Financial statements or your life… A few observations on the amended Public Registers Act

Current law already allows for the punishment of corporations which fail to properly lodge their financial statements in the roll of deeds at the Commercial Register, but even so, a substantial number of legal entities keep disregarding this duty. A recent proposal for an amendment seeks to change this sorry state of affairs.


Under current law, businesses must file their financial statements (and, where relevant, their annual reports) with the Commercial Register within 12 months from the respective balance date. These documents are then lodged in what is known as the “collection of deeds”. They are publicly accessible so that third parties have the opportunity to familiarize themselves with the economic standing and performance of the given corporation during the period of interest.

Current law also provides that if business corporations fail to observe this filing duty, they may be fined up to CZK 100,000; or up to 3% of their total asset value (under the Accounting Act); or if further requirements set out in the law are fulfilled, they may even be dissolved and liquidated. Considering these fines, dissolving and liquidating corporations which do not even have the assets to cover the costs of liquidation, is a costly and inefficient affair, which is why the courts rarely make use of this sanction in practice.

This is about to change, however, thanks to a government-sponsored bill amending the Corporations Act and the Public Registers Act. In line with the government’s proclaimed intention to increase transparency in business, this amendment seeks to prevent corporations which have no economic life of their own and exist merely formally (in the records of the Commercial Register), through stiffer penalties for failure to lodge annual financial statements and reports. In this respect, the register court will let its actions be guided by whether or not the corporation is “responsive”, i.e., whether it can successfully be served notice wherein the court calls upon the company to submit the missing financial statements so that these can be lodged in the collection of deeds (whereas the usual legal fiction of delivery will be excluded).

Corporations which can be successfully served process in this sense are assumed to be economically active and “merely” in default with their duties of disclosure. The amendment bill envisions that such companies are then brought to order by being hit with a fine.

Conversely, if the register court summons cannot be served, the dissolution procedure is supposed to be initiated (whereas the commencement of this procedure will be automatically flagged in the Commercial Register entry for the company). Unless the procedure reveals that the company in question has at least enough assets to cover the liquidation costs, the register court will order the company to be dissolved without liquidation. In the opposite case, the corporation will be dissolved and liquidated.

On the whole, the amendment seeks to declutter the Commercial Register by removing those corporations which lead a merely formal existence (and which moreover are easily exploited as a means to commit white-collar crime).

Accounting Act (Act No. 563/1991 Coll.)
Public Register Act (Act No. 304/2013 Coll.)
Parliamentary press 270/0 – government bill for an amendment to Act No. 90/2012 Coll. and related laws

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