The novelization of the BCA will soon take effect – do you know your obligations?

A novelization of the Business Corporations Act will enter into force on 01.01.2021 (hereinafter referred to as the “novelization”). This novelization brings not only a variety of changes but new obligations for entrepreneurs as well. What should you watch out for?

Are you a joint-stock company with a statutory director? Be careful, change your statutes.

  • The institute of a statutory director expires. The only body in monistic joint-stock companies will be the Board of Directors from now on.
  • How to proceed in practice? If you are a joint-stock company with a statutory director change your statutes so they reflect everything mentioned above. The change must be done no later than 01. 01. 2021. Do not forget to include the new wording of the statues in the collection of instruments and enter the changes in the Commercial register as well.

Is your company an executive, member of the board of directors, or a member of the supervisory board of a different company? Do not forget to satisfy the new obligation to the Commercial register.

  • Companies which are the executives, members of the board of directors or the supervisory board of a different company (generally the ones which are a member of elected body of a different legal person) must from now on choose a single natural person who will then represent them in that body (hereinafter referred to as “authorized natural person”). But it is not the end of it with the election – it is also required to register the authorized natural person in the Commercial register within the legal deadlines.
  • How to proceed in practice? If your company gets elected as a member of a different company’s body (i.e., as an executive, member of the board of directors, or the supervisory board) do not forget to choose an authorized natural person and enter it into the Commercial register. All this must be done within 3 months of the origination of that certain position of your company as an elected body of a different company. If your company already is a member of an elected body of a different company, you must choose the authorized natural person and register it no later than 01.04.2021. Otherwise, the position of your company as a member of an elected body expires.

In addition to the obligations listed above this novelization brings a variety of other changes. Here are the most important ones.

A member may be accompanied by another person at a general meeting.

  • The novelization allows the members to be accompanied by another person at a general meeting. If you stand against such an option for members you must rule it out of the memorandum and articles of association. If you do not rule this option out do not forget to bind the accompanying person by secrecy.

The option of broadening the cases in which a member cannot take part in voting at a general meeting.

  • Since the novelization there is an option to specify reasons for which the member will not be entitled to vote on a general meeting, these reasons must be listed in the memorandum and articles of association. Typically, this will be a situation in which the member is in a conflict of interests.

Tightening of the objection process on a general meeting

  • If a member wants to object to the invalidity of a resolution by the general meeting, he must submit an objection which must newly include an explanation. It is possible to exclude such condition entirely in the memorandum and articles of association.

Changes concerning the agreements on the performance of the office.

  • In the case of a conflict between the agreement on performance of the office and the memorandum and articles of association the provisions of the memorandum and articles of association will now take precedence. However, this will apply only for the agreements on the performance of the office concluded after 01.01.2021.

The prohibition of additional voting on a general meeting

  • A member absent on a general meeting is only able to additionally give consent with the decisions on changes of the memorandum and articles of association which intervene in his rights or responsibilities. In comparison to the former regulation, a member is therefore not able to additionally vote after the general meeting has taken place.

The conjunction of the rights of appointing and dismissing a share-holding member of a statutory body.

  • From now on you have the option to unite the right of appointing or dismissing a member of a statutory body in the memorandum and articles of association Plc. with a certain share of stock.

Changes concerning the prohibition of competition.

  • The permission of all the members is now required for a member of an elected body to do a certain competitive activity. If you wish to differ the rules for competitive activities from the Act you must set them in the memorandum and articles of association.

The moment of the resignation of the member of an elected body.

  • From now on you have the option to determine that the office of a member of an elected body expires at the moment of the negotiation about their resignation by the body which they are a member of. Otherwise, the office expires at the moment of a negotiation of the body which elected the member.

Storing financial reports into the collection of instruments

  • Courts will be able to abolish a company without its liquidation if the company does not meet the founding obligation in at least 2 consecutive accounting periods and it will not be possible for the court to deliver the request for additional fulfillment of the founding obligation.

We will be happy to explain all the changes in detail and help you with the adjustments of your memorandum and articles of association or statutes. All the contact details are listed below. 

Lukáš Zahrádka and Karel Nejtek