Types of Companies in the Czech Republic

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All the following companies begin to exist immediately once registered in the Commercial Registry. Below the Czech Commercial Code, the following organizations are deemed legal entities: Joint Stock Company; Co-operative; Limited Liability Company; Limited Partnership; General Commercial Partnership; European Cooperative Society; European Joint Stock Company; and, European Economic Interest Grouping.

Legal Entities:

Provided below is a detailed list describing most of the organizations’ considered legal entities.

Joint Stock Company: must ha a minimum registered capital of CZK 2 million and at least 30% of the said amount must be endorsed in cash and paid upon integration. A Joint Stock Company should have two boards, one composed of directors and another of supervisory. Each board should have three different members unless the company has a sole shareholder; in that case, there may be one director and three supervisory members. To be founded by a single shareholder, that individual must be a legal entity; if not, then there should be a minimum of two founders. There must be a Foundation Deed (Memorandum of Association) if there is solely one founder and Articles of Association. If a said company has over 50 employees, then they have the option of electing one-third of the members in the supervisory board.

Trade licenses are essential and a reserve fund of at least 20% of the net profit in the first profitable year of business. Moreover, at least 5% of net profit, after taxes, must be passed to the reserve fund every subsequent year until it reaches at least 20%. A registered auditor must audit annual reports and published on the commitment that one of these three reasons are met: turnover exceeds CZK 80 million; assets exceed CZK 40 million; and, the number of employees surpasses 50.

Co-operative: can be created by at least five people or at least two legal entities. Must have registered capital at least 50,000 CZK. A permanent fund must be established at the time of integration in the amount of at least 10% of the registered capital. After taxes are deducted, at least 10% of profits must be passed over into the indivisible fund annually pending it reaches 50% of the registered capital. Audit requirements are similar to those for Limited Liability Company.

Limited Liability Company: registered capital is composed of investments which are agreed in advanced and then invested into the company by the members. This company may be founded by a sole founder, natural person, or legal entity with the maximum number of members as 50, and no shares granted; each person holds an “ownership interest.” A minimum amount of registered capital is 200,000 CZK with each member’s investment into the company being 20,000 CZK. If there is more than one founder, 30% or more of each monetary investment must be paid, and the total endowments cannot be less than 100,000 CZK. If there is a sole founder, 100% of registered capital must be paid.

Unless two of the following reasons are met, it is unnecessary to conduct an audit: assets exceed 40 million CZK; turnover exceeds 80 million CZK; and, the number of employees surpasses 50. Reserve fund must establish at least 10% of net profit in the first profitable year of business.

The General Meeting issued to the body empowerment of most crucial decisions along with adopting Articles of Association and modifications of the Memorandum of Association; appointing; recalling and remunerating members and directors of the supervisory board; and, making decisions about the distribution of proceeds. Directors make rulings regarding the firm’s business management. The Supervisory board is created to manage the directors and oversee and administer commercial or accounting books and check the financial statements.

Limited Partnership: a company similar to a General Commercial Partnership; nonetheless, it is distinctive because at least one partner must have unlimited liability. Also, at least one partner must have their liability limited to the value of their registered investment within their company. Only the partners with unlimited liability are authorized to administer the company.

Unless two of these three circumstances are met: assets exceed 40 million CZK; turnover exceeds 80 million CZK; and, the number of employees surpasses 50, the company does not have to be audited.

General Commercial Partnership: a company where each partner is jointly and severally liable for the partnership obligation, and unlimitedly empowered to operate on behalf of the partnership. The Czech Commercial Code permits two individuals to create a General Commercial Partnership. The existence of this partnership relies on its partners, although it is still considered a legal entity.

Unless two of these three circumstances are met: assets exceed 40 million CZK; turnover exceeds 80 million CZK; and, the number of employees surpasses 50, the company does not have to be audited.

European Legal Entities

Provided below is a detailed list explaining the rest of the organizations which are considered European legal entities.

European Cooperative Society: can be created by at least five people or legal entities; these must be residents as governed by laws of at least two distinct EU Member States. There are two other methods to establishing a European Cooperative Society: by the transformation of a cooperative organized under the laws of a Member State; and, a fusion of cooperatives created under the laws of two distinct Member States with both method’s registered offices within the EU.

The European Cooperative Society must have a registered capital of at least 30,000 EUR consisting of the value of registered capital and the cost of members’ permanent endowments registered under Commercial Registry. A reserve fund is also required with the amount of at least 30,000 EUR as well consisting of at least 15% of profits after tax deductions of any losses must be transferred annually to the reserve fund until the limit is reached.

European Joint Stock Company: the companies implementing business activity not limited to pleasing local needs should be able to perform the reorganization of their company on a Community scale. A Joint Stock Company with the mission to manage companies with a European dimension, no obstacles emerging from the limited territorial application of national company law and disparity (considered as SE). The Joint Stock Company can be discovered with means of a merger, formation, or transformation of a SE.

Private and public limited liability companies with registered offices within the Community and created under the law of a member state, can boost an establishment of a holding SE, guaranteed by two of the companies governed by the law of a distinct member state. The SE can operate under two systems: one-tier where an administrative organ administers, and two-tier where there is a management organ and a supervisory organ as well. The minimum of agreed capital is 120,000 EUR.

European Economic Interest Grouping: can be created by at least two companies with central management in the distinct Member States. Members included in this group must contain commercial, industrial, craft, or agricultural activity and be able to deliver other professional services. The purpose should be to encourage or establish the economic efforts of its members and improve the results of said efforts. Members included as a body can make decisions for the intention of achieving goals of grouping; some members may even account for more than one vote, as long as no one member contains the primary votes.

Profits ensuing the group’s operations should be apportioned equally amongst them unless the contract of formation declares otherwise. Members of said grouping contain unlimited joint and several liabilities for its other liabilities and debt while the profits or losses are taxable under the responsibility of its members.