We would like to use this opportunity to remind you and to introduce to you some of the acts that have already been implemented and should be reflected in your business.
The reason we are opening this discussion now is the fact that some obligations are often neglected in the course of doing business or they are not complied with to the full extent.
Compliance with the Business Corporations Act
Let us start with the oldest and for some companies still unresolved issue. Act No. 90/2012 Coll., on Commercial Companies and Cooperatives (Business Corporations Act) became effective as of 01-Jan-2014. According to the interim provisions under Act No. 90/2012 Coll., business corporations were to comply with the Business Corporations Act no later than 01-Jan-2016 by amending either their Memorandum of Association or Articles of Association. However, many business corporations have not yet complied with the Business Corporations Act and in some cases they still follow the old Commercial Code. If a company fails to comply with the new Business Corporations Act and does not update its Memorandum of Association or Articles of Association, it will be subject to a double legal regime. Therefore, some aspects of the company may be governed by the Business Corporations Act and other aspects by the Commercial Code. This may cause interpretation issues to the company management.
To comply with the Business Corporations Act, a company needs to change its founding legal document, i.e. the Articles of Association or the Memorandum of Association, and the change is to be carried out through a notarial deed. Attention – the change in the legal regime becomes effective on the day the company’s compliance with the Business Corporations Act is published in the commercial register.
If you need help to comply with the Business Corporations Act, please contact your legal representative.
Website of joint stock companies
The above-mentioned Business Corporations Act affects also the companies’ websites. As of 01-Jan-2014, the Business Corporations Act requires that joint stock companies maintain a website containing relevant statutory information. These are, in particular, information about the company (business name, registered office, identification number, entry in a public register), as well as e.g., an invitation to the general meeting, financial statements, annual report, and information on changes to the above.
Setting up such a website is optional for a company with limited liability. If a company with limited liability has its own website, the Business Corporations Act requires that the company uses the website to publish at least basic information.
Failure to comply with this obligation may result in a fine of up to CZK 100,000.
Convening the General Meeting and obligations resulting therefrom
The company has an obligation to convene a General Meeting at least once a year to approve regular financial statement; the General Meeting shall be convened no later than six months of the last day of the previous financial year. This obligation is not a novelty, but it is often forgotten. If the company’s marketing year corresponds to the calendar year, the General Meeting shall take place no later than on 30th June. For “s.r.o.” companies (corresponds to “limited liability companies”), the invitations to the General Meeting are to be sent no later than 15 days before the meeting, for “a.s.” companies (corresponds to “joint stock companies”), the invitations are to be sent no later than 30 days before the meeting. If the General Meeting is convened incorrectly, for example there is an error in the invitation, failure to meet the deadline, etc., the member or shareholder has the right to demand that the resolution made at such General Meeting is to be considered invalid. Minutes of the meeting must be drafted during or after the General Meeting; the minutes clerk is required to publish the minutes of the meeting in the company documents registry without undue delay. If the company fails to comply with this obligation even after being called upon to do so by a court, the fine can be up to CZK 100,000 or the court may decide to proceed to the company’s liquidation.
If you need help convening your General Meeting, please contact your legal representative.
You should not forget to publish the financial statements in the company documents registry. To find out more about this legal obligation, read the article: Have you published your financial statements in the Collection of Deeds?
Registers of actual owners of legal entities and trust funds
The registration of actual owners of legal entities and trust funds was launched quite some time ago. This process is regulated by Act No. 253/2008 Coll., on certain measures against money laundering and financing of terrorism, as amended. As of 31-Dec-2018, legal entities could have their actual owners registered in the registry free of charge; as of 01-Jan-2019, this registration is subject to an administration fee of CZK 1,000. Failure to comply with this statutory obligation does not subject the companies to any sanctions as yet. By failing to register the actual owner, the company risks being excluded from the public procurement procedure, while extending the period necessary for processing the application at some of the state institutions.
We will be happy to help your company being run smoothly by taking on the administrative burden. Do not hesitate to contact us!