Company Liquidation in the Czech Republic
Company Liquidation in the Czech RepublicUpdated on Thursday 26th November 2020
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The business environment in the Czech Republic is appealing to numerous investors from abroad who decide to set up their operations in varied fields. There are cases in which companies do not perform as expected, therefore, the subject of company liquidation enters into the discussion. For a better understanding of how a company can be closed, we invite you to talk to one of our Czech lawyers who can explain the legal aspects. Also, our team can help foreign investors in business-related matters and company formation.
What is liquidation in the Czech Republic?
Liquidation implies the process of termination of a firm, its assets being sold and any remaining assets of the company being distributed to the shareholders. A Czech lawyer should usually be contacted so as to proceed with ending a business in the Czech Republic, as this process can sometimes be rather delicate.
Procedures of a Czech company's liquidation
There are some procedures that must be followed in a liquidation process in the Czech Republic, namely:
- analyzing the state of the company (financial related matters);
- filing the tax return from the date of entering the liquidation process onwards;
- appointment of a company liquidator in agreement with the applicable legislation in this sense;
- auction sale of the property in liquidation, whether on a local plan or abroad;
- drawing up of the company's balance sheet (a team of accountants can help in this matter);
- obtaining confirmation from the district social security administration company with no outstanding payments;
- acquiring the approval of the liquidation of the Czech company from the tax authority.
Our law firm in the Czech Republic can make sure that you are assisted and provided with the necessary information throughout the liquidation process.
What is a voluntary company liquidation in the Czech Republic?
According to the Commercial Code of the Czech Republic, voluntary company liquidation may be instituted if the legal structure chooses to take another legal form, if the term of the company has expired, if the goals of the company have been reached, etc.
What is an enforced company liquidation?
An enforced company liquidation is usually ordered by the court when the legal entity is in bankruptcy and when the company lacks a reserve fund. In case the reason for which the court decides to liquidate the company can be solved, the decision may be canceled. Liquidation is thus one of the forms of company dissolution and it is not necessarily instituted due to bankruptcy. Ultimately, the Czech company is deleted from the Commercial Register so as to complete the liquidation process.
What happens before the liquidation process starts?
One should know that the company liquidation in Czech Republic starts with a verification in this sense: the company’s debts, the assets and the list of creditors for which the payments have not been made. There are cases in which the existing assets can be distributed in accordance with the registered debts, but there are also situations in which the company cannot comply with the liabilities involved. In this direction, the firm needs to file for bankruptcy.
How long does the liquidation process take in the Czech Republic?
Company liquidation in the Czech Republic is a procedure that takes approximately 4 months no matter if the firm is small, medium or large. We remind that for starting this process you can ask our Czech attorneys for legal assistance.
The costs of company liquidation in the Czech Republic
Companies which no longer have activities on the market in the Czech Republic need to pay a fee of approximately CZK 35,000, but costs might vary, depending on the assets and liabilities involved.
Applicable legislation in a company liquidation
Companies in the Czech Republic can be closed in complete respect with the Civil Code and Act no. 89/2012, the Commercial Companies and Cooperatives, particularly the Act no. 90/2012. These regulations can be entirely explained by our Czech lawyers who can also provide the needed legal advice if you are interested in closing the business in this country.
Reasons for voluntary termination of the company
There are companies registered in the Czech Republic which activate for a specific period of time. If that period expired, the company can be terminated by using the voluntary method. The decision is normally issued by the relevant board of managers in agreement with the owners of the firm. Also, if the company achieved the business goals for which it was registered in the first place, then the owners can decide on company liquidation in the Czech Republic. Voluntary liquidation of the company may be suggested or may intervene in the case of mergers, property and assets transfers to another company or stockholder. We remind that any change in the company, whether it is related to a structural change or to company liquidation, needs to be presented to the entitled bodies in charge of business formation. It is recommended to ask for legal support in other to properly understand the regulations in these aspects. As for the involuntary company liquidation, this may intervene when illegal activities have been detected and affected the public order. Also, if the trading or the business license expired and if the activities cannot be carried out in this country, the company liquidation is imposed.
Dissolution without company liquidation in Czech Republic
The transformation of a legal entity or the transition to the legal successor can be made without having to consider the company liquidation. The regulations in this sense are comprised by the Act on Transformation and particularly the Act no. 125/2008 on the transformation of business companies and cooperatives in the Czech Republic. In this matter, the Commercial Register in the Czech Republic needs to be informed by the future changes as soon as the day of filling the petition to make the transformation is settled. It is extremely important to minimize the potential risks in a company liquidation and make sure that all the regulations are entirely respected, in compliance with the legislation and with complete attention on the protection of the company owners. This is where our specialized lawyers in company liquidation in the Czech Republic can provide comprehensive legal assistance.
Liquidation of sole proprietorship in Czech Republic
Sole traders in Czech Republic can close the business if there are no profits or if the direction of the activities is not as expected. In this case, the sole proprietor can cancel the business or can delay the operations for a specific period of time. The next step is to announce the authorities about your decision and particularly the Tax bodies and the Social and Medical Funds, in order for you to have a break from the taxes and liabilities in the Czech Republic. The sole proprietorship can be closed as soon as an accountant provides the necessary financial information and support. All the records need to be up to date, a complete financial analysis is normally issued by your accountant alongside a tax declaration which needs to be submitted before the business is liquidated. Closing a sole proprietorship is not subject to restrictive or harsh formalities, however, it is suggested to consider the legal advice of Czech lawyer. Feel free to get in touch with us at any time.
Involuntary dissolution of a company
A person can propose to the Czech authorities regarding a company considered having illegal activities or for disturbing the public order. This is where the involuntary resolution on termination of company activities can intervene if such a decision is made in the court of law. The authorities can order the liquidation of such a company if the company did not have operations for the past year, or if the business license expired. According to the legislation, the company can be declared invalid if the legal deeds are missing, if the business was established by fewer persons than necessary or if the Articles of Association were not created in respect with the applicable laws. This is a sensitive topic, yet, if you find yourself in this position, please feel free to discuss all the legal aspects with our Czech attorneys.
Choosing our specialists for company liquidation in Czech Republic
Company liquidation can be a complex process that requires complete attention and legal assistance offered by a specialist in this field. The procedures will depend on the type of company, legal form, operations, and of course, the reasons that stand at the base of such a decision. Our specialized Czech lawyers know how the company liquidation takes place, based on the grounds and specific reasons for such an important decision. A series of documents will be required for company liquidation in Czech Republic, plus other important steps, like announcing the tax authorities for the determination of closing the company. Our experts will work closely with the local authorities and will act in the best interest of the clients. We have experience in this field and customers can rely on our help, guidance, and professionalism.
Making investments in Czech Republic
The Czech Republic is open for business in a wide range of developed sectors. International entrepreneurs already thrive and enjoy their profits in sectors like tourism, IT, pharmaceutical sector, retail, manufacturing, financial, and insurance, to give a few examples. The Czech government sustains the foreign direct investments through all sorts of incentives and encouragements designated to international entrepreneurs. The main target is to attract foreign investors in a large number by providing an excellent business climate. So far, the Czech Republic attained this scope, thanks to the attention and concentration on the business environment and the benefits for foreign entrepreneurs. We have gathered some interesting facts and figures that highlight the business direction of Czech Republic:
- The total FDI stock was around USD 171 billion in 2019.
- The total value of greenfield investments stood at USD 2.3 billion in the same year.
- More than half of FDIs in the Czech Republic was directed to the manufacturing sector.
- The Netherlands represents the main investor in this country.
- According to the 2020 Doing Business report issued by the World Bank, the Czech Republic ranks 41st out of 190 economies in the world.
FAQ about company liquidation in Czech Republic
1. How can I close a company in Czech Republic?
Ending a business in Czech Republic is made under the rules of the company liquidation process.
2. Is a company liquidator appointed in this matter?
Yes, one of the requirements for closing a company is to appoint a company liquidator in respect to the country’s legislation.
3. Can I close the company through the voluntary procedure?
Yes, voluntary company liquidation is permitted in Czech Republic.
4. Can a court decide on enforced company liquidation?
Yes, an enforced company liquidation is imposed for bankrupt companies in the Czech Republic.
5. How long does it take to close a company?
It takes approximately 4 months to close a company in the Czech Republic, however, the period might prolong, depending on the company type. Feel free to solicit legal assistance if you are interested in company liquidation in the Czech Republic.
6. Is the sole proprietorship liquidation process hard?
No, sole traders in Czech Republic should not worry about the liquidation of their business. In most cases, if the business is not successful the owner can request liquidation. One must announce the tax authorities about the decision.
7. Is voluntary liquidation available for joint-stock companies in Czech Republic?
Yes, joint-stock companies in Czech Republic can be voluntarily liquidated, if the board of managers and owners agree. Also, the same method applies in cases of property transfers, or business mergers and acquisitions. Complete assistance can be offered by our specialists.
8. What the legislation applicable to company liquidation in Czech Republic?
Act no. 89/2012 of the Civil Code and Act no.90/2012 of the Commercial Companies and Cooperatives comprise the legal framework for company liquidation in Czech Republic.
9. How much the company liquidation cost?
Around CZK 35,000 is the cost for company liquidation in Czech Republic. Our Czech lawyers can tell you more about this aspect.
10. Do I need a specialist to close my company in Czech Republic?
Yes, it is recommended to have legal support by your side when closing the company. Some aspects might require specific verifications only an experienced lawyer can do. You can solicit the legal advice of our Czech lawyers for company dissolution.
Should you need assistance or advice on company liquidation in the Czech Republic, you can contact our Czech lawyers, as they have the required expertise in these matters.