Setting up company is now faster and easier

Founders of limited liability companies may now obtain a trade license even after the company has been incorporated/registered in the Commercial Register. Things should also be made easier by an official memorandum of association template, which leaves out some important information, however. What else has changed in the establishment of the company?

On 15 January 2023, Act No. 416/2022 Coll., amending certain acts in connection with the use of digital tools and processes in company law and the functioning of public registers, entered into force, in part. It follows the amendment to the Rules of Notarial Procedure, under which a founder of a company does not have to appear before a notary in person, but a real-time audio-visual connection suffices. For newly established limited liability companies, the obligation to have a special account with a bank was also abolished, so registered capital can be paid in another manner if it does not exceed CZK 20,000.

One of the most important changes effective from 15 January 2023 is that newly established legal entities no longer have to obtain a trade license prior to being registered in the public register. The founder of a legal entity can choose at which stage to report a trade or apply for a trade licence: it is up to them whether they do so before or after filing for the registration in the public register. It is, however, advisable not to delay obtaining a trade license once the company is registered: if the trade is not reported or the trade licence applied for within 1 year of its establishment, the court may dissolve the company with liquidation.

Another simplification consists in reducing the number of documents required by the Trade Licensing Office. Until recently, legal entities had to attach to the report on carrying out a trade or the application for a trade licence documents proving their legal title to using the premises; this was abolished by the amendment, as they have the same obligation when being recorded in a public register.

The establishment of a limited liability company should be further simplified by an official memorandum of association template published by the Ministry of Justice on its website. The template contains mandatory essentials but does not regulate some of the non-mandatory provisions that memoranda of association usually provide for – e.g., the powers of the general meeting. Therefore, should a company use the template without any modifications, the decision to liquidate the company or to appoint a liquidator would remain in the hands of the members, not the general meeting, which could be impractical for the members in some situations.

The amendment not only facilitates the establishment ofcompanies but also regulates the impediments to exercising an office of a member of an elected body of a business corporation. Newly, these obstacles will be stipulated explicitly in the Corporations Act and without reference to the condition of a clean criminal record under the Trade Licensing Act and impediments to carrying out a trade. Another novelty will be the registration of persons disqualified from exercising the office of a member of an elected body of a business corporation, to be maintained by the Ministry of Justice. It will include persons who have been disqualified by a court order, convicted of a criminal offence constituting an impediment to exercising an office, or whose assets have been declared bankrupt. This register will be non-public and will be accessible to courts and notaries. The legislative changes concerning the impediments to exercising an office of an elected body of a business corporation and their registration will enter into effect on 1 July 2023.