Establishing companies online in Czechia – another step towards full digital governance

The EU Digitalisation Directive makes it possible to create a company (and pay up the company’s capital stock) remotely from anywhere, even one’s garden or cottage, as long as the founder has internet access.

On 31 July 2019 the Digitalisation Directive (Directive (EU) 2019/1151 of 20 June 2019) came into force which introduces unified rules for establishing companies, entering branch offices into the relevant public register, and lodging official documents and mandatory data online.

The Directive’s primary purview rests on limited liability companies, seeking to make it easier to set up companies and to foster entrepreneurial activities by reducing costs, shortening processing periods, and lightening the administrative burden. As for joint-stock companies, all depends on whether the lawmaker will make use of the option not to apply the online incorporation tools to them.

In connection with the online establishment of companies, the Czech Republic will have to create a detailed rulebook and set up a Single Digital Gateway which includes a template for standard foundation deeds (though company founders should also have the option to use their own language for the foundation deed).

The defining characteristic of the online procedures envisioned by the EU Directive is that they do away with the need for company founders to appear in person before a notary. An online option must exist for all individual steps along the way, such as drawing up the foundation deed and other documents, obtaining a business license, and paying up the registered capital. In this respect, the EU Directive introduces an important new feature: the possibility to pay up the capital stock of the company via cashless transfer into a bank account administered by a bank established in the EU.

In order to expedite the entire process, the online establishment (and incorporation) of a company should not be made conditional upon first obtaining a trade license or other license or concession, i.e., these documents could be procured only afterwards (once the company has been entered in the Commercial Register). As an exception, national law may require proper supervision over certain lines of business, especially in industries which are subject to more stringent regulation.

The legislative agenda of the Czech government for 2020 includes a law for implementing the provisions of the EU Directive into Czech law, informally referred to as bill for an amendment to Act No. 304/2013 Coll., on public registers of legal and natural persons and on public records of trusts, as amended, and certain other laws. Submission of the draft bill to the government is slated for November 2020; the bill is expected to be written into law no later than by 1 August 2021, in accordance with the Directive.

Directive (EU) 2019/1151

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