Digitalization of Corporate Law

The Czech government proposes amendments to the Act on Business Corporations concerning the use of digital instruments and procedures in corporate law. The most significant changes are:

Obstacles to performance of office

A whole new catalogue of obstacles to the performance of office shall be introduced to the Act on Business Corporations, namely:

• a prohibition to exercise the office of a member of a management, supervisory or administrative body has been imposed by a public authority of the Czech Republic, of another EU or EEA member state or by a decision of an international organization, as well as a prohibition to perform activities, which are the scope of activities of the corporation,

• a decision of a public authority of any other state is also decisive, if the reasons are similar to reasons for its imposition in the Czech Republic,

• conviction of any of the listed criminal offences relating to conduct of business, or

• declaration of bankruptcy in the Czech Republic or a similar decision of a public authority of another state.

• The absence of the obstacles described above shall be proven based on a statutory declaration of the person appointed as member of a corporation’s body.

The Czech registry court or the Czech notary can verify them even by looking into the registries of other EU or EEA member states.

A person already in office to which an obstacle arises due to the amendment has one month to inform the company about it. His/her office terminates within three months from the effectiveness of the amendment. Thus the company has two months to appoint another person as the member of its body.

Register of Excluded Persons

The second novelty introduced by the amendment is the so called Register of Excluded Persons. It shall contain information about individuals for which obstacles to perform an office arise in the Czech Republic. Similar registers shall be established also by other EU member states. The registry shall not be public, only courts, notaries and certain authorities in other member states shall be allowed to have access. Every citizen shall be entitled to ask for an extract of entries relating to himself/herself.

Registration of a company without a trades license

Currently, if you want to register a newly established company with the Czech commercial register, you first need to obtain the trades licenses for performance of its business. However, it will be possible to apply for the trades licenses at a later stage, i.e. after the company has been registered in the commercial register. In case the corporation has not obtained the trades licenses within one year and its only scope of business is entrepreneurship, the court might dissolve such company.

Taking into account that the proposed changes mostly implement provisions from several EU directives on digitalization into Czech law, it is highly probable, that they will be adopted by the Czech Parliament.

By Mgr. Denisa Molnár

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