CZECH REPUBLIC Law and Practice Contributed by: Petr Janů, Vladislav Klimeš and Leoš Vavřík, BADOKH
8.4 Independent Outside Advice Directors involved in a business combination – pri - vate or public – commonly seek independent outside advice from various professionals to assist them in evaluating the transaction, understanding its implica - tions and fulfilling their fiduciary duties. Some common forms of independent outside advice include financial, legal, accounting, tax or strategic advisers. By seeking independent outside advice from professionals with expertise in various relevant areas, directors can enhance their understanding of the transaction, mitigate risks, and make informed decisions that are in the best interest of the company and its shareholders. Independent advice also helps demonstrate good governance practices and trans - The Business Corporations Act contains a detailed regulation of conflicts of interest between the com - pany and members of its bodies. A member shall notify the relevant bodies if there is a potential con - flict between the member’s interests and those of the company. Failure to do so may result in the conflicted member’s personal liability. In public takeovers, the members of corporate bodies shall further obey the duty of neutrality, ensuring that they will remain impar - tial. Shareholders are only subject to the duty of loyalty which, while widely applied across different legal fields, generally does not apply to takeovers. parency in decision-making. 8.5 Conflicts of Interest It is customary for advisers to thoroughly assess potential conflicts of interest before accepting any engagements.
actions fall within the ordinary course of the compa - ny’s business. Nevertheless, the directors may actively pursue a competitive takeover bid or even submit their own competitive takeover bid without breaching any prin - cipal directors’ duties, as Czech law expressly allows such actions. 8.2 Special or Ad Hoc Committees Business combinations concerning a public company are relatively rare. Due to the unique nature of these transactions, both the bidder and the target company will typically establish a special committee to evalu - ate the bid, handle potential conflicts of interest, and consider potential issues and synergies. For details on conflicts of interest, see 8.5 Conflicts of Interest . Members of the special committee are exempt from the duty of neutrality and can actively oppose the takeover bid, unlike the directors. However, the spe - cial committee may not absorb the duties of directors in connection with the business combination, and the directors remain ultimately in charge of the business combinations. Thus, while the directors may consider the inputs of the special committee, the special com - mittee’s ability to influence the business combination is significantly limited. 8.3 Business Judgement Rule Czech law recognises the business judgement rule, which provides a “safe harbour” to directors as long as they have acted in good faith, in an informed and defensible manner, and in the best interests of the company, regardless of any negative outcomes. Czech courts have continually upheld the business judgement rule in management liability cases and emphasised that the courts should focus on assess - ing whether the decision-making process was sound, rather than evaluating the substance of the business decision and its consequences. Nothing suggests that the courts will take a different approach to takeover situations; that said, the body of relevant case law is minimal.
9. Defensive Measures 9.1 Hostile Tender Offers
Hostile tender offers are not prohibited in the Czech legal system, which implies their permissibility. How - ever, they are rare because of the small number of publicly traded companies with high capitalisation. The takeover process usually involves friendly nego -
406 CHAMBERS.COM
Powered by FlippingBook