Czech News - July 96 - Implementation Of The Commercial Code And The Securities

REPORTING DUTY

Under section 183d) of the Commercial Code amendment a person or persons acting in accord who acquired one-tenth or more of the voting rights in a company with publicly traded shares must report the fact in writing to the Securities Center and to the company. Also any further increase or decrease by one-twentieth or more must be reported. The Securities Center has recently published the form of the announcement in the Commercial Bulletin. Exemptions from the reporting duty are available for controlled persons if the notification is made on their behalf by their controlling entity, or for an owner of dematerialized securities provided that his share of voting rights is determined only by the amount of his shares.

Entities which share in voting rights in the company reaching the above limits on the effective date of the amendment (1 July, 1996) must comply with the duty within 60 days from the effective date, ie. no later than on 29 August, 1996.

There is no independent institution which currently controls whether investors are complying with the new security rules, particularly the rule to report acquisitions of 10% or more of the voting rights in companies. The New Securities and Exchange Commission is planned to be set up, but it is not likely to commence its activities before 1 July, 1997. The penalty for noncompliance is that the investor loses his voting rights over the shares acquired but not reported for a one year period.

COMPULSORY BUYOUT

The problem of determining prices of compulsory buyouts should be stipulated by a Decree of the Ministry of Finance which is expected to be issued shortly. It is understood that prices should be derived from the official published rates, which is not influenced by rates from block or direct trades.

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.

For further information contact Paul Antrobus or Richard Fletcher, Arthur Andersen Prague, tel +42 2 2440 1300 or enter a text search 'Arthur Andersen' and 'Business Monitor'.