The amendment of the Act No. 513/1991 Coll., Commercial Code, as amended (hereinafter referred to as the “CC”), which entered into force as of January 1, 2012, introduced several important changes to business law in the Czech Republic. We would like to hereby provide you with a list of the most important ones:
1. Concurrence of executive and employment positions
These changes react to the judgment of Supreme Administrative Court of Czech Republic, file no. 3 Ads 119/2010, which it generally did not allow executives of a company to be employed by the same company as employees with decisive powers.
As of January 1, 2012, the CC explicitly states that one person can be employed as a director of a company and be an executive of the same company at the same time.
2. Change of the provision against conflict of interests
Substantial changes affected Section 196a of the CC which regulates the possible conflicts of interests.
As of January 1, 2012, the CC explicitly states that value of a guaranty does not have to be determined by an expert in cases when the guarantor is a founder, or shareholder, or a person acting in concert with a founder or a shareholder.
The amendment also changed the requirements for situations when the company is securing obligations of a member of the Board of Directors or Supervisory Board, of a proxy or other person that is authorized to act on behalf of the company. As of January 1,2012 such security does not have to be provided under conditions that are common in business relations and the only remaining requirement is the approval by the General Meeting. Such approval by the General Meeting does not have to be provided prior to the provision of the respective security anymore.
A new paragraph 6 in has been added to the Section 196a of CC. This paragraph protects an acquirer who acquired the property in a good faith from a person who acquired the same property in breach of Section 196a of CC. In general, the principle of protection of a bona fide acquirer is gaining precedence over protection of ownership right of the original owner in the Czech law.