What is the main source of law authorising this entity form?

90/2012 Coll. Act on Commercial Companies and Cooperatives (Business Corporations Act).

Give a brief summary of this entity form, including

Does the entity possess separate legal personality?

The a.s. has legal personality;

(Maximum) period of existence

There is no maximum period of existence. If the time for which a legal person is formed has not been provided, it is conclusively presumed to have been created for an indefinite period;

Governing document(s)

The governing document is the Articles of Association (stanovy) (which require the form of an authentic instrument, which means a notarial deed);

Liability of incorporators / shareholders

Shareholders are not liable for the company’s debts. Except in the case of dissolution of the company by liquidation in which case the shareholders are liable for the company’s debts up to the amount of their share of the liquidation balance;

(Governing) bodies

The supreme body is General Meeting (valná hromada);

The a.s. can be established in either a dualistic or a monistic system;

In a dualistic system, there are a Board of Directors (představenstvo) and a Supervisory Board (dozorčí rada); and

In a monistic system, there is only an Administrative Board (správní rada).

Other particularities

NA

Can this type of entity be involved in international transactions and restructurings (e.g. cross border mergers, asset acquisitions, equity acquisitions, etc.)?

According to Czech law, cross border restructurings are a merger, separation, transfer of assets and seat transfer.

The a.s. can be involved in international restructurings between EU Member States.

Can this type of entity be publicly listed or held?

Yes, the a.s. is the basic entity which is on a public exchange.

Can this type of entity be used for a non-profit or charitable organization?

No, common forms of a non-profit organisation are association (spolek), benevolent association (obecně prospěšná společnost), social cooperative (sociální družstvo) or foundation (nadace).

Give a brief summary of the process of incorporation, formation, or organization, including

Main documents required

The main document is the Articles of Association. It requires the form of an authentic instrument which means a notarial deed.

Involvement of notary, company register, governmental authorities

The Articles of Association include the objects or activity of the company.

The company has to arrange the company’s business licence.

Within six (6) months after establishment, it is necessary to submit the application for registration of a company in the Commercial Register.

Timing (estimate)

The company can be established within two (2) weeks, including its incorporation in the Commercial Register.

Main costs, including registration and similar fees (excluding legal fees)

The main costs are the notaries’ fee, the application fee, the fee for the company’s business licence and the required monetary contribution to the registered capital.

Is a description of the anticipated business or purpose of the entity required for incorporation, formation or organization?

Yes, a description of the anticipated business is required for the process of incorporation.

All steps can be made by a lawyer acting based on a power of attorney (verified/notarised signature(s) required).

Minimum number of incorporators / shareholders and residency requirements

There must be at least one (1) funder (incorporator) and there are no residency requirements.

Minimum number of directors (or other applicable officers) and residency requirements

In a dualistic system, the Board of Directors consists of three (3) members unless provided otherwise in the Articles of Association (the minimum number is one (1)).

In a monistic system, the Administrative Board consists of three (3) members unless provided otherwise in the Articles of Association (the minimum number is one (1)).

Minimum share capital, or equivalent, and payment requirements (including opening a bank account)

The registered capital shall amount to at least CZK 2,000,000 or EUR 80,000. A monetary contribution shall be paid into a designated account held with a bank or a savings and loan cooperative to be opened by the contribution administrator. A contribution in kind must be contributed to the capital company prior to its incorporation.

Is the physical presence of incorporators / directors required in the jurisdiction for incorporation, formation or organization?

No, the process of incorporation may be done by virtue of a power of attorney (verified/notarised signature(s) required).

Is a tax identification number, or equivalent, required? If so, how is it obtained?

A tax identification number is required and is obtained pursuant to registration with the tax administration. It is received in the form of a certificate.

What is the title of the applicable company registry?

The Commercial Register (Obchodní rejstřík), which is held by respective Regional or Municipal courts, depending on the registered office of the company.

What types of information must be filed at the (company) register, and which of them will it be publicly available, e.g.: Articles , Ownership identification (direct and/or indirect ownership, 'beneficial owners') , Group structure , Share capital , Directors , Accounts , Insolvency, good-standing, liquidation , Liens and encumbrances on the shares , Liens and encumbrances on assets of the entity , Other (e.g. litigation, tax matters)

Information listed below must be filed at the Commercial Register and be publicly available:

• Articles of Association;
• Company’s trade name and seat;
• Legal form;
• Date of incorporation and dissolution;
• Identification number;
• The objects and activities of the company;
• Executives, including their date of birth and address details, and the manner in which they act on behalf of the company
• Details about control authority and corporate agent;
• Amount of registered capital;
• Details about the enterprise;
• Suspension of the execution of the function;
• Details about shares;
• In case the a.s. has sole member, identification including date of birth and residency in case of natural persons and identification No. and seat in case of legal persons;
• Insolvency and liquidation etc.;
• Annual accounts; and
• Notice of dissolution proceedings.

Additionally, information regarding beneficial owners must be filed (or be recorded automatically from other public registers) at the Register of Beneficial Owners and be publicly available including:

• First and last name;
• Date of birth (only month and year is publicly available);
• Address details (only state of residence is publicly available);
• Citizenship;
• An indication of the nature of the beneficial owner's position (whether the beneficial owner has a relevant interest in the voting rights or profits or exercises controlling influence in the parent company (if applicable));
• Beneficial owner’s status – real or substitute;
• An indication of the size of the beneficial owner's direct or indirect interest or profit, when that interest or profit establishes his position; and
• The day from which the individual is the beneficial owner.
• The date until which the natural person was the beneficial owner.

What is the title of the executive body and its members? What are their main duties, tasks and responsibilities?

In a dualistic system, the executive body of a company is the Board of Directors. In a monistic system, it is the Administrative Board.

Apart from the representation of the company and the management of the company’s business, it ensures the books are properly kept, and that a register of shareholders is administered, submits financial statements and proposals on profit distribution or coverage of loss to the General Meeting for approval. A Member of the executive body must, without undue delay after becoming aware of any change in the Articles of Association, draft the full text of Articles of Association including any changes and deposit it, together with the documents proving the change, in the Commercial Register's collection of instruments (sbírka listin).

How are the members of the executive body appointed, dismissed and replaced?

In a dualistic system, the Board of Directors is elected and recalled by the General Meeting, unless it is determined in the Articles of Association that the same falls within the powers of the Supervisory Board. The Articles of Association can also determine that the right to appoint and recall one (1) or more members of the Board of Directors is attached to a particular share.

In a monistic system, the Administrative Board is elected and recalled by the General Meeting, unless it is determined in the Articles of Association that the right to appoint and recall one (1) or more members of the Administrative Board is attached to a particular share.

Is it possible to appoint corporate directors or must all directors be natural persons?

Yes, however in this case a representative who is a natural person must be appointed by the legal entity. The representative acts on behalf of the legal entity as a member of the executive body. Both the legal entity and its representative shall be registered with the Commercial Register.

Is there a requirement to have non-executive directors? How are they appointed, dismissed and replaced? Do non-executive directors serve on a separate body (two-tier structure) or can a one-tier board (with executive and non-executives) be appointed, or is some alternate structure used?

The a.s. can have non-executive directors. In a monistic system, they would be in a separate body. The same applies in a dualistic system. Means of recall and appointment of non-executive directors shall be specified in the Articles of Association.

What is the title of the body of owners / shareholders / members, and what are the main tasks / responsibilities / powers of that body?

The body of shareholders is the General Meeting. It decides in particular on the contents of the Articles of Association, on changes in the amount of registered capital, appointment and recall of Members of the Board of Directors, Supervisory Board, or Administrative Board. The General Meeting primarily approves financial statements, decides to transform the company, or dissolve the company by liquidation and also decides to distribute profit. The General Meeting cannot reserve the right to decide in relation to maters which fall within the powers of another body of the company.

What are the majority and quorum requirements for decisions by the shareholders? Can they be varied or changed?

The General Meeting decides by a simple majority of votes of the present members, unless the Articles of Association or the law state otherwise. However, to approve some decisions, a majority of two-thirds of the votes of all members is required, in particular in case of decision on the contents of the Articles of Association, dissolution of the company by liquidation or the distribution of the liquidation balance. There are also other special provisions, e.g. to increase the registered capital with contributions in kind the majority of at least three-fourths of the votes of the present shareholders is required. Same applies in case of decision on restriction of transferability of registered shares, where a majority of three-fourths of present shareholder owning the aforementioned shares is required. The Articles of Association may also require a greater majority for specific decisions. The quorum requirements are met if shareholders owning shares the nominal value or number of which exceeds 30 % of the share capital are present, unless otherwise specified in the Articles of Association.

Any special governance regimes (e.g. depending on size, being listed at a stock exchange, or other criteria)?

Not in general. However, other legal regulations than Business Corporation Act may require special governance regimes e.g. in connection with special object of business e.g. banks, funds, companies operating on the capital market etc.

What are the periodic accounting obligations incumbent upon the entity? To whom must those accounts be submitted?

A company creates the financial statements which have to be approved by the General Meeting. The ordinary financial statements have to be done no later than six (6) months after the last day of the past accounting period and have to be filed with the collection of instruments of the Commercial Register.

Is the entity permitted to determine its own financial year?

Yes.

Is the entity subject to any statutory (external) auditor obligations?

The obligation to have a statutory auditor depends on the number of employees, the annual net turnover, and the assets.

Requirements to appoint other persons (officers, secretary, internal auditor / accountants). If so, what are their functions? Are there any residency requirements?

In a dualistic system, the Supervisory Board supervises the exercising of powers by the Board of Directors and the company’s activities. In case of a joint-stock company with over 500 employees and a dualistic system, the number of members of the Supervisory Board needs to be divisible by three (3) – one-third is to be appointed by employees, two-thirds by the General Meeting. There are no residency requirements that apply to members of the Supervisory Board.

What is the title designated for ‘ownership interests' (e.g. shares, quota, interests, membership)?

Shares (akcie). For the sake of completeness, the law distinguishes between registered and bearer shares (relevant especially because of different transfer methods). Bearer shares shall only be issued as immobilised securities or as book-entry securities.

Are different classes of ownership interests possible? If so, what are some examples of different classes?

Czech law allows shares with special rights (e.g. different fixed or subordinated profit shares or shares in the liquidation balance, and/or different vote).

What documentation is required for the transfer of ownership interests?

In case of registered shares, the conclusion of the share purchase agreement is required (written form is not necessary, however is recommended). Following the conclusion of the agreement, the registered share is transferred by endorsement and physical transfer to the transferee.

In case of bearer shares, the conclusion of share purchase agreement is required (written form is not necessary, however is recommended). Following the conclusion of the agreement, bearer share is transferred by a change of shareholder in the respective evidence.

Are there any additional formal requirements required for the transfer of ownership (notary, approvals, stamping, filings, corporate records)?

The change of the shareholder of the registered share shall be notified to the company and shall become effective by presenting the registered share to the company’s member of the executive body. The transfer could be subject to the consent of a company body (in particular of the General Meeting).

A bearer share is fully transferable without restriction. The transfer has to be evidenced to the company with an extract of the shareholder’s account, or on the date of delivery or acceptance of an extract from the share issue register.

Are there any applicable stamp duties imposed when transferring ownership interests?

No.

How are shares issued? (including information on payment obligations, registration requirements)

Information about shares (number, issue price, the method of payment and the period within which the issue price is to be paid) are included in the Articles of Association. The capital increase must be adopted by the General Meeting (the decision has to have the form of a notarial deed) and registered with the Commercial Register.

Further information on equity contributions, e.g. , Non-cash payments on shares; (Share premium) contributions without issuance of shares , Can partially paid shares/ownership interests permitted and what are the restrictions on them?

It is possible to contribute by an item the value of which can be expressed in monetary terms, which is called the “contribution in kind”. The value of a contribution in kind must be specified in the Articles of Association of the business corporation and must be based on evaluation made by an expert. Contribution in kind cannot consist of work or services.

Share premium contributions are possible.

Any requirements with respect to share cancellation, share repurchase and other capital reductions

A company’s registered capital may not fall below the level provided for in the Business Corporation Act.

A decrease of the registered capital shall not impair the collectability of the creditors’ receivables. Therefore, notice of a decision of the General Meeting to decrease the registered capital has to be given to known creditors and has to be published at least twice.

For decreasing the registered capital, the company firstly uses its own shares in its possession. The other methods are decrease of the par value of shares or interim certificates, withdrawal of shares from circulation on the basis of drawing lots, withdrawal of shares from circulation on the basis of a public bid or refraining from the issue of shares.

The a.s. can acquire its own shares when specific conditions set out by the Business Corporation Act are met.

Any requirements with respect to distributions to shareholders?

A profit share is determined on the basis of the financial statement approved by the General Meeting. It can only be distributed among the members, unless provided otherwise in the Memorandum of Association. If the share carries a right to a fixed share in the profit, no decision of the General Meeting on its distribution is required.

Decisions to pay a profit share are made by the executive body.

Profit may not be paid if the same could result in insolvency of the a.s. under another legal regulation.

Can the owners or shareholders adopt a restrictive or governing agreement among themselves such as a Shareholders Agreement?

Yes, such agreements are allowed.

Which are the typical annual maintenance costs of maintaining the existence and legal good standing of such an entity (excluding legal fees)?

The a.s. has to maintain its business address and have executives. At least once every accounting period (which is usually one (1) year), the General Meeting has to be convened. Also, expenses covering bookkeeping and other expenses associated with preparation of the tax returns occur.

What are the general corporate tax rates? (Specify if there is a national versus local distinction).

The corporate tax rate is 19 %. There is no local distinction.

Summary of any specific matters, e.g. recent or prospective major legal developments

At the end of 2016, an amendment of the Criminality Liability Act expanded the scope of criminal liability of legal entities. The legal entities themselves are liable for almost all crimes under the Criminal Act.

From 2017, legal entities are themselves liable for administrative offenses (přestupky) under the Act on Liability for Offenses and the Procedure of Offenses.

From 2018, all legal entities registered in the Czech Republic have a duty to disclose information about their beneficial owners to the register courts via Register of the beneficial owners. The beneficial owner is defined as any natural person who may de facto or legally directly or indirectly control the legal entity or benefit from such entity. The system of beneficial owners is based on the EU AML Directive (Directive (EU) 2015/849) as amended by Directive (EU) 2018/843. From June 2021, there are new sanctions of up to CZK 500,000 (approx. EUR 21,325) imposed on entities that do not disclose their beneficial owners. Furthermore, if the beneficial owner is not disclosed in the register, he cannot exercise his voting rights at the General Meeting and the company cannot pay a profit share to such person.

From July 2023, conditions of performance of office change. Persons who are to become executives or members of the supervisory board (if established) are not eligible for the office (i) if disqualification of holding of office has been imposed on them by court or other public authority, (ii) the prohibition of exercise of activities relating or similar to the company’s object of activity has been imposed on them by court or other public authority (iii) they have been convicted of certain criminal offenses and there has been no acquittal, and (iv) for the declaration of bankruptcy on their assets. Following the change in the conditions of performance of office, the evidence of disqualified persons (evidence vyloučených osob) is established and the eligibility for performance of office shall be investigated by the notary or registry courts (rejstříkový soud).