Corporate Law at Czech Republic
Corporate Law in the Czech Republic governs the formation, operation, and dissolution of companies within the country. Here's an overview of the key aspects of corporate law in the Czech Republic:
1. Legal Framework
Corporate law in the Czech Republic is primarily governed by:
Civil Code (Act No. 89/2012 Coll.)
Business Corporations Act (Act No. 90/2012 Coll.)
Trade Licensing Act (Act No. 455/1991 Coll.)
Insolvency Act (Act No. 182/2006 Coll.)
These laws are harmonized with EU regulations.
2. Types of Business Entities
The most common business structures include:
| Type of Entity | Czech Name | Key Features |
|---|---|---|
| Limited Liability Company (LLC) | Společnost s ručením omezeným (s.r.o.) | Most popular for small to medium businesses. Requires only 1 CZK as minimum capital. |
| Joint-Stock Company (JSC) | Akciová společnost (a.s.) | Suitable for larger businesses or public companies. Requires at least CZK 2 million in capital. |
| General Partnership | Veřejná obchodní společnost (v.o.s.) | Partners are jointly liable. |
| Limited Partnership | Komanditní společnost (k.s.) | Has general and limited partners. |
| Branch Office | Organizační složka | Foreign companies can set up branches. |
3. Company Formation Process
Steps to set up a company in the Czech Republic:
Choose company name (must be unique and checked with the Commercial Register).
Prepare foundation documents (Memorandum/Articles of Association).
Deposit share capital (at a bank, especially for JSC or LLC).
Register with Commercial Register (maintained by Regional Courts).
Obtain a Trade License (if needed).
Register with tax authorities and get a tax identification number (DIČ).
Register for social security and health insurance if employing staff.
4. Corporate Governance
LLC: Managed by one or more executives (jednatelé).
JSC: Governed by a board of directors or dual system (supervisory and management boards).
Shareholders' meetings must be held annually.
Statutory bodies are liable for damages caused by breaching duties.
5. Taxation
Corporate income tax: 21% (as of 2024).
Dividend withholding tax: 15% (unless EU Parent-Subsidiary Directive applies).
VAT: 21% standard rate.
6. Employment & Labor Law
Companies must comply with:
Czech Labor Code
Minimum wage regulations
Social security contributions
Employee protections and contracts
7. Bankruptcy and Insolvency
Handled under the Insolvency Act, with restructuring or liquidation options available. Directors have a legal duty to file for insolvency if the company becomes insolvent.
8. Foreign Investment
Foreigners can fully own Czech companies.
EU and EEA nationals have equal rights as Czech citizens.
Few restrictions, mostly in regulated industries (e.g., banking, energy).
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