Legal entities as statutory or supervisory bodies of corporations and cooperatives following a major amendment to the Czech Business Corporation Act

Fundamental changes to reasons for disqualifying legal entities from acting as statutory or supervisory body members of corporations and cooperatives and registration of such entities in the Commercial Register following a major amendment to the Business Corporations Act effective from 1 January 2021

A major amendment to the Business Corporations Act will come into effect on 1 January 2021, significantly expanding the reasons for disqualifying legal entities from acting as (members of) statutory or supervisory bodies (hereinafter the “elected bodies”) of corporations and cooperatives (hereinafter the “corporations”) and imposing stricter conditions for their registration in the Commercial Register. This is relevant not only for corporations, the shareholders of which decide to appoint, as an elected body, a legal entity after 1 January 2021, but also for corporations, in which legal entities currently act as or become members of elected bodies.

A legal entity will newly be required to authorise one specific individual to represent it as an elected body member. In case such individual is not authorised within three months from the appointment of the legal entity as the elected body and such fact is not duly registered in the Commercial Register within the same period of time, the relevant legal entity will cease to act as the elected body. Moreover, a registration court will not register a legal entity as an elected body until its representative (i.e. an individual) is authorised.

If an individual authorised by a legal entity to act as an elected body member becomes ineligible to hold such office (e.g. due to his/her failure to comply with regulatory requirements for elected bodies, which may not even come to the attention of the legal entity in question), the legal entity will cease to act as the elected body, unless another individual is authorised to act as an elected body member within 3 months.

Corporations that currently have (or appoint in 2020) legal entities as their elected bodies should ensure that their respective elected body (i.e. a legal entity) authorised only one individual as its representative and that this fact was accurately registered in the Commercial Register. If this is not the case – i.e. there are several or no authorised individuals or general authorisation for legal entity’s statutory body only exists – corporations must remedy the situation and register the relevant change in the Commercial Register no later than 31 March 2021, otherwise the legal entity in question will cease to act as the elected body.

Source:
Act No. 33/2020 Coll. amending Act No. 90/2012 Coll., on Business corporations and cooperatives (Business Corporations Act), as amended by Act No. 458/2016 Coll., and other related acts
Act No. 90/2o12 Coll., on Business corporations, as amended
Act No. 89/2012 Coll., the Civil Code, as amended

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