Czech Commercial Code
Czech Commercial CodeUpdated on Sunday 26th January 2020
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The Czech Commercial Code has been modified in 2012 and it became effective from 1st of January 2014. The Czech Parliament also modified the Civil Code and the Commercial Companies and Cooperatives Act. Foreign investors interested in opening a company in Czech Republic should know the stipulations applicable to businesses set up here. Our Czech lawyers can provide you with a detailed presentation of the Commercial Code's provisions and can help entrepreneurs establish the business presence in this country.
Reserve fund and power of attorney in the Czech Commercial Code
The new legislation has changed the way in which a lawyer can act on behalf of a client; as such, a lawyer who needs a special form to represent his or her client, such as the notarial form applicable in the case of amendments to the Articles of Association, will have to receive the power of attorney through a notarial form. The notarial form will have to be issued only by a Czech notary. The new Commercial Code is stating that companies set up in Czech Republic are no longer obliged to establish a statutory reserve fund. Our Czech law firm can offer you more details on this topic.
Changes to the Czech limited liability companies
The new Commercial Code brought significant changes to the statute of the limited liability companies. The Czech Corporations Act is now stating that the minimum capital of a limited liability company (LLC) set up in Czech Republic is of CZK 1, compared to the stipulations of the previous legislation, which required a minimum capital of CZK 200,000. The new Corporations Act states a new provision for the ownership interest of the company, in the sense that a company will be permitted to have more than one type of ownership interest.
The new legislation provides new regulations for the general meeting of a company. According to this, at a general meeting, all the proposed decisions to be discussed by the management will have to be listed. If they are not listed and they may appear in the general meeting discussions, they will be taken into consideration only if all the shareholders agree upon to present this topic; it is mandatory for all the shareholders to be present at the general meeting. Decisions taken outside the general meeting are allowed under the provisions of the Memorandum of Articles as long as they are provided in a written form.
How can I open an LLC in Czech Republic?
The Articles of Association stand at the base of LLC formation in Czech Republic. These are the company’s important documents that contain information like:
- • the name of the owners and their country of residence (whether from abroad or from Czech Republic);
- • the name of the business and information about further activities, whether established as a branch or as a new business;
- • the date of incorporation and the purposes of the company;
- • information about the minimum share capital and the contribution of each member;
- • the voting rights and other liabilities of the shareholders in the company.
What is the meaning of the commercial name?
According to the Czech Commercial Code, the business name is seen as the commercial name through which your company will operate on the market. We remind that the company formation starts at the Trade Register in the Czech Republic through the local offices. Legal support is offered by our Czech attorneys when starting a business in this country and when verifying a business name in order to avoid identical commercial names.
Can I set up a business as a sole trader in Czech Republic?
Yes, foreign or local business persons can decide on performing the activities under the rules of sole proprietorship in Czech Republic and in respect to the Commercial Code regarding the activities, and the administration of the business. Information and legal assistance in this sense can be provided by our Czech lawyers.
How do I register a trademark in Czech Republic?
The registration of a trademark in Czech Republic is made with the Industrial Property Office as long as it respects the general rules. It is forbidden to have the same visual identity as a company already registered in the Czech Republic. A trademark can be a graphical representation created with letters, colors, drawings, numbers, words, signs, etc. Registering a trademark means protecting your business from any infringements referring to your property rights ad to your business name and visual. In other words, once the trademark is registered, no other entity or business can use it within the territory of Czech Republic or abroad, according to the Commercial Code. All the formalities involving the registration of a trademark in Czech Republic can be solved by one of our Czech lawyers who is at your service with complete legal advice.
Contractual obligations of a Czech company
According to the Commercial Code in Czech Republic, companies with establishments in this country are obliged to collaborate with suppliers or providers only under the rules of an agreement. In other words, the business between two entities needs to be concluded with the help of a contract comprising the all the conditions of the business, the name of the parties involved, details about the services offered, the nature of the agreement, the duration of the contract, the fees agreed. The same contract must comprise information about the termination of the contract and the legal terms in case of litigation. It is important to know that if one of the parties involved in a business contract does not respect the terms and conditions involved, such contract can be terminated through litigation or by negotiating new terms and conditions. Business contracts might be complicated or might seem complex for foreign investors in the Czech Republic, so the legal support and advice of a Czech lawyer will prove extremely important.
The legislation of foreign investments in Czech Republic
Foreign investors are welcomed in the Czech Republic and can benefit from equality and protected rights, as stated by the legislation on foreign investments. This means that international entrepreneurs have the same rights as the local ones, mentioning that the authorities focus on the support provided in terms of business and investments. For instance, CzechInvest, the business and investment development agency in the Czech Republic which is supervised by the Ministry of Economy in this country implemented a strategy of five principles referring to the improved services for international investors, to the importance of research and development in varied fields, increasing the business activities outside borders, providing support for small and medium-sized companies and sustaining a permanent communication between the agency and other Czech authorities. Being aware of the importance of the investments in this country, the authorities introduced the “Welcome Package” that targets foreign investors who need to obtain the residence permits to make investments in the Czech Republic. In other words, the path to business development has been considerably simplified. If you need to know more about the legislation on foreign investments, feel free to address your questions to one of our Czech attorneys. They can also help you with VAT registration.
Why invest in the Czech Republic
The business opportunities are huge in the Czech Republic so it is quite normal for international players to choose this country for future operations and profits. The automotive industry, tourism, the manufacturing sector which represents about 40% of the country’s GDP and the agriculture sector are the main fields in which foreign investors can thrive. Even the tax regime in the Czech Republic is appealing to foreigners and that because the corporate income tax, for example, is set at a 19% rate, alongside the reduced CIT of 5% rate. More than that, foreign investors in the Czech Republic are protected by the provisions of the double taxation treaties, so that profits can be levied only once. Below you can find information, statistics, and facts about business and economy of Czech Republic:
- Approximately USD 9.48 million represented the FDI inflow of Czech Republic in 2018.
- According to “2019 Doing Business Report”, Czech Republic ranks 35th out of 190 economies worldwide.
- USD 155,024 million was the FDI stock registered in 2018.
- Non-EU entrepreneurs investing EUUR 1.9 million have the long-term residency granted.
If you need further information on the new Czech Commercial Code, please contact our Czech law firm for assistance in this matter.