Czech Republic: Incorporating A Joint-Stock Company

Last Updated: 7 February 2018
Article by Roman Macháček

The joint-stock company is the second most common form of business corporations in the Czech  Republic. How to establish such company?

A joint-stock company is established at least by one founder on the basis of Articles of  Association, which are executed in the form of the  notarial deed of a Czech notary and signed by all the founders. The notary fee usually does not exceed CZK 16 ooo  (EUR 580) and is depending on  the amount of the registered capital. The founding deed must contain basic information about the joint-stock company, such as business  name, registered address, list of the company's business activities, number of shares and their  nominal value, specification of shares and whether the company issues registered shares or bearer  shares, amount of the registered capital, number of votes attached to an individual share, the  total number of votes in the company and estimation of costs related to the establishment of the  company.

The business name must not be inter­ changeable with any already existing name of another company  registered in the Commercial Register. This is why the business name being considered by the founders should be checked out in this regard in advance at the website www.justice.cz.

OBTAINING  A BUSINESS  LICENSE

After the founding deed has been executed, the members of the  company's statutory body need to  obtain the trade license at the Trade License Office unless the company's business activity  includes only management of own property, letting of real estate, residential units and  non-residential units or a special permit is required. The administration fee for obtaining the  trade license at the Trade License Office amounts to CZK 1 ooo  (EUR 40).

CORPORATE GOVERNANCE

The founders could choose between the monistic and dualistic model of corporate governance. In  case of the former, the company establishes a Board  of Directors and a Supervisory Board. The Board of Directors is in charge of the management of the  company's business. The Supervisory Board supervises the exercising powers by the  Board of Directors. In case of the latter, the company has only an Administrative Board that determines the basic  orientation of the management of the company's business and supervise its proper execution. The  Administrative Board elects a statutory director who is responsible for management of the   company's business. The chairman of the  Administrative Board could also be the company's statutory  director. All the above-mentioned company's bodies could have only one member.

SHARES

There are two types of shares in the joint-stock company, i.e. shares with no special rights  (ordinary shares) and shares with special rights (such as different or fixed profit shares or  different vote weighting shares) . The so-called no par value shares are shares that have nominal value.

REGISTERED CAPITAL AND PAYMENT OF CONTRIBUTIONS INTO THE REGISTERED CAPITAL

The minimum amount of the  registered capital of the  joint-stock company is CZK 2  ooo  ooo  (EUR  73 000). A shareholder 's contribution into the company's registered capital may take either monetary or  in-kind form, whereas all contributions are administered by contribution administrator who is  usually one of the founders. Monetary contributions are deposited to a special bank account  identified in the Articles of Association. The value of in-kind contributions is determined by the  expert chosen by the founders from the official list of experts. Before submitting the application for registration of the company into the Commercial Register,  each founder must pay up at least the share premium and all the founders must further pay up in  aggregate at least 30   % of nominal value of the subscribed shares. All in- kind contributions  must be fully paid.

ENTRY OF THE COMPANY INTO THE COMMERCIAL REGISTER

The application for entry of the company into the Commercial Register could be either submitted  by all the members of the  company's statutory body on the prescribed form with their officially  verified signatures or the registration can be performed through the notary, who can register the  company into the Commercial Register directly.

The application must be submitted to the competent court depending on the location of the  company's registered office within 6 months from the foundation of the company; otherwise the founding  deed is considered as withdrawn. The founding deed may stipulate another period. The registration court fee equals to the amount of CZK 12  ooo  (EUR 450). The fee amounts to CZK 8  ooo  (EUR 300) only if the  registration is performed by the notary. Irrespective whether the application is submitted by the company's members of the statutory body or  through the notary, the following documents must usually be presented:

  • a notarial deed containing the founding deed;
  • a trade licence or licence for other type of business activity;
  • a deed attesting the legal basis for use of the premises at which the company's registered office  is situated, e.g. a written consent of the owner (such consent may not be older than 3 months and
  • signatures on the document must be legally certified), together with decision of the company's statutory body on the company's registered office location;
  • a document attesting the fulfilment of the  obligation to pay at least statutory minimum  contributions into the registered capital. This fact could be proved by a declaration of the  contribution administrator and confirmation from the bank that the relevant monetary sums have  been credited to the bank account of the  company;
  • documents attesting the fact that persons who are to be registered as members of the company's  bodies satisfy the requirements set forth by law, i.e. that they are at least 18 years old, have  legal capacity, are without a criminal record related to the business, and that there are no  impediments to their operating of a trade in accordance with the Trades Licensing Act and other  legal regulations (such as an affidavit concerning such facts and an extract from the criminal  record or equivalent document issued by the relevant authority of the EU Member State in which they were  last residents in the case of citizens from another than EU Member State);
  • the consent of the person being registered to their registration in the Commercial Register  (members of the company's statutory body);
  • the decision on the appointment of the chairman of the  Board of Di­ rectors, chairman of the  Supervisory Board, chairman of the Administration Board or statutory director, if applicable.

The necessary forms for entering the company into the Commercial Register can be found in Czech on  the website of the Czech Ministry of  Justice https://or.justice.cz/ias/iform/index.html?o. Documents presented to the Commercial Register must be in Czech, including all their attachments; any deeds in a  foreign language must have a legally certified translation unless they are drawn up in one of the   official languages of the European Union (in that case a simple translation is sufficient). For certain types of foreign deeds (e.g. an extract from a criminal register or commercial  register), a special form of higher authentication is required, one that certifies the authenticity  of the  issuing authority, generally identified as an apostille or 'super-legalisation',  depending on whether the country issuing the deed is a signatory to the so-called Hague Apostille  Convention.

The statutory deadline for registration of the  company is five working days from submission of the   application. If, within this period, the court does not register the company or request additional documents  from the appli­ cants, the company is considered as registered. The notary can register the company  into the Commercial Register almost immediately.

In order to submit an application to the Commercial Register or Trade Register, it is not mandatory  to be represented by a lawyer. Nonetheless, with respect to fulfilment of formal requirements, we  recommend that an attorney-at-law is engaged.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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