| New types of participation interests |
| Participation interest without voting right |
- A participation interest without a voting right is expressly permitted to be regulated in the memorandum of association as a type of participation interest.
- Not applicable with respect to all participation interests → there must be at least one participation interest with a voting right.
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| Participation interest with right of appointment |
- It is expressly permitted to include in the memorandum of association as a type of participation interest a participation interest with the right to appoint and recall one or more executives (this is also possible with respect to members of the supervisory board).
- The total number of so appointed executives (members of the supervisory board) must not exceed the number of executives (members of the supervisory board) elected by a general meeting.
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| Rights and duties of participants |
| Distribution and payment of share in profit and other company funds |
- Profit and "other company funds" may be distributed on the basis of approved financial statements until the end of the next accounting period.
- The following tests must be met for the purposes of the distribution and payment:
- First balance sheet test (i.e., profitability test) — The amount for distribution must not exceed the sum of the profit/loss for the most recently ended accounting period, the profit/loss for the past years and other funds that the company may use at its discretion, decreased by amounts allocated to reserves and other funds by virtue of law and the memorandum of association.
- Second balance sheet test (i.e., equity test) — The company must not distribute any profit or other company funds if, on the end date of the last accounting period, the equity resulting from ordinary or extraordinary financial statements or the equity after such distribution drops under the amount of the subscribed registered capital increased by funds that cannot be distributed by virtue of law or the memorandum of association.
- Insolvency test — The company must not pay a share in profit or other company funds if such a payment results in the insolvency of the company.
- The Amendment also stipulates other terms and conditions for the distribution and payment (including a new notification duty vis-á-vis the tax authority if the distributable amount of profit exceeds CZK 100,000).
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| Prohibition of performance to participant for no consideration |
The Amendment intends to prevent the circumvention of rules for the distribution and payment of a share in profit by prohibiting the provision of performance for no consideration by a corporation to its participant or a next-of-kin of such participant, with certain exceptions such as usual occasional gifts or benefits provided by business corporations pursuant to applicable law. |
| General meeting |
| Participation and voting at a general meeting |
- A participant has the right for a person designated by them to attend a general meeting in addition to them. Such a person must be bound by at least the same confidentiality obligation as the respective participant and must prove the same to the company.
- Until 31 December 2022, this regulation will not apply to already existing companies, unless their memorandum of association stipulates otherwise.
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| Subsequent exercise of voting right |
- The Amendment restricts the types of resolutions that may be voted on subsequently.
- Their adoption will be attested by a public deed → a new type of notarial deed is introduced (Sec. 80ga of the Notarial Code).
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| Approval of transfer or pledge of enterprise by general meeting |
From 1 January 2021, a transfer or pledge of an enterprise or any part of company assets that would result in a material change to the actual scope of business or activities is subject to approval by a general meeting. Such a part of assets need not be an independent organizational unit; for example, it may involve the sale of a trade secret or patent upon which the company's business is based. On the other hand, a transaction resulting in a change to the structure of an enterprise, but not affecting the company's scope of business or activities, will not be subject to approval. |
| Strategic and conceptual instructions to executive |
The Amendment introduces a duty of an executive to adhere to principles and instructions as approved by a general meeting (i.e., strategic and conceptual instructions) if they are in compliance with legal regulations and the memorandum of association. These, however, must not be instructions relating to business management. |
| Resolution per rollam |
- The Amendment introduces stricter requirements for adoption of a resolution, which must be attested by a public deed by operation of law.
- If the law requires that the adoption of a resolution by a general meeting is to be attested by a public deed (i.e., it is to be in the form of a notarial deed), it will be necessary, commencing as of 1 January 2021, for a draft per rollam resolution to already be in the form of a notarial deed, with individual participants receiving a simple copy. Signatures attached to statements of participants must be officially certified. A notary will then prepare a notarial deed on the resolution per rollam.
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| Members of elected bodies (i.e., executives or members of supervisory board, if established) |
| Legal entity being a member of elected body |
- If a legal entity has been elected as a member of an elected company body, it has to empower one individual to represent such legal entity.
- Such an individual has to be registered in the commercial register within three months from the establishment of the office of the legal entity as a member of an elected body.
- Current members of elected bodies, which are legal entities, will have to register such an individual in the commercial register within six months from the effective date of the Amendment (i.e., by 30 June 2021).
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| Resignation from office |
- A new non-mandatory rule concerning resignation from the office of a member of an elected body reverts back to the previous regulation as stipulated in the former Commercial Code.
- An executive (member of the supervisory board) may resign from their office. Performance of the office terminates on the day when their resignation was, or was supposed to be, discussed by the body that elected them, unless the memorandum of association stipulates that it will be sufficient if the resignation was, or was supposed to be, discussed by the body of which such a person is a member.
- If the resigning executive (member of the supervisory board) notifies their resignation at a meeting of the respective body, performance of the office terminates upon the lapse of two months from such a notice, unless the respective body approves a different time of termination of the office upon their request.
- Where the powers of a general meeting are exercised by a sole participant, performance of the office terminates upon the lapse of two months from the delivery of the resignation notice to the sole participant, unless the respective body approves a different time of termination of office upon the request of the resigning member.
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| Agreement on performance of office |
- From 1 January 2021, such an agreement does not take effect until approved by the supreme body of the company.
- The performance of office is free of charge until the agreement is approved. However, remuneration may be awarded ad hoc by a resolution of a general meeting.
- If the agreement conflicts with the memorandum of association, provisions of the memorandum of association will prevail; however, if the agreement was approved by the majority required for a change of the memorandum of association, provisions of the agreement on performance of office will apply.
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| Court disqualification of executive from performing office |
- There are two types of reasons resulting in the disqualification of an executive from performing their office:
- repeated or material breach of duties when performing the office during the three years preceding the commencement of the procedure
- breach of duties in the performance of the office, which contributed to insolvency of the company
- A petition to issue a decision on disqualification can be filed by anyone having a vital interest therein.
- A disqualified executive is prohibited from performing the office of a statutory body member in all companies for up to three years. Specific terms and conditions of disqualification will be determined by a court.
- If an executive breaches the prohibition, they will guarantee the meeting of all duties of the company that arose during the time when they factually carried out the activities of a member of the company's statutory body, despite the prohibition. A court may decide on a repeated ban for up to 10 years.
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| Other |
| Factual manager |
- The Amendment introduces this new term, which generally includes a person being factually, but not formally, in the position of a member of an elected body, whatever their actual relationship to the business corporation may be (such as a former member of a statutory body, who does not respect the fact that their office has terminated; a majority shareholder factually managing a statutory body, etc.).
- Factual managers have the same duties as members of elected bodies — a duty to act with due professional care and the rules governing conflicts of interest and prohibition of competition apply.
- Regulations governing the disqualification from performing an office or the statutory guarantee apply by analogy to factual managers.
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| Related parties report |
- If a company prepares an annual report, a related parties report forms an integral part that needs to be audited by an auditor.
- There is also a new regulation that provides that information that is proprietary or confidential does not need to be included in the related parties report. Information forming part of a trade secret is to be adequately generalized in the related parties report as appropriate to satisfy the purpose of the report.
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