CZECH REPUBLIC Law and Practice Contributed by: Petr Janů, Vladislav Klimeš and Leoš Vavřík, BADOKH
In asset deals, the purchaser buys specific pre- selected assets of the target company. Such sets of assets may be comprehensive to such an extent that they form part of the target com - pany’s business (or even its whole business). Subject to the fulfilment of certain conditions, the purchaser may select which (potentially problematic) assets or liabilities remain outside the scope of the transaction. Thorough legal, financial and tax due diligence is highly recommended in both types of structures as it helps to discover and address the purchas - er’s main potential risks upfront. In addition to the typical transaction struc - tures described above, purchasers may wish to explore alternative structures. These include joint ventures – ie, sharing of ownership/control/ profits, or mergers/demergers of target compa - nies. 2.2 Primary Regulators The primary regulators for M&A in the Czech Republic are: • the Czech Office for the Protection of Com - petition ( Úřad pro ochranu hospodářské soutěže ), which is responsible for ensuring compliance with competition laws, including reviewing mergers and acquisitions to assess their potential impact on competition in the Czech market (also see 2.4 Antitrust Regula- tions ); and • the Czech National Bank ( Česká národní ban - ka ), which supervises financial institutions and may exercise regulatory oversight in cases where M&A activities involve entities such as banks or financial services companies. In addition to the above, and depending on the particular industry sector of the M&A activity,
other regulators may also be relevant to a par - ticular deal, such as (i) the Energy Regulatory Office; (ii) the Civil Aviation Authority; and (iii) the State Institute for Drug Control. 2.3 Restrictions on Foreign Investments The Czech Republic generally welcomes foreign investment and has an open investment climate. As a member of the EU, the Czech Republic generally adheres to EU rules on the free move - ment of capital and investment within the EU. This means that investors from other EU mem - ber states generally face few restrictions when investing in the Czech Republic. However, there are certain sectors of business where restrictions or regulations on foreign investment may apply. The main restrictions on foreign investment in the Czech Republic are imposed by the Act on Review of Foreign Investments, which sets out rules for the review of certain foreign investments and certain obligations of foreign investors. The Ministry of Industry and Trade examines for - eign investments, conducts consultations, nego - tiates terms and conditions, decides on foreign investments and monitors compliance with the obligations set out in the respective laws. In some areas, foreign investment is not allowed without clearance – eg, investments into compa - nies that deal with arms and military equipment or operate critical infrastructure. For details, please see 2.6 National Security Review . 2.4 Antitrust Regulations The primary antitrust rules applicable to busi - ness combinations in the Czech Republic are contained in the Competition Act. In general, it prohibits mergers and acquisitions in the follow - ing situations: agreements, practices and deci -
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