What is the main source of law authorising this entity form?

Act No. 90/2012 Coll., on Commercial Companies and Cooperatives (Business Corporations Act), as amended (the “Business Corporations Act”).

Give a brief summary of the entity form:

Does the entity possess separate legal personality?

The a.s. has legal personality;

(Maximum) period of existence

There is no maximum period of existence. If the time for which a legal person is formed has not been provided, it is conclusively presumed to have been created for an indefinite period;

Governing document(s)

The governing document is the Articles of Association (stanovy) (which require the form of an authentic instrument, which means a notarial deed);

Liability of incorporators / shareholders

Shareholders are not liable for the company's debts. Except in the case of dissolution of the company by liquidation in which case the shareholders are liable for the company's debts up to the amount of their share of the liquidation balance;

(Governing) bodies

The supreme body is General Meeting (valná hromada);

The a.s. can be established in either a dualistic or a monistic system;

Other particularities

In a dualistic system, there are a Board of Directors (představenstvo) and a Supervisory Board (dozorčí rada); and

In a monistic system, there is only an Administrative Board (správní rada).

Can this type of entity be involved in international transactions and restructurings (e.g. cross border mergers, asset acquisitions and divestitures, equity acquisitions, conversions etc.)?

According to Czech law, cross border restructurings are a merger, division, transfer of assets and registered office transfer.

The a.s. can be involved in international restructurings between EU Member States or States of the European Economic Area.

Effective from July 19, 2024, the Czech a.s. may transfer its registered office to the country outside the EU Member States and European Economic Area.

A foreign legal entity (i.e. a legal entity not incorporated under law of the EU Member State or State of the European Economic Area) may transfer its registered office to the Czech Republic.

Can this type of entity be publicly listed or held, or its securities be issued to members of the public?

Yes, the a.s. is the basic entity which may be listed on the European regulated market.

Can this type of entity be used for a non-profit or charitable organization?

No, common forms of a non-profit organisation are association (spolek), benevolent association (obecně prospěšná

Give a brief summary of the process of incorporation, formation, or organization, including:

Main documents required

The incorporation of the s.r.o. consists of 2 phases, the first one being the establishment by adopting a Memorandum of Association. After the Memorandum of Association is duly executed in the form of a notarial deed, the founders fulfill their contribution obligation and other requirements by law (such as obtaining an approval from the owner of a premises to use the premises as a registered office) and after that the s.r.o. can be registered in the Commercial Register. The company becomes a legal person as of the date of the entry into the Commercial Register.

Involvement of notary, company register, governmental authorities

The s.r.o. is established by a Memorandum of Association. It requires the form of an authentic instrument which means a notarial deed. The Memorandum of Association includes in particular:

• company’s trade name,
• objects or activities of the company,
• identification of the shareholder(s),
• information on whether there is only one type of share or several types of share; where different types of business shares are permitted in the memorandum of association, the Memorandum of Association must include determination of the types of shares held by each shareholder and the rights and duties attached thereto,
• amount of contributions and amount of registered capital,
• number of Executive Directors and the way they act on behalf of the company,
• contribution obligation of the founders including the deadline for its fulfillment,
• person(s) to be appointed by the founders as first Executive Directors,
• contribution administrator.

Timing (estimate)

Any time after the establishment of the company by a Memorandum of Association but not later than before commencement of business, the company must notify a trade licensor or/and obtain a trade license.

The s.r.o. can be established and registered in the Commercial Register as fast as within one business day (by direct registration by a notary if all legal prerequisites are met). The “regular” registration procedure within the Commercial Register takes around 1-2 weeks. If the founders do not file the application for registration of a company within 6 months after the date of its establishment, it is presumed that the shareholders had withdrawn from the Memorandum of Association.

Main costs, including registration and similar fees (excluding legal fees)

The main costs are the notaries' fee (for drawing up the notarial deed and for the registration of the company in the Commercial Register), the application fee within the Commercial Register, and the fee for the company's business license.

A description of the anticipated business is required for the process of incorporation.

Is a description of the anticipated business or purpose of the entity required for incorporation, formation or organization?

All founders must be identified either personally, or by a facilitated identification (zprostředkovaná identifikace) when establishing a s.r.o. in accordance with the Act No. 253/2008 Coll., on Certain Measures Against Money Laundering and Terrorist Financing (the “AML Act”). All the subsequent steps to establish a company can be made by an attorney acting based on a power of attorney (verified/notarised signature(s) on the power of attorney required).

The s.r.o. can also be established online via virtual conference with notary. However, in this case, bank identity (bankovní identita) and qualified electronic signature (kvalifikovaný elektronický podpis) are required.

Minimum number of incorporators / shareholders and residency requirements

There must be at least one (1) founding shareholder (incorporator) and there are no general residency requirements, however, there may be specific restrictions based on the international sanctions in accordance with the AML Act and other applicable law.

Minimum number of directors (or other applicable officers) and residency requirements

In a dualistic system, the Board of Directors consists of three (3) members (unless provided otherwise in the Articles of Association, the minimum number is one (1)). The Supervisory Board consists of three (3) members (unless provided otherwise in the Articles of Association, the minimum number is one (1) unless the employees vote a member of the Supervisory Board – in such case the number of members must be divisible by three (3)).

In a monistic system, the Administrative Board consists of three (3) members (unless provided otherwise in the Articles of Association, the minimum number is one (1)).

Minimum share capital, or equivalent, and payment requirements (including opening a bank account)

The registered capital shall amount to at least CZK 2,000,000 or EUR 80,000. Opening a bank account is required by law, all monetary contributions shall be paid into a designated account held with a bank or a savings and loan cooperative to be opened by the contribution administrator. All contributions in kind must be contributed to the company’s capital prior to its incorporation.

Is the physical presence of incorporators/directors/shareholders required in the jurisdiction for incorporation, formation, or organisation?

No, the process of incorporation may be done by virtue of a power of attorney (verified/notarised signature(s) required). However, AML Act applies and therefore it is possible that the physical presence of the founder(s) may be required to comply with the AML Act.

Is a tax identification number, or equivalent, required? If so, how is it obtained?

A tax identification number is required, and it is obtained pursuant to registration with the tax administrator (správce daně) within 15 days of the company's formation. It is received electronically via data box (datová schránka). If the company fails to register itself with the tax administrator, the tax administrator will register the company automatically based on the law and delivers the company the decision of the tax administrator and the tax identification number via data box (datová schránka); there is no sanction if the registration is done ex offo by the tax administrator.

What is the title of the applicable company registry?

The Commercial Register (Obchodní rejstřík), which is held by respective Regional or Municipal courts, depending on the registered office of the company.

What types of information must be filed at the (company) register, and which of them will it be publicly available, e.g.: Articles or other formation document, Articles or other formation document, Group structure, Share capital, Directors, Accounts, Insolvency, good-standing, liquidation, Liens and encumbrances on the shares, Liens and encumbrances on assets of the entity, Other (e.g. litigation, tax matters)

Information listed below must be filed at the Commercial Register and be publicly available:

• Articles of Association;
• Company's trade name and seat;
• Legal form;
• Date of incorporation and dissolution;
• Identification number;
• The objects and activities of the company;
• Details about the members of the company’s corporate bodies, i.e. members of the Board of Directors and Supervisory Body or the Administrative Board, including their date date of birth and address details (or identification number and registered office in case the member of the corporate body is a legal person)
• Information on the way the executive body acts on behalf of the company,
• Information about the proxy (prokura), if applicable, and information about the person who is granted with the proxy (prokurista) including the name and surname, date of birth and address detail of the person granted with the proxy;
• Amount of registered capital,
• Detail about shares, in particular number of shares, the nominal value of each share, information about the form (i.e. whether the shares are registered shares or bearer shares and information whether they are issued as book-entry securities or immobilized shares);
• Details about the enterprise;
• Suspension of the execution of the function;
• In case the a.s. has sole shareholder, identification including date of birth and residency in case of natural persons and identification number and seat in case of legal persons;
• Insolvency and liquidation etc.;
• Liens and encumbrances in the interests and in assets of the entity, including negative pledge;
• Annual accounts;
• Notice of dissolution proceedings;
• Any other important fact which the registered person requests to be recorded if they have a legal interest in such recording.

Additionally, information regarding the beneficial owners of the company must be filed to the Beneficial Owners Register with the notary public or the Commercial Court (in case of simple shareholding structure and in case shareholders are registered in the Czech population register, the record in the Beneficial Owners Register shall be updated automatically); information regarding the beneficial owners will be publicly available and include:

• First and last name;
• Date of birth (only month and year is publicly available);
• Address details (only state of residence is publicly available);
• Citizenship;
• An indication of the nature of the beneficial owner's position (whether the beneficial owner has a relevant interest in the voting rights or profits or exercises controlling influence in the parent company (if applicable));
• Beneficial owner’s status – real or substitute;
• An indication of the size of the beneficial owner's direct or indirect interest or profit, when that interest establishes his position or profit;
• The day from which the individual is the beneficial owner; and
• The date until which the natural person was the beneficial owner.

What is the title of the executive body and its members? What are their main duties, tasks and responsibilities?

In a dualistic system, the executive body of a company is the Board of Directors. The Board of Directors consists of 3 members, unless provided in the Articles of Association otherwise.

In a monistic system, it is the Administrative Board. The Administrative Board consists of 3 members, unless provided in the Articles of Association otherwise.

The role of the Board of Directors and the Administrative Board when acting as the executive body of the a.s. is nearly the same. Apart from the representation of the company and the management of the company’s business (obchodní vedení), the respective body ensures the books are properly kept, and that a register of shareholders is administered, submits financial statements and proposals on profit distribution or coverage of loss to the General Meeting for approval. A Member of the executive body must, without undue delay after becoming aware of any change in the Articles of Association, draft the full text of Articles of Association including any changes and deposit it, together with the documents proving the change, in the Commercial Register's collection of instruments (sbírka listin).

How are the members of the executive body appointed, dismissed and replaced?

In a dualistic system, the Board of Directors is elected and recalled by the General Meeting, unless it is determined in the Articles of Association that the authority to elect and recall the members of the Board of Directors falls within the powers of the Supervisory Board. The Articles of Association can also determine that the right to appoint and recall one (1) or more members of the Board of Directors is attached to a particular share (akcie s vysílacím právem). The total amount of Board of Directors members appointed by the shareholders must not be higher than amount of members appointed by the General Meeting.

In a monistic system, the Administrative Board is elected and recalled by the General Meeting. The Articles of Association may also determine that the right to appoint and recall one (1) or more members of the Administrative Board is attached to a particular share (akcie s vysílacím právem). The total amount of Administrative Body members appointed by the shareholders must not be higher than amount of members appointed by the General Meeting.

The members of the executive body have to be registered in the Commercial Register without undue delay after their appointment. However, the entry in the Commercial Register has declaratory, not constitutive effect, so date of registration does not hinder a person elected as a member of the executive body to perform their office.

Is it possible to appoint corporate directors or must all directors be natural persons?

It is possible to appoint a legal entity as a member of the Board of Directors or Administrative Board, however in this case a representative who is a natural person must be appointed by such legal entity. The representative acts on behalf of the legal entity as a member of the executive body. Both the legal entity and its representative shall be registered in the Commercial Register. In the event of a breach of the duty to act with due care, the legal entity and the representative shall jointly and severally compensate for the damages

Is there a requirement to have non-executive directors? How are they appointed, dismissed and replaced? Do non-executive directors serve on a separate body (two-tier structure) or can a one-tier board (with executive and non-executives) be appointed, or is some alternate structure used?

The Czech law does not recognize the concept of non-executive directors (but at the same time does not prohibit companies from having non-executive directors). The powers of non-executive directors would have to be specified in the Memorandum of Association as well as their obligations and means of their appointment and recall.

However, non-executive directors are more common in monistic system – where some Administrative Body members exercise executive powers and some Administrative Body members exercise supervisory powers.

What is the title of the body of owners / shareholders / members, and what are the main tasks / responsibilities / powers of that body?

The General Meeting consists of all shareholders of the company. It decides in particular on the contents of the Articles of Association (including all changes and amendments thereof), changes to the amount of registered capital, appointment and recall of the members of the executive and supervisory body, appointment of the liquidator. It further approves financial statements and also decides to convert the company or to dissolve the company by liquidation. General Meeting also decides on the distribution of the profit to the shareholders. The General Meeting cannot reserve the right to decide in relation to matters which fall within the powers of another body of the company.

What are the majority and quorum requirements for decisions by the shareholders? Can they be varied or changed?

The General Meeting decides by a simple majority of votes of the present members, unless the Articles of Association or the law state otherwise.

• Some decisions require a majority of two-thirds of votes of present shareholders (e.g. change of the Articles of Association, increase of the registered capital, issue of bonds, decision on the dissolution with liquidation etc.). Where a majority of two-thirds of votes is required, a form of notarial deed is also required.  
• Some decisions require a majority of three-quarters of votes of present shareholders holding the same kind share. Such majority of three quarters require a decision to change the type or form of shares, to change the rights attached to a certain type of shares, to restrict the transferability of registered shares or book-entry shares and to exclude participating securities from trading on a European regulated market.
• There is a special provision requiring a unanimous resolution of the shareholders holding the same kind share when (i) merging shares and (ii) change of the type of shares to non-voting shares.
• There is a special provision requiring a majority of 90 % of all votes (including shareholders holding non-voting shares) in case of squeeze-out.

The Articles of Association may also require a greater majority for specific decisions.
The quorum requirements are met if shareholders owning shares the nominal value or number of which exceeds 30% of the share capital are present, unless otherwise specified in the Articles of Association.

Any special governance regimes (e.g. depending on size, being listed at a stock exchange, or other criteria)?

Not in general. However, other legal regulations than Business Corporation Act may require special governance regimes e.g. in connection with special object of business e.g. banks, investment funds, companies operating on the capital market etc.

What are the periodic accounting obligations incumbent upon the entity? To whom must those accounts be submitted?

A company creates the financial statements which have to be discussed by the General Meeting. The ordinary financial statements have to be done no later than six (6) months after the last day of the past accounting period and have to be filed with the collection of deeds (sbírka listin) of the Commercial Register.

Is the entity permitted to determine its own financial year?

Yes, the a.s. is permitted to determine its own financial year.

Is the entity subject to any statutory (external) auditor obligations?

The obligation to have a statutory auditor depends on the number of employees, the annual net turnover, and the assets.

Requirements to appoint other persons (officers, secretary, internal auditor / accountants). If so, what are their functions? Are there any residency requirements?

In a dualistic system, the Supervisory Board supervises the exercising of powers by the Board of Directors and the company's activities. In case a joint-stock company with a Supervisory Board has more than 500 employees as at the first day of the accounting period, (i) the number of members of the Supervisory Board has to be divisible by 3 and (ii) one third of the members of the supervisory Board has to be appointed by employees (the Articles of Association may state that the employees appoint and dismiss more than one third of members of the Supervisory Board, however, the number of members of the Supervisory Board appointed by employees must not be higher than members of the Supervisory Board appointed by the General Meeting). The Articles of Association may determine that employees appoint a part of the Supervisory Board even if the number of employees is lower.

There are no residency requirements that apply to members of the Supervisory Board.

What is the title designated for 'ownership interests' (e.g. shares, quota, interests, membership)?

Share(s) (akcie). For the sake of completeness, the law distinguishes between registered and bearer shares (relevant especially because of different transfer methods). Registered shares are issued mainly as a certificated security in series. Bearer shares shall only be issued as immobilized securities or as book-entry securities.

Are different classes of ownership interests possible? If so, what are some examples of different classes?

Czech law allows shares with special rights (e.g. different fixed or subordinated profit shares or shares in the liquidation balance, and/or different vote).

What documentation is required for the transfer of ownership interests?

In case of registered shares, the conclusion of the share purchase agreement is required (written form is not necessary, however is recommended). Following the conclusion of the agreement, the registered share is transferred by endorsement and physical transfer to the transferee.

In case of bearer shares, the conclusion of share purchase agreement is required (written form is not necessary, however is recommended). Following the conclusion of the agreement, bearer share is transferred by a change of shareholder in the respective evidence.

Are there any additional formal requirements required for the transfer of ownership (notary, approvals, stamping, filings, corporate records)?

The change of the shareholder of the registered share shall be notified to the company and shall become effective by presenting the registered share with endorsement to the company’s executive body. The transfer could be subject to the consent of a company body (in particular of the General Meeting).

A bearer share is fully transferable without restriction. The transfer has to be documented to the company with an extract of the shareholder's account, or on the date of delivery or acceptance of an extract from the share issue register.

In case the General Meeting decides on the restriction of transfer of registered shares (e.g. of restriction being the requirement to obtain a consent of a company body to transfer shares), such change becomes effective as of the date of entry of such change in the Commercial Register. For completeness, the Articles of Association may restrict the transfer of registered shares (and the restriction has to be registered in the Commercial Register) but not exclude the transfer of registered shares.

Are there any applicable stamp duties imposed when transferring ownership interests?

No.

How are shares issued? (including information on payment obligations, registration requirements)

Information about shares (number, issue price, the method of payment and the period within which the issue price is to be paid) are included in the Articles of Association. The capital increase must be adopted by the General Meeting (the decision has to have the form of a notarial deed) and registered with the Commercial Register.

Further information on equity contributions, e.g., non-cash payments on shares, (share premium) contributions without issuances of shares, can partially paid shares/ownership interests be permitted and what are the restrictions on them?

It is possible to contribute by an item the value of which can be expressed in monetary terms, which is called the 'contribution in kind'. The value of a contribution in kind must be specified in the Articles of Association of the business corporation and must be based on evaluation made by an expert. Contribution in kind cannot consist of work or services.

Share premium contributions (commonly referred to as the “contribution outside the share capital”) are possible on the basis of the agreement concluded between the shareholder and the company. Unless provided in the Articles of Association otherwise, an approval of the General Meeting is not required.

Any requirements with respect to share cancellation, share repurchase and other capital reductions

A company's share capital may not fall below the minimum share capital provided for in the Business Corporation Act (currently CZK 2.000.000 or EUR 80.000).

The a.s. can acquire its own shares when specific conditions set out by the Business Corporation Act are met.

A decrease of the registered capital shall not impair the collectability of the creditors' receivables. Therefore, notice of a decision of the General Meeting to decrease the registered capital has to be given to known creditors and has to be published at least twice in the Commercial Bulletin (obchodní věstník).

For decreasing the registered capital, the company firstly uses its own shares in its possession. The other methods are decrease of the par value of shares or interim certificates, withdrawal of shares from circulation on the basis of drawing lots, withdrawal of shares from circulation on the basis of a public bid or refraining from the issue of shares.

Any requirements with respect to distributions to shareholders?

A profit share is determined on the basis of the financial statement approved by the General Meeting. It can only be distributed among the shareholders, unless provided otherwise in the Articles of Association. If the share carries a right to a fixed share in the profit, no decision of the General Meeting on its distribution is required.

Decisions to pay a profit share are made by the executive body.

Profit share may be paid to the shareholders only after the executive body performs the “bankruptcy test” (in brief, the General Meeting may only decide on the distribution of profits and own resources not exceeding the sum of profit for the accounting period and undistributed profit plus free capital funds minus allocations to reserves and other funds required by the law and Memorandum of Association) and the “insolvency test” (in brief, the profit share shall not be paid if such payment could result in insolvency as defined by Act No. 182/2006 Coll., on Brankruptcy and Methods of its Resolution (Insolvency Act)).

Can the owners or shareholders adopt a restrictive or governing agreement among themselves such as a Shareholders Agreement?

Yes, such agreements are allowed.

Which are the typical annual maintenance costs of maintaining the existence and legal good standing of such an entity (excluding legal fees)?

The company has to have a proper legal reason to use the premises at the registered office of the company. The company has to have members of the corporate bodies (and it is common that the company concludes an executive service agreement – smlouva o výkonu funkce (more commonly called performance agreement) governing the renumeration of the members of the Board of Directors, Supervisory Board or Administrative Board; however, the performance of the function can be agreed as free of charge). The company must convene the General Meeting at least once every accounting period. The company has further expenses with bookkeeping and expenses associated with preparation of the tax return (varies based on the taxes the company is subject to, e.g. if the company is subject to value added tax, the company must file a VAT control report monthly).

What are the general corporate tax rates? (Specify if there is a national versus local distinction).

The general corporate income tax rate is 21 %. There is no local distinction.

Summary of any specific matters, e.g. recent or prospective major legal developments

At the end of 2016, an amendment of the Criminality Liability Act expanded the scope of criminal liability of legal entities. The legal entities themselves are liable for almost all crimes under the Criminal Act.

From 2017, legal entities are themselves liable for administrative offenses (přestupky) under the Act on Liability for Offenses and the Procedure of Offenses.

From 2018, all legal entities registered in the Czech Republic have a duty to disclose information about their beneficial owners to the register courts via Register of the beneficial owners. The beneficial owner is defined as any natural person who may de facto or legally directly or indirectly control the legal entity or benefit from such entity. The system of beneficial owners is based on the EU AML Directive (Directive (EU) 2015/849) as amended by Directive (EU) 2018/843.

From June 2021, there are new sanctions in case the company fails to identify its beneficial owner(s). The sanctions vary from prohibition of exercise of the voting rights of the beneficial owner at the General Meeting of the company, the prohibition to pay out the profit share to the beneficial owner and, as an ultima ratio, the possibility of imposing a fine of up to CZK 500.000 (approximately EUR 20.000).

From July 2023, conditions to become a member of the corporate body are stricter. Persons who are to become Executive Directors or members of the Supervisory Board (if established) are not eligible for the office (i) if disqualification of holding of office has been imposed on them by court or other public authority, (ii) if the prohibition of exercise of activities relating or similar to the company’s object of activity has been imposed on them by court or other public authority, (iii) if they have been convicted of certain criminal offenses and there has been no acquittal, and (iv) in case of the declaration of bankruptcy on their assets. Following the change in the conditions of performance of office, the evidence of disqualified persons (evidence vyloučených osob) is established and the eligibility for performance of office shall be investigated by the notary or registry courts (rejstříkový soud).