Novela zákona o přeměnách

The Ministry of Justice has published a draft amendment to the Act on Transformations of Companies and Cooperatives and Related Regulations (the "Amendment") in the electronic library of forthcoming legislation, which aims to transpose into Czech law Directive (EU) 2019/2121 of the European Parliament and of the Council of 27 November 2019 (the "Directive") amending Directive (EU) 2017/1132 as regards cross-border conversions, mergers and divisions.

Czech law allows for these types of cross-border operations  to be carried out without the need to transpose the Directive, but some of the existing rules and safeguards provided for in the Conversion Act do not comply with the new requirements of EU law.

Moreover, the Amendment takes into account the findings of Czech practice by proposing at the same time partial changes and elimination of shortcomings of the existing legislation which cause difficulties in practice.

Below we summarise selected changes proposed by the Amendment:

• the possibility of cross-border conversion, i.e. relocating the registered office, to or from a country other than the EU or EEC Member States is explicitly enshrined - it will now be possible to relocate the registered office of a company from or to Switzerland, for example, without any further doubts;
• the latest date of the so-called decisive date will now be based on the date of registration of the transformation in the Commercial Register (previously, the 12-month period was calculated from the filing of the application for registration of the transformation), while the decisive date of the merger or division will no longer be the day preceding the date of formation of the company or cooperative involved. It is expressly allowed for a company or cooperative to participate in several conversions with the same decisive date;
  
• an expert for the purposes of the valuation of the assets required by the law on transformations will no longer have to be appointed by the court but will be selected by the participating company from a list of experts; 
  
• the obligation to publish the notice of the deposit of the draft terms of the operation in the Commercial Bulletin and the notice to creditors is replaced by the obligation of the participating party to file with the Collection of Deeds of the Commercial Register a notice to creditors, employees and shareholders of their rights, while the alternative option of publishing this information in a manner allowing remote access (via a website) is retained, under the conditions laid down by law;
  
• the procedure regarding the exercise of the right of creditors to additional security is changed - this right must be newly exercised before the court within 3 months of the date of publication of the draft terms of the operation; it will also be possible to request security in relation to future or contingent claims, provided that these are claims arising from obligations incurred before the publication of the draft terms;
  
• a new form of spin-off by separation is introduced - as a result of a spin-off by separation, the company being divided is not dissolved but (i) part of its assets are transferred to the newly created successor company, with the company being divided becoming the sole shareholder of the newly created company and/or (ii) part of its assets are transferred to an existing company and the company being divided acquires a shareholding in the existing company (only a spin-off by separation with the creation of a new company will be allowed for cross-border divisions); and
  
• the notary will be empowered to refuse to issue a certificate for a cross-border operation if he/she finds that the purpose of the cross-border operation is abusive or fraudulent, aimed at avoiding or circumventing national or Union law, or at committing a criminal offence.
  

At the same time, the Amendment introduces related changes to the Act on Business Corporations and the Act on Public Registers of Legal and Natural Persons and on Registration of Trusts.

The Amendment is currently in the comment procedure. According to the explanatory memorandum, it is proposed to set its effective date on 1 January 2023. However, we do not consider this date likely in view of the legislative process, but we will continue to monitor the legislative process relating to the Amendment for you. 

If you would like more detailed information, please contact the authors of this article or other members of EY Law or the EY team with whom you work.

Authors:

Dalibor Šimeček

Ondřej Havránek