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Czech Republic Legal Entities
Limited Liability Company (“s.r.o.” or a “spol. s r.o.”)
Mainly used for small and medium-sized businesses. Contrary to other jurisdictions, in Czech Republic the members do not have shares issued in their name. The members of a Czech company have a corresponding participation interest (minimum contribution being CZK 1 as from 2014, which is not advisable as it would be easier to bring upon issues of insolvency) in the company and their rights and duties assigned against the company are set out in the (i) memorandum of association or in the event there is only one participant (whether physical or legal) in the company, (ii) a founding deed. Regardless of which one of the two is used, it must be executed as a notarial deed would have been executed and it must also indicate whether the company has intention of issuing articles of association.
A Limited Liability Company has the freedom to have more than one type of ownership interest, which may carry a variety of rights and obligations, therefore a shareholder (provided that it is provided for in the memorandum of association or in the founder’s deed as the case may be) may hold more than one ownership interest in the company, which can only be transferred to another provided a written agreement (having notarized signatures) is submitted and therefore a general meeting authorising as such will not be required.
A Limited Liability Company’s non-monetary contributions, which are indicated in either the founder’s deed or in the memorandum of association, depending on what the case may be, must be in full settlement prior to registering the company in the Commercial Register.
Joint Stock Company (commonly referred to as “a.s.” or an “akc. spol.”)
A Joint Stock Company is formed on the basis of articles of association document (if there is more than one member) or a founding deed (if there is only one member), either of which must be executed and drafted as would a notarial deed and the context of which is stipulated within the Act on Business Corporations.
A minimum registered capital is CZK 2,000,000 (or the equivalent of EUR 80,000 for companies that in light of specific legislation to maintain accounts in euro currency). A minimum of 30% of the registered capital must be paid up prior to the application for registering the company is made, or at any other time that is indicated in the articles of association.
What an essential benefit of the Joint Stock Company is the fact that the shares in such company can be easily traded, depending on the context of the Articles of Incorporation, without the requirement of primarily going through the Companies Register. Such a company is seen as a favourite for investors as it provides extreme confidentiality as the bearer shares can be issued in the form of book-entry securities or as immobilized securities and in addition there is no liability for shareholders.
Limited Partnership (k.s.)
A Limited Partnership can be formed by two or more partners which can be either legal or physical entities. On or more of the partners needs to be assigned as a general partner, holding unlimited liabilities with regards to any potential debts that are issued in the name of the company, and who will be solely permitted to manage the partnership, whilst another partner must hold proportional liability depending on unpaid contribution, referred to most commonly as a ‘limited partner’.
There is no minimum share capital requirement for such entity, other than the one imposed on the limited partner to contribute up to the minimum amount of CZK 5.000.
General Commercial Partnership
A General Commercial Partnership (commonly known as v.o.s.) is a form of business very similar to common known partnerships. Parties using such business entity can be held personally liable. The General Commercial Partnership can be formed by two or more persons and the benefit to choosing such a business vehicle is that it does not require initial investment.
A Branch Office, is not considered essentially as a legal entity. It is viewed as a representation of a foreign entity not located in Czech Republic and additional is depended on the entity that it represents, despite the reality that it holds independed management and its own accounts.
It is regulated by Czech Republic relevant legislation and it must also be registered into the Commercial Register. The Branch Office is required to bare the same name as its foreign head office with an addition of ‘Organizational Unit’.
Such a business entity must comprise of a director and must set out a list of planned activities, however it does not require a basic capital payment.