Taking Over a Business

Aside from establishing a new company, an entrepreneur can also acquire a share in an already existing company. The most typical options are acquisition of a business share in a limited liability company, acquisition of stock or other participation securities in a joint stock company and/or actual take over of a specific part of business of a company without acquiring an interest in it, by a contract for transfer of a business without changing the corporate structure.

Legal requirements

Aside from establishing a new company, an entrepreneur can also acquire a share in an already existing company. The main legal requirements for this are set out in the Civil Code and in the Act on the Transformation of Companies and Cooperatives.

Foreign nationals may also own shares in Czech legal entities. Foreign nationals have the same rights and obligations as Czech nationals.

Types of takeover

Several options exist for business owners wishing to own part of another company:

  • acquiring a business share in a limited liability company,
  • acquiring stock or other participatory securities in a joint stock company,
  • taking over part of a business without acquiring an interest in it by means of a business transfer contract.

Other more complex means exist to transform businesses, such as mergers for example.

Transferring a business share in a limited liability company

This is the commonest way of acquiring a share in a company. The current partner transfers his/her business share to another partner and/or a person outside of the company by means of a contract on the transfer of a business share.

Acquiring participation in a joint stock company

This is based on a contract on the transfer of stock or other participatory securities. Unlike a business share - where the partner is always entered into the Commercial Register - the company here can remain anonymous.

Transformation of a company

Business transformations are complex operations from both a legal and an organisational standpoint. For this reason, experienced professionals must be called upon. The legal aspects of business transformations are set out in Act No 125/2008 on the transformation of companies and cooperatives.

Changes to the structure of a company will often require an amendment to the company's deed of establishment. These amendments can be performed only by a notary.

Contract on the sale of a company

A business also consists of items, rights and other assets that belong to the business owner and serve the running of the business.

A contract on the sale of a company does not automatically lead to participation in that company. It involves a change to the ownership of an asset that belongs to the business owner, or a change to the ownership of part of a business, if the sale involves part of a business. The new owner thereby acquires a business asset.

Steps in the takeover process

Acquiring participation in another company is typically a very complex process requiring a sound contractual basis for the safety of both parties. Typically, the parties involved in the transaction have legal representatives. Law firms frequently carry out detailed audits at the request of participants. The goal is to identify any possible legal or economic risks related to the takeover.

Retiring business owners need to plan the transfer of their business in advance.

Some standard requirements to be completed when taking over a business are the same as when setting up a new business.

Administrative procedures

Registration

All changes relating to the structure of a company that occur during the course of acquiring participation in a company need to be entered into the Commercial Register.

Applications for a change to be entered must be delivered to the Court of Registration as soon as possible after the change has taken place. Further details may be found on:

Resources

The following governmental and non-governmental institutions and web portals offer other information and useful services.

  • Czech Bar Association
  • BusinessInfo.cz - official portal for business and export
  • Public Administration Portal of the Czech Republic
  • Ministry of Industry and Trade of the Czech Republic - Business Support Section

Programmes

The programme of investment incentives for business start-ups, intended mostly for foreign companies:

  • Investment incentives of the Ministry of Industry and Trade of the Czech Republic

Personalised help and advice

The Enterprise Europe Network is an extensive network (with 600 host organisations and 4,000 full-time staff) providing information and advice to entrepreneurs through its local partners.