New Rules for Mergers

The latest amendment to the Act, on Transformations of Commercial Companies and Cooperatives introduces significantly enhanced efficiency and clarity of the transformation process.

Division by separation

Under the new division by separation (in Czech: vyčlenění) a company can separate a portion of its assets and liabilities and transfer them to one or more existing or newly established companies. In exchange, it receives shares in those companies. 

Fair Value

The amendment introduces alternatives to the previous requirement for expert valuation of assets. Companies may now opt for one of the following methods: (i) Fair value of assets. This is determined by a recognized independent appraiser, adhering to generally accepted standards and principles of valuation not more than six months prior to the registration of the transformation). (ii) Fair value as reflected in the audited financial statements. This may be applied, if in the preceding accounting period, the company valued its assets at fair value. In both cases, the statutory body of the company has to consent to the chosen method of valuation. 

Expert Appointment Flexibility

The appointment of the expert valuing the merged or divided assets is no longer done by the court. Instead, the participating companies may select an expert from a list maintained by the Ministry of Justice. 

Streamlined Publication Requirements

Companies are no longer required to publish the filing of the (de)merger project in the Commercial Gazette. Instead, companies now file the (de)merger project along with notification to creditors, employees and shareholders with the Collection of Deeds. Additionally, the notification must be published on the company’s website at least one month prior to the general meeting’s approval of the (de)merger. Alternatively, companies may register the basic data regarding the merger or division in the commercial register, publish the relevant documents on their website from one month before to one month after the general meeting’s approval and file the notification to creditors with the Collection of Deeds. 

Enhanced Creditor Protection

The amendment clarifies creditor protection rules. Specifically, it reduces the timeframe for creditors to submit their claims from six months to three months following the publication of the (de)merger project. Furthermore, the definition of claims eligible for security has been broadened to include future or conditional claims, provided they arise from obligations incurred prior to the publication of the (de)merger project. 

Cross-border transformations

The scope of the Act on Transformations has been expanded to encompass cross-border relocations of registered offices to and from countries outside the EU and EEA. The amendment simplifies the preparation of reports on cross-border transformations and introduces streamlined procedures for certain types of cross-border transformations. Notably, notaries are now required to refuse issuance of certificates for cross-border transformations if they suspect the purpose is abusive or fraudulent, intended to circumvent national or EU legislation, or associated with criminal activities. In cases of serious suspicion, the notary may seek assistance from relevant public authorities. 

Conclusion

This amendment is a positive development, as it addresses several shortcomings of the previous legislation, simplifies the process for cross-border transformations and reduces the administrative burdens and costs for the companies involved. However, the true effectiveness of these changes will only become apparent once they are implemented.

By Mgr. Denisa Molnár

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