Czech Republic reforms business law
19 April 2021 - On 1 January 2021 an amended Business Corporation Act came into force. There are a number of changes under the new legislation that need to be highlighted:
- Profit distribution may be done either via ordinary or extraordinary financial statements, approved by the supreme body of an entity until the end of the financial year end;
- Advance payments for the profit share that may be paid out during the accounting term are allowed only on the basis of interim financial statements;
- If the legal representative of the company is a corporate body, it is obliged to appoint an individual by 31 March 2021, otherwise the office of the legal entity will be terminated;
- An Executive Service Agreement (i.e. agreement between legal entity and Director) has to be made in writing and approved (including its amendments such as wording change, director’s remuneration or any additional provisions) by the supreme body of the company (i.e. by the General Meeting).
- Provided that the amount of all cash contributions does not exceed CZK 20,000, it would be possible to pay a monetary contribution to a limited liability company;
- The only mandatory body of a joint stock company with a single tier system will be the Administrative Board, which will be responsible for business management and supervision of the company’s activities. Furthermore, it is possible to determine in constitutional documents companies’ shares are carrying the right to appoint and recall one or more executive directors or members of the Board of Directors.