CZECH REPUBLIC Law and Practice Contributed by: Petr Janů, Vladislav Klimeš and Leoš Vavřík, BADOKH
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 evaluate the bid, han - dle 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 special committee may not absorb the duties of directors in connection with the business combination, and the directors remain ultimately in charge of the business combina - tions. Thus, while the directors may consider the inputs of the special committee, the special committee’s ability to influence the business Czech law recognises the business judgement rule, which provides “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 neg - ative outcomes. combination is significantly limited. 8.3 Business Judgement Rule Czech courts have continually upheld the busi - ness judgement rule in management liability cases and emphasised that the courts should focus on assessing whether the decision-mak - ing 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 situa - tions; that said, the body of relevant case law is minimal.
8.4 Independent Outside Advice Directors involved in a business combination – private or public – commonly seek independ - ent outside advice from various professionals to assist them in evaluating the transaction, understanding its implications 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 share - holders. Independent advice also helps demon - strate good governance practices and transpar - The Business Corporations Act contains a detailed regulation of conflicts of interest between the company and members of its bod - ies. A member shall notify the relevant bodies if there is a potential conflict between the mem - ber’s interests and those of the company. Failure to do so may result in the conflicted member’s personal liability. In public takeovers, the mem - bers of corporate bodies shall further obey the duty of neutrality, ensuring that they will remain impartial. Shareholders are only subject to the duty of loyalty which, while widely applied across dif - ferent legal fields, generally does not apply to takeovers. ency in decision-making. 8.5 Conflicts of Interest It is customary for advisers to thoroughly assess potential conflicts of interest before accepting any engagements.
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