Limited-liability company

The most common form of entrepreneurship in the Czech Republic is the limited liability company, which can be established either by a natural or a legal person. A limited liability company is commonly used for small and medium-sized businesses.

The advantages of limited-liability company are the simple registration, basically no minimum capital requirement, simple structure of the company and no personal liability of members for the limited-liability company’s obligations.

Basic characteristics of a limited liability company (LLC)
The lowest number of founders 1 natural or legal person
The highest number of partners unlimited
Minimum registered capital CZK 1
The lowest possible contribution CZK 1
The highest possible contribution unlimited
Scope of contribution at the establishment 30% cash contribution and 100% in-kind contribution
Deadline for paying off the contribution determined by the memorandum of association, no later than 5 years from the formation of the company or the assumption of the investment obligation
Number of votes per share 1 CZK has 1 vote (the memorandum of association may specify otherwise)
Liability of partners for the company’s obligations jointly and severally up to the amount of unfulfilled investment obligations according to the status registered in Commercial Register when summoned for payment by a creditor
Scope of business the business, it can be founded for other purposes
Internal structure system General Meeting, statutory body – directors (executives), supervisory board (optional), others according to the partnership agreement
Founding document memorandum of association or deed of foundation in form of an authentic instrument

Memorandum of association or deed of foundation

The limited liability company is established by a memorandum of association in event it is founded by two or more members or by deed of foundation in event it is founded by a sole member. The memorandum of association or deed of foundation must be in form of a notarial deed.

The memorandum of association or deed of foundation shall also include at least:

  1. the company’s trade name,
  2. the objects or activity of the company,
  3. identification of the members by indication of their name and their place of residence or registered office,
  4. determination of the types of business shares held by each member and the rights and duties attached thereto, where different types of business shares are permitted in the memorandum of association,
  5. the amount of contribution(s) pertaining to the business share(s),
  6. the amount of registered capital, and
  7. number of executives and the manner in which they act on behalf of the company.

Upon the company’s establishment, the memorandum of association shall also include:

  1. the contribution obligation of the founders, including the deadline for its fulfilment,
  2. indication of the person(s) appointed by the founders to act as the director(s) [executive(s)] or, as appropriate, the members of other company bodies who are to be elected by the general meeting in accordance with the Act No. 90/2012 Coll.,
  3. appointment of the contribution administrator, and
  4. for any contribution in kind, its description, its valuation, amount applied towards the issue price, and specification of the person appointed as the expert to value the contribution in kind concerned.

Payment of contribution

Before the filing of the application for incorporation to Commercial Register the company in the commercial register, the entire contribution premium as well as at least 30 % of the amount of every cash contribution must be paid up. The memorandum of association can impose a duty to pay more than this legal minimum or pay all contribution before the application for for incorporation to Commercial Register is submitted. However, all contributions must be paid in 5 years from the day of registering a company.

Common certificate (kmenový list)

If so provided by the memorandum of association, a member’s business share may be represented by a common certificate. If the memorandum of association allows for multiple business shares to be formed for one member, a common certificate may be issued by the company for each business share. A common certificate can only be issued for a business share that is not subject to any restrictions or conditions regarding its transferability. A common certificate is an order instrument. A common certificate cannot be issued as a book-entry security. A common certificate may not be subject to public offering or admitted for trading on a European regulated market or other public market.