Recodification Guide

Recodification Guide for Entrepreneurs No. 10

As mentioned in the previous issues, the new Civil Code (“NOZ”) introduces significant changes to obligation law. The most important change is the unification of the contractual types in one act (the NOZ), thus removing their current duplicate civil-law and commercial-law regulation. The previous issues were dedicated to the general rules of contract law and purchase and lease agreements. In this issue, we would like to outline the most important changes in other important contractual types, such as contract for work, mandate and similar agreements, e.g. the contract on commercial representation. Finally, we describe the most important changes in the field of liability for damage and possibilities of its contractual limitation.

Recodification Guide for Entrepreneurs No. 9

One of the most common contractual types in the private law is the lease agreement. Practically everyone has lived in a leased or a cooperative apartment, or, at the very least, lived in a student dormitory or in a hotel room and thus entered into an accommodation agreement which is, in fact, a type of lease agreement. Entering into agreements on lease of non-residential premises is also an integral part of life of business corporations. A specific issue is lease of agricultural lands or whole business enterprises which will be referred as “usufructuary lease”. However, there are other things which can be subject to lease agreements too, such as cars, working tools or whole sets of machinery. More than 150 sections of the new Civil Code are dedicated to the single regulation of lease agreement which is a response to today’s practical problems and introduces new concepts and rules, which are common in some other European countries.

Recodification Guide for Entrepreneurs No. 8

The most important and the most frequent contractual type in the everyday life is the purchase agreement. Every day people and companies enter into many purchase agreements, buying things of daily use, materials for production, selling their own products, reselling products of other entrepreneurs or buying devices needed for operation of their business. Subject of a purchase agreement can be also a whole enterprise or newly other (mostly immaterial) things. The regulation of the purchase agreement is largely inspired by the Commercial Code which is complemented in the new Civil Code by other elements (such as requirement of certified signatures in the reservation of ownership clause) or the current ones are further developed (e.g. detailed regulation of pre-emptive right). Together with the purchase agreement, the new Civil Code contains regulation of donation and barter agreements. Besides, there will be new rules of acquisition of ownership right from the non-owner which aim to balance preservation of rights of third persons and protection of the owner from unlawful interference in his property.

Recodification Guide for Entrepreneurs No. 7

An inalienable part of each Civil Code is the regulation of obligations. The most common basis for the creation of obligations are contracts, the conclusion and content of which are usually quite thoroughly regulated. The law provides formal procedure for the making and offering for conclusion of a contract and its acceptance, the moment of conclusion of a contract, requirements for a form or e.g. the right to refer to general terms & conditions. Contract law includes also rules for amending (either by virtue of agreement or any other event) or termination (e.g. by notice of withdrawal or notice of termination) of contracts. The question of securing obligations is also very important, i.e. contractual provisions or even whole agreements drawn up to strengthen the creditor’s rights (e.g. contractual penalty) or give him a substitute source of satisfaction for his claims (e.g. guarantee or pledge agreements). Similarly as in the field of business corporations, the new Civil Code aims to give parties as much freedom as possible so that they can determine the content of their contract to the maximum possible extent, while seeking to protect weaker party (consumers, in particular). In this issue, we will deal with the above outlined general issues of contract and obligation law and the following issues will be dedicated to specific contractual types under the new Civil Code.

Recodification Guide for Entrepreneurs No. 6

The new Civil Code introduces significant changes not only to the field of legal entities, but to all branches of private law, including real estate law. Legal regulation of real estate in the new Civil Code is inspired by the Austrian Civil Code (valid in the territory of the Czech Republic until 1950) in many aspects and brings a wide range of important changes. The most important change is the return to the principle “the surface yields to the ground” and to the legal concepts related to this change, such as right to build, registration of machines in the Cadastral Register etc. Another fundamental change is the return to rigorous adherence to the principle of material publicity of entries in the Cadastral Register (what is written in the Cadastral Register shall be true). The aim of the changes is, on one hand, to ensure more legal certainty in dealing with real estates, and, on the other hand, to provide private persons with more tools for regulation of their rights and obligations. In this issue of the Recodification Guide we outline the most important changes.

Recodification Guide for Entrepreneurs No. 5

If founders want to incorporate a large business company with enough capital or if they do not want to disclose its shareholder structure (to avoid registration of their names in the Commercial Register), they usually choose a joint-stock company. This form of business corporation is not, unlike in the USA, Great Britain of Germany (where there are much larger stock markets) as common in the Czech Republic. Czech entrepreneurs mostly prefer limited liability companies. Nevertheless, there are about 25 000 joint-stock companies. The recodification aims to make the legal framework more flexible and efficient and to make the joint-stock company a more modern and popular form of entrepreneurship as it is in the above-mentioned countries. In this issue of the Recodification Guide key changes in the regulation of joint-stock companies are outlined: both the inevitable changes (new obligations and bans) and the optional changes that can help the functioning of a joint-stock company to adapt to the needs of their founders / shareholders.

Recodification Guide for Entrepreneurs No. 4

Limited liability companies (S.R.O.) are the most popular form of business company in the Czech Republic. There are about 20 000 new ones incorporated every year. Hence, there’s no wonder that the comprehensive recodification contains regulation of their legal status as well. The new Civil Code and, in particular, the Business Corporations Act, change a wide range of currently valid and familiar rules of corporate governance of limited liability companies, legal status and decision-making of their Managing Directors, as well as the concept of business shares and their dispositions. Our previous Recodification Guide outlined in detail the general regulations of incorporation, the acting on behalf of a company, business enterprise and dispositions, as well as the status, rights and obligations of corporate officials. Based on information from previous issues, this issue highlights the most important changes in the regulation of limited liability companies,. We describe not only those changes affecting the existence of these companies that cannot be avoided, but also those that are voluntary and which can be used by companies to make their functioning and decision-making more efficient.

Recodification Guide for Entrepreneurs No. 3

Just as a man needs a heart, a brain and hands to live, companies cannot exist without their shareholders, directors and other officials. The functioning of a company is closely related to the status, rights and obligations of its bodies and their members. The recodification brings major changes to legislation that will affect not only the statutory bodies (Managing Directors, Boards of Directors, etc.) and their conduct on behalf of a company, but also the supreme body (the General Meeting) and supervisory bodies (the Board of Supervisors). The new legislation in many aspects allows for statutory bodies to act more freely and enables them to carry out a series of steps which is prohibited under the current law. In this issue of our Business Bulletin we will outline the most fundamental changes in the status, rights and obligations of members of bodies of companies and about innovations in the field of representation of companies.

Recodification Guide for Entrepreneurs No. 2

Business companies are the standard and widely used form for running business in the Czech Republic. There were more than 350,000 companies in the Czech Republic last year and these will be affected by the upcoming recodification as well. As of 1 January 2014, when the new regulation becomes effective, there will be significant changes in the founding and the functioning of business companies, as well as of other legal entities. In connection with these changes, there will be a large number of new restrictions and obligations applied to companies and their statutory bodies, primarily targeted to strengthen the protection of creditors, shareholders and companies itself (to ensure proper management of companies’ property through their bodies). In addition to various obligations, the recodification introduces many new rights and concepts that are new to Czech law and which should allow companies to adjust their organizational structure, corporate governance and management to their specific needs. For this reason, we will present the most important changes in the general legal framework of company law in this and in the following issue of our Recodification Guide. The consequences of the outlined changes will affect all existing companies. In a relatively short period of time they will be forced to bring their Deed of Association in line with the new rules. Companies should not leave anything to chance and prepare for the re-codification even now.

Recodification Guide for Entrepreneurs No. 1

Much time has passed since the first proposals to make a new Civil Code were heard. As far back as the beginning of 1990s, when a major amendment of the current Civil Code was adopted, it was apparent that the amendment was a mere “bridge” between the “socialistic” law and a new code of the civil law. Although a new code of private law was discussed among experts and politicians from time to time, it took until the year 2000 before then Minister of Justice Otakar Motejl decided to begin the process on the recodification of private law. More than 11 years and 3000 comments later, a bill on the New Civil Code was passed in both houses of Parliament. The New Civil Code, along with the Business Corporations Act and Act on International Private Law which were also parts of the so-called “recodification package”, are a valid part of the legislation, and it is expected that they will become effective on January 1, 2014. In this issue, we have summarized some of the basic information in this code, which should be familiar to everyone running a business after 2014.