CZECH REPUBLIC Law and Practice Contributed by: Petr Janů, Vladislav Klimeš and Leoš Vavřík, BADOKH
notable exception, namely squeeze-out disputes over fair compensation (see 10.1 Frequency of Litigation ). It is safe to say that Czech courts continue to uphold the general principles introduced in 2014, which rep - resented a substantial overhaul of corporate and civil law. Some of the key principles that the courts have confirmed include the following. • Due Care Requirements – Czech law recognises the business judgement rule, which provides direc - tors with a “safe harbour” as long as they have acted in good faith, in an informed and defensi - ble manner, and in the company’s best interests, regardless of any negative outcomes. • Status of the Majority Shareholder in Squeeze- Out – the courts have ruled that a special purpose vehicle (SPV) company temporarily holding the status of the majority shareholder in a squeeze-out (at least 90%) cannot benefit from the squeeze-out mechanism under Czech law. The majority share - holder may implement the squeeze-out solely in accordance with the purpose for which it is intend - ed – that is, simplifying the shareholder structure and streamlining the management through a sole shareholder. The purposeful and temporary consol - idation of shares directly conflicts with the purpose of the squeeze-out mechanism. • Default Interest in a Squeeze-Out – default inter - est is relevant if the courts increase the amount of fair compensation for minority shareholders in a squeeze-out. The majority shareholder must then pay default interest on the additional payment of the fair compensation awarded by the courts to minority shareholders. This default interest is cal - culated from the day when the minority shareholder handed over its shares and the majority sharehold - er had to pay the fair compensation. The exposure for the majority shareholder might be significant, given that the average squeeze-out litigation over the amount of fair compensation usually takes five to ten years to play out in courts. Notable legal developments during the relevant peri - od include an amendment to Act No 458/2000 Coll., the Energy Act, known as LEX OZE III, which came into force in 2025. This amendment introduced sig - nificant changes in energy storage, grid flexibility, and
aggregation but also further developed the regulatory framework for acquisitions of influence over strategi - cally significant energy infrastructure, highlighting the growing importance of regulatory approvals and deal conditionality in sensitive sectors. Additionally, an amendment to Act No 125/2008 Coll., the Transformation Act, aligns Czech transformation laws with EU directives on cross-border conversions, mergers, and demergers, while also strengthening the framework for cross-border transformations and streamlining selected corporate reorganisation pro - cedure. Given that many M&A transactions are fol - lowed by post-closing restructurings, this amendment is likely one of the most practically significant legal developments in the Czech M&A market in the past three years. 3.2 Significant Changes to Takeover Law The Czech act on takeover bids has remained essen - tially unchanged since the incorporation of the EU directive back in 2008. Accordingly, there have not been any significant changes to the Czech takeo - ver regulations over the past 12 months, nor is there anything to indicate that any such changes might be forthcoming in the months ahead. 4. Stakebuilding 4.1 Principal Stakebuilding Strategies Stakebuilding strategies concerning public compa - nies are rather rare and almost non-existent for private companies. That said, such strategies typically involve the gradual acquisition of publicly traded target com - pany shares through open market purchases (acquisi - tion from minority shareholders at the stock market) or private negotiations (acquisition from significant shareholders). However, it is important to note that bidders are not allowed to abuse any inside informa- tion obtained during due diligence. Stakebuilding before a mandatory offer (see 6.2 Man- datory Offer Threshold ) triggers a premium consid - eration requirement. The consideration in a mandatory offer must correspond, at a minimum, to the highest price paid by the bidder for target company shares during the 12 months preceding the offer. It is impor -
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