Cash Pooling, the Czech Way

Czech Republic: “Shifting” money within a group of companies may trigger notification duties towards the Czech National Bank

Cash pooling has become a popular instrument for managing disposable cash in the bank accounts of companies belonging to one and the same group. Cash pooling is principally based on “shifting” money between individual bank accounts within the group in order to optimize interest or accumulate liquid funds. In terms of the technical implementation of cash pooling, one must differentiate between two basic varieties: “notional cash pooling”, in which the bank merely allocates fictitious interest to the respective balance of several group accounts, and “physical cash pooling”, which involves actual money transfers between accounts.

Even though Czech law provides no explicit cash pooling rules, cash pooling arrangements may still draw the attention of the Czech National Bank (ČNB). The supervisory duties of this central bank were modified substantially in August 2013, when decree No. 235/2013 Coll., pertaining to the submission of statements to the ČNB, came into force. The previous decree (No., 34/2003 Coll., regarding compliance with notification duties under the Foreign Currency Act) had explicitly cited cash pooling among those operations which need not be reported to the ČNB. However, the decree on the submission of statements to the ČNB no longer contains such an exemption. It sets forth an annual limit for funds received from or disbursed abroad, and when this threshold is reached, the relevant entity must compile the prescribed statements and submit them to the ČNB. The wording of the new decree does not expressly mention the term “cash pooling”, but the ČNB has stated that it will consider such operations within the limits drawn by the decree to be tantamount to loans. In other words, if the total volume of funds which a Czech entity received from or made available to an entity in another country amounts to CZK 100 million or more, then that entity must compile monthly debt financing statements and submit them to the ČNB. Failure to do so qualifies as an administrative offense, and carries a fine of up to CZK 1 million (to be imposed by the Czech National Bank).

Source: Decree No. 235/2013 Coll., pertaining to the submission of statements to the Czech National Bank by statistically significant reporting entities, for the purposes of preparing statistics on the international balance of payments, investment position and debt service

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