Czech SRO & Joint Stock Companies

We look at different types of Czech Company formations

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BY EXPATS.CZ
PUBLISHED 07.11.2005
LAST UPDATED 15.02.2006



Czech SRO & Joint Stock Companies



Written by Richard Gürlich
of GÜRLICH, ODROBINA & spol.



Even though the valid legal order takes into account a few types of business companies, in this article we will talk about the limited liability company, which is utilised most often, and we will also briefly mention the joint stock company. Other types of business companies are not utilised for the high extent of responsibility for the liabilities of the company (general commercial partnership and limited partnership), or for the high complexity (European company and European economic special-interest association).

As mentioned above, there are more than one way to become “an owner or co-owner of a business company”, namely its member or shareholder. It is possible to choose one of the following options:

1. forming of a completely new company
2. transfer of business share or shares in already formed companies (this way will be described in the following article)

1. Forming a new company

1.1. A company is formed by one or more founders. This can be both natural and juristic persons. The main task of founders is the preparation of a founding document of the company. The document must contain basic data about the company required by law, has to be written in the form of notarial record and signed by all founders of the company.

1.2. The next step is to pay up the registered capital of the company or its part according to law and relevant regulations of a founding document, and to provide other written documents that are necessary to put in a court that administers relevant Commercial Register together with petition for entry of the company into the Commercial Register.

1.3. The number of needed documents depends especially on the number of members of a founding company whether they are in the position as its members, or more precisely shareholders, statutory or other bodies of a company but also on the object of business activities of the business company or on the citizenship of persons who are to be the company´s statutory body or responsible representatives in relation to individual activities.

1.4. When founders keep all needed documents at their disposal, it is possible to file petition for entry into the Commercial Register. The company as a subject eligible to have rights and obligations comes into existence on the day when the company was registered in the Commercial Register.

1.5. We will give you the simplest case how to act when forming a new company as an example:

1a. forming a limited liability company by one founder, natural person, citizen of the Czech Republic: this person will be the only member and at the same time the executive (statutory body) of the company, the supervisory board will not be set up as one of the company´s possible bodies and for the operation of activity that is the object of business activity of the company, trading licence is not necessary, registered capital of the company will be paid up only through pecuniary deposit:

1a.1. writing the notarial record, which content shall be the full wording of the founder´s deed of the company;

1a.2 conclusion of the lease contract concerning the seat premises of a new company or obtaining a written content of the premises owner with placing the company´s seat there;

1a.3. setting-up of a bank account, in which registered capital shall be paid in the full amount;

1a.4. providing documents, which shall be put in the Commercial Register, extract from the rap sheet of the Czech Republic, affidavit and specimen signature of the executive of a company, consent of the founder with the entry into the Commercial Register, bank confirmation about paying in the registered capital and relevant confirmation of the deposit governor. The founder can be also a governor.

1a.5. filing a petition for the entry of the company into the Commercial Register, which shall be attested by at least the above mentioned documents.

As it is obvious from the above mentioned, forming a business company even in the simplest form requires preparation of a several documents, communication with notaries and if need be with other administrative authorities. It is necessary to remind you of the financial side of the whole transaction when the registered capital of the limited liability company amounts to at least 200,000. - CZK, and of the joint stock company amounts to at least 2,000,000. - CZK.

Even though we have made every effort to comprehend the whole process in this article, it is necessary to consider this as information on the basis of which you can have an idea about the realization of the whole matter. We stress this especially in relation to the fact that even a minute change in the above mentioned may call for the need of another document. The situation is even more difficult if it is a juristic or especially foreign persons who participate in the process.

On the other hand, Czech commercial registers are full of registered juristic persons, whether it is a joint stock company or limited liability company. Thus forming a business company is fairly normal.

Do you consider the above mentioned procedure so complicated that you are thinking of giving up your intention? There is no need for that.

If you buy a company that has been already formed (we will talk about this option next time), it is simpler. However, this variation is connected with certain risks resting in the fact that this company has existed for some time and is eligible to execute a business activity. But about this matter you will read more in the next article.


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