CZECH REPUBLIC Law and Practice Contributed by: Petr Mlejnek, Robert Klenka, Matěj Manderla, Jan Wagner, Ivo Hartmann and Arbër Balliu, Tenacta, advokátní kancelář, s.r.o.
3. Corporate Vehicles 3.1 Most Common Forms of Legal Entity Introduction The most commonly used corporate vehicles in the Czech Republic are the limited liability company ( společnost s ručením omezeným – s.r.o.) and the joint stock company ( akciová společnost – a.s.). Both a pri - vate limited liability company and a joint stock compa - ny provide separate legal personality and limited liabil - ity protection. In a private limited liability company, shareholders generally do not bear personal liability beyond their unpaid capital contributions. In a joint stock company, shareholders do not bear personal liability for the company’s obligations at all. In both structures, the company itself is liable for its debts and obligations with all of its assets. Both forms are available to domestic and foreign investors on sub - stantially equal terms. Limited Liability Company The limited liability company is the most frequently used legal form and is generally considered the stand - ard structure for small and medium-sized enterprises, holding structures, subsidiaries of foreign investors and joint ventures. The structure is widely used due to its relatively simple administration and flexibility in internal governance arrangements. The limited liability company may be established by one or more share - holders, and the minimum statutory contribution may be lower than EUR1. Shareholders are generally liable only up to unpaid contributions registered in the Com - mercial Register. The company is managed by one or more managing directors, while the supreme corporate body is the general meeting of shareholders. A supervisory board is optional. The internal governance structure is rela - tively flexible and may be extensively tailored in the constitutional documents, including voting arrange - ments, transfer restrictions, profit distribution mecha - nisms or veto rights. Compared to a joint stock company, the limited liability company is subject to lower administrative and regu - latory requirements. Corporate formalities are general - ly simpler, disclosure obligations are more limited, and the structure is easier and less costly to maintain. For
this reason, the limited liability company is commonly used for SPVs and ordinary operating businesses, pri - vate holding structures and closely held companies with a limited number of shareholders. At the same time, the limited liability company may become less practical in situations involving a larger number of investors, more sophisticated financing arrangements or frequent transfers of ownership inter - ests. Joint Stock Company The joint stock company is a more formalised and capital-oriented corporate vehicle typically used for larger or more complex business structures, including investment platforms, regulated businesses, financ - ing structures and holding companies with multiple investors. Ownership interests in a joint stock company are rep - resented by shares, which facilitates transfers, inves - tor entry and exit mechanisms, pledge structures and more sophisticated shareholder arrangements. Share - holders do not bear personal liability for the compa - ny’s obligations, with their economic risk generally limited to the value of their shares. A joint stock company may be established by one or more shareholders. The minimum registered capital requirement amounts to approximately EUR80,000. Czech law allows both: • a dualistic governance system consisting of a board of directors and supervisory board; and • a monistic governance system consisting of an administrative board. In both systems, the general meeting remains the supreme corporate body. Compared to a limited liability company, the joint stock company structure is generally considered more suitable for larger shareholder projects, private equity and venture capital investments, joint ventures involv - ing multiple strategic investors, management incen - tive structures, financing transactions and situations where future capital raising is contemplated.
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