An amendment to the Commercial Code (act No.351/2011 Coll.) comes into force on 1 January 2012 which was originally conceived to be of a primarily "clerical" nature, but which in the end brings a number of substantial changes - chiefly among them a rule for the parallel performance in a corporate office and under an employment contract with one and the same company, and the prior waiver of the right to damages.
Also noteworthy are the new requirements regarding the registered office of a business, and new rules to do with the record kept by the Commercial Register.
Managerial authorization
A provision newly inserted in the Commercial Code under the heading "Managerial Authorization" seeks to do away with the existing legal uncertainty regarding the permissibility of concurrent performance in a corporate office and under an employment agreement, by allowing the statutory body (i.e. the management) of the company to assign the management of the company`s affairs (or parts thereof) to a third party, e.g. an employee of the
company.
The amendment anticipates explicitly that an employee may at the same time act as a statutory body (or member thereof). This allows executives and board members (directors) to be employed by "their" company, under an employment agreement (often referred to as "executive agreement") which covers, in particular, decisions which fall within the scope of managing the company's business affairs. In such cases of concurrence, the general meeting shall decide on the remuneration (salary) which is awarded to the executive or board member in their employment agreement.
Compensation for damages
Also new is the option to waive or restrict the right to compensation for damages in commercial-law relations even before the breach of obligations which may give rise to the pertinent damages has occurred. Previously, such waivers were contentious.
Property owners vs. rentals
The amendment to the Commercial Code discussed in this article also seeks to improve the situation regarding businesses who lose their legal title (or, in fact, never had a legal title) to the premises in which
their registered office or place of business is installed. The idea is to help property owners whose premises serve against the owners` will as the registered office or place of business of entrepreneurs (whereas it is not unusual to find dozens of businesses headquartered at the same address).
Thanks to the present amendment, the Commercial Code now expressly requires that businesses hold a legal title of usage to the respective premises for the entire time during which they are entered as headquarters in the Commercial Register. If the court finds out that this is not the case (e.g. by being alerted to the fact by the property owner, who may for instance have terminated the pertinent lease), then the court may (in the case of a legal entity) order their dissolution and liquidation. Businesses who have no legal title to the premises of their registered office or place of employment also risk forfeiting their trade license in proceedings before the Trade Licensing Office.
Birth/ID number accessability
The Commercial Register is also affected by the changes contained in the latest amendment to the Commercial Code. For the future, the personal ID number ("rodné číslo") of individuals on record in the Commercial Register cannot be accessed by the general public. However, if this "birth number" is specified in deedswhich must be lodged in the Roll of Deeds at the Commercial Register (such as the Memorandum of Association), then it remains accessible as a part of this public record. If businesses wish to remove the personal ID of members of their corporate bodies or of their shareholders from the public record, then they must themselves arrange for redaction of such data in the submitted documents.
A potential door for abuse has been closed by removing the requirement to lodge signature specimens in the Roll of Deeds. Upon request by the "affected party" (a term which, in our view, does not only include the individual who holds the given position, but also the company on whose behalf the individual signs documents), the register court must remove existing signature specimens from the files. Another procedural novelty: deeds need only be submitted to the register court as a single copy. Previously, those deeds which served the double purpose of evidencing facts which are recorded in the Commercial Register and of forming a part of the Roll of Deeds had to be submitted in two counterparts - a rule which e.g. applied to the Memorandum of Association and any later amendments thereof.
This list of changes is far from exhaustive. Other modifications include e.g. a provision on exemptions from the duty to have contributions-in-kind towards an increase of capital stock appraised by a courtappointed expert, or the new rules for liquidating dormant companies, on financial assistance, or on the notorious Section 196a.
The article was originally published in the bnt - pravda & partner newsletter, author: Lucie Josková, attorney-at-law
