CZECH REPUBLIC Law and Practice Contributed by: Petr Janů, Vladislav Klimeš and Leoš Vavřík, BADOKH
the Russian economic and financial sector and aim at restricting financial flows and investments from Russia to the EU. 3. Recent Legal Developments 3.1 Significant Court Decisions or Legal Developments Pinpointing the most significant court deci - sions or legal developments related to M&A in the Czech Republic over the past three years will vary depending on specific perspectives and industry sectors. Generally speaking, pub - lic M&A deals are very rare, and the majority of deals are private. Accordingly, the disputes arising from takeovers are infrequently subject to public scrutiny before courts. However, there is one notable exception, namely squeeze-out disputes over fair compensation (see 10.1 Fre- quency of Litigation ). It is safe to say that Czech courts continue to uphold the general principles introduced in 2014, which represented a substantial overhaul of corporate and civil law. Some of the key prin - ciples that the courts have confirmed include: • Due Care Requirements: Czech law recog - nises the business judgement rule, which provides directors with “safe harbour” as long as they have acted in good faith, in an informed and defensible 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 major - ity shareholder in a squeeze-out (at least 90%) cannot benefit from the squeeze-out mechanism under Czech law. The majority
shareholder may implement the squeeze-out solely in accordance with the purpose for which it is intended – that is, simplifying the shareholder structure and streamlining the management through a sole shareholder. The purposeful and temporary consolidation of shares directly conflicts with the purpose of the squeeze-out mechanism. • Default Interest in a Squeeze-Out: Default interest 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 compensa - tion awarded by the courts to minority share - holders. This default interest is calculated from the day when the minority shareholder handed over its shares and the majority shareholder 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 rele - vant period include an amendment to Act No 458/2000 Coll., the Energy Act, known as LEX OZE III, which is set to come into force in 2025. This amendment introduces significant changes in energy storage, grid flexibility, and aggrega - tion. 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, with the goal of streamlining pro - cesses and reducing administrative burdens. 3.2 Significant Changes to Takeover Law The Czech act on takeover bids has remained essentially unchanged since the incorporation of the EU directive back in 2008. Accordingly,
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