A governmental proposal of an amendment of the Commercial Code and other related legislation is currently in the Parliament.
After partial modification and revision of the former proposal of the amendment of the Commercial Code (Act No. 513/1991 Coll., the Commercial Code as amended) a governmental proposal of an amendment of the Commercial Code and other related legislation (“Amendment”) is currently in the Parliament. The anticipated date of effectiveness of the amendment is 1 January 2018
The upcoming Amendment will be focused mainly on the following:
(a) The proposed changes expand the liability of statutory representatives, members of statutory bodies, liquidators or other statutory representatives (“Representative”) of the companies in the event of a failure to timely file a petition for a bankruptcy, in which case:
(b) The Amendment revises the obligations of the former Representatives even in the event of cessation of their capacity:
(c) The amendment further prescribes that the obligations of a Representative (including the duty to act with professional care and in accordance with the interests of the company and its partners) are also imposed on a person which in fact carries out the scope of activities of the Representative, without being appointed as such.
(d) The amendment further introduces liability of a controlling person (i.e. a person directly or indirectly holding a controlling ownership interest with the most voting rights attached to it) to the creditors of the subsidiary for any damages
For the purposes of this article, the controlling person is insolvent even in the event that bankruptcy was not filed or was cancelled, or the execution or similar proceedings against this company was cancelled because of insufficient assets.
The controlling person is liable for damages, which were caused by a breach of this obligation to the creditors. If no other amount of damages is proven, it is assumed that the total amount of damages is equal to the frustrated claim.
With regard to mergers of companies, the Amendment introduces several new obligations and constraints, in particular:
At the same time, the Amendment specifies, that the decisive date for tax and accounting purposes might be determined retrospectively to the first day of the accounting period, in which the draft of the merger agreement or the project of demerger is devised at earliest, under the condition that the statement of finance written for the date preceding this date is yet to be confirmed with the appropriate corporate body.
The Amendment finally introduces the concept of a capital fund of a company, which consists of contributions of shareholders/partners of a limited liability company or a joint stock company (“contribution”).
The legislature pertaining to stocks is used for payment of the contributions. The contribution is considered a capital fund in the moment of its payment.
The Commercial Code in the proposed wording expressly provides for the possibility not only to create but also to use capital funds for:
The contribution cannot be divided between the shareholders if the company is in crisis or if such apportionment of the contributions would result in a crisis. In the event of division of the capital funds between the shareholders, the announcement of the total amount of each part has to be published within 60 days.
The amendment also alters other areas, for example:
• Extensive revision of the Institute for Trade Secrets, the conditions of violation of trade secrets and means of protection in the case of violation of trade secrets;
• Further limitations in the case of transfer of ownership share in a limited liability company (restriction of transfer if there are proceedings to wind-up the company, if the company is wound-up by a court or on the basis of a decision of a court, or the effects of a decision to declare bankruptcy or to allow restructuring have an impact on the company);
• Indirectly amends the Criminal Code (Act No. 300/2005 Coll. Criminal Code as amended) and establishes key fcts of a crime of unfair liquidation.
This alert does not contain an exhaustive overview of all proposed changes. Its aim is to provide an approximate summary of the nature and extent of legislative changes that can be expected in the nearest future.
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