MAJOR AMENDMENT TO THE BUSINESS CORPORATION ACT – INTRODUCTION

Are you a member or an executive of a limited liability company (LLC, in Czech s.r.o.), a shareholder in a joint-stock company (in Czech a.s.) or do you have any other function in other form of a commercial company? In a series of our articles concerning the so-called Major Amendment to the Business Corporation Act, you will learn about the most important changes you should not miss.

We are talking about the Amendment No. 33/2020 Coll., through which not only the Business Corporation Act was changed, but also the Civil Code, the Act on the Public Registers of Legal and Natural Persons, as well as other related acts.

From when will the changes take effect and until when are you obliged to implement them?

The Amendment will come into effect on the 1^st January 2021. However, this does not mean that you have to implement all changes in your company by this deadline. From the effect of the Amendment (from 1^st January 2021), all companies have a 1-year period within which the companies are obliged to bring their forming juridical act (the Memorandum of Association, Deed of Foundation or Articles of Association) in accordance with the Amendment.

Furthermore, a period of 6 months will run from the same moment, in which the companies are obliged to record certain new entries to the Commercial Register and file certain new documents in the Collection of Documents.

Grounds and objectives of the Amendment

According to the law-makers, the Amendment is intended to remove inaccuracies or ambiguities in the texts of the laws in question, simplify and make transparent the functioning of corporations, remove ambiguities concerning the monistic system of internal administration of joint-stock companies and help solve the problems of so-called inactive companies.

In addition, however, the Amendment will also bring a lot of work to us attorneys, because as a result of these changes, it is necessary to change the Memorandum of Associations, Deed of Foundations or Articles of Associations, as well as perform other legal acts, which undoubtedly requires the need for legal assistance.

So what changes will the Amendment bring?

The Amendment will bring significant changes in the functioning of companies, especially a new way of payment of the monetary contribution to the capital of a so-called low-capital LLC (limited liability company with a registered capital of up to CZK 20,000), the obligation to authorize a natural person as a representative of a legal entity that is a member of an elected body of a capital company, change of the legal form of deleting some data from forming juridical acts after the incorporation of LLC, court authority to dissolve inactive companies and dissolution of the position of statutory director of joint-stock companies.

We will discuss the essence of these changes with you in the upcoming article entitled “Major Amendment to the Business Corporation Act – Substantial Changes in the Functioning of Companies“, which will be published on our blog in the week from 23^rd November 2020 to 27^st November 2020.

In the article entitled “Major Amendment to the Business Corporation Act – Substantial Changes concerning Bodies” we will introduce you to changes related to the Contract to Perform a Function, resignation of a member of an elected body, new duties of persons who do not officially, but actually, perform the function of a member of an elected body, right of some members to appoint an executive without a cooperation of the general meeting, simplification of making out-of-session decisions (per rollam), right of a member to be accompanied by another person at the general meeting, additional consent of a member with the decision of the general meeting, new conditions for protest at the general meeting or new obligation to keep minutes of general meeting of the highest bodies. You can look forward to this article on our blog in the week from 30^th November 2020 to 5^th December 2020.

And last but not least, from the article entitled ““Major Amendment to the Business Corporation Act – Other Substantial Changes”, you will learn what has changed in connection with the Report on Relations, the pledge of shares and other real rights associated with the share, new conditions for distribution of profit and other own resources, news concerning a membership lawsuit, how the reasons for denying the member’s voting rights have expanded, how the ban on competition has changed and what is new for salary and other benefits for employee who is also member of the company’s statutory body, and other changes , with whom we will introduce you on our blog in the week from 7^th December 2020 to 11^th December 2020.

Conclusion

There is a lot of change going on and maybe you are nervous about it now. But do not worry, in the series of the above-mentioned articles we will explain you all the substantial changes and advise you what needs to be done in connection with them. And, of course, we will be pleased to legally arrange for you what needs to be done overall.