal year, usually by 30 June or 31 December. If there is only one shareholder in the company, the powers of the General Meeting are exercised by this sole shareholder. This means that the sole shareholder may decide on all matters that would otherwise fall within the General Meeting’s competence. If that is the case, a Sole Shareholder Decision needs to be drawn up.
Publication of financial statements (FS):
Every company is obliged to publish its financial statements for the last closed fiscal year in the Collection of Deeds of the Commercial Register. This step is vital in order to ensure the transparency of your business and avoid possible sanctions. In addition to financial statements, the auditor’s statements, decisions on the dissolution of the company or shareholders’ decisions on changes in the company are also published in the Collection of Deeds. These documents are published via the company’s data box by sending them to the competent registration court or via the tax administrator.
Management of the company’s data box:
A data box is the company’s electronic mailbox for the secure exchange of documents between the company and public authorities. Submission via data box automatically replaces the signature of the governing body. Therefore, such a submission has the same legal value as a written submission and, at the same time, enables more effective communication with authorities. A data box is automatically set out for each company by law; access credentials are generated for each statutory representative and are delivered to them in person. Every company is obliged to manage its data box actively.
Updating data in the Commercial Register:
All data entered in the Commercial Register about your company must be up to date at all times. We therefore recommend checking whether your data corresponds to the reality and is entered correctly in accordance with the law. Depending on their nature, entries in the Commercial Register can be divided into constitutive and declaratory entries. Constitutive entries take effect upon their entry in the Commercial Register (e.g. registration of the company). Declaratory entries, on the other hand, take effect regardless of whether they are already entered in the Commercial Register (e.g. a change of the company’s statutory representative). The company name, registered office, line of business, governing body, manner of acting, shareholders and registered capital are entered in the Commercial Register. Pay special attention to the line of business – many companies have not corrected it yet after the 2021 amendment. This means that it is not sufficient to state “manufacture, trade and services not specified in Annexes 1, 2 and 3 to the Trade Licensing Act” and more precise lines of business must be specified.
Trade Licensing Office – establishment, trades:
Like the Commercial Register, the Trade Register should always contain up-to-date data. If you have trades entered in the Commercial Register, these trades should be registered with the Trade Licensing Office. Similarly, if a company has leased or owns premises where it carries out its activities, these premises must be registered as an establishment. An establishment is defined by the Trade Licensing Act as special and separately registered business premises in which a trade is carried on.
Checking if a correct beneficial owner is registered:
Although a year has passed since last year’s amendment to the Beneficial Owners Act, some companies have not yet fulfilled this obligation. The basic criterion for determining the beneficial owner is only direct or indirect ownership or control, or controlling influence, and whether the beneficial owner is material (newly contained only in Section 4 of the Act) or “formal” (newly contained in Section 5a of the Act). The amendment also narrows down the group of persons without a beneficial owner (Section 7 of the Act).
Some entities that did not have this obligation prior to the amendment are now obliged to register the beneficial owner. They include, without limitation, district and regional chambers, political parties, churches and religious societies, and owners’ associations. Again, we therefore recommend checking the registered data and adjusting it if necessary so that the beneficial owner is always up to date and factually correct.
Internal documentation
Every company should ensure that mandatory internal guidelines are drawn up and followed, including:
- OHS
- Fire protection
- Accounting guidelines
- Anti-bribery policy
- Disciplinary procedures for the submission of complaints
- Safety and information security policy
In the Czech Republic, significant changes are taking place regarding whistleblowing, i.e. the reporting of unlawful conduct. The new Whistleblower Protection Act came into force on 1 August 2023. This Act implements the EU Whistleblowing Directive and aims to strengthen the protection of people who blow the whistle on unlawful or unethical conduct in organisations. In particular, the Act imposes the obligation to have an internal whistleblowing system. Companies with more than 250 employees must have an internal whistleblowing system in place from 1 August 2023. For companies with 50 to 250 employees, a transitional period applies until 15 December 2023. The system enables employees and third parties to report any violations, both verbally and in writing, and must also include the option to report in person.
How can we help?
We strongly recommend reviewing these often-neglected corporate obligations, as non-compliance can result in unpleasant sanctions, complicating the process of corporate transformation or the due diligence process. Last but not least, inconsistencies in records give a bad impression to banking institutions and business partners.
Responsibility for the company’s compliance with legal regulations rests with the statutory representative. We understand that the statutory representative usually has other priorities and a number of pressing responsibilities. That is why we are ready to lend you a helping hand and relieve you of this administrative burden.
Our long-term experience allows us to take the necessary steps to resolve any issues very efficiently while keeping up to date with what needs to be addressed.
If you are interested in entrusting your company to our hands, do not hesitate to contact us.
