1. What types of company can be formed in the Czech Republic?

The Business Corporations Act recognizes the following types of business entities:

  • limited liability company (s.r.o.)
  • joint stock company (a.s.)
  • general partnership (v.o.s.)
  • limited partnership (k.s.)
  • co-operative (družstvo)
  • European cooperative society (evropská družstevní společnost)
  • Societas Europaea (SE)
  • European economic interest grouping (evropské hospodářské zájmové sdružení)

European Cooperative Society, Societas Europaea and European Economic Interest Grouping are primarily regulated by EU regulations which are legally binding for all EU Member States.
The Czech Civil Code recognizes also other forms of legal entities, such as trust and associations, which can also perform business activity, but this should not be the main purpose of their existence.

Foreign companies may also conduct business in the Czech Republic by means of their business or branch offices located in the Czech Republic and registered with the Czech Commercial Register.

The limited liability company (s.r.o.) is the most common form of business in Czech Republic.

2. What is the minimum share capital for each company type in Czech Republic?

For corporate enterprises, minimum capital is dependent on the business type:

  • limited liability company (s.r.o.): The minimum amount of registered capital is CZK 1. The minimum contribution of each member to the registered capital is CZK 1.
  • joint stock company (a.s.): The minimum amount of registered capital is CZK 2,000,000 or EUR 80,000.
  • Societas Europaea: The minimum amount of registered capital is EUR 120,000.

The Business Corporations Act does not set out the amount of minimum registered capital or minimum contribution for other types of companies.

3. Are there any requirements relating to company management in Czech Republic?

Foreigners who will form the company management (i.e. statutory body) have to prove their moral integrity by obtaining and submitting the criminal background check from the state of citizenship or long – term residency.

In addition, members of the statutory body should be at least 18 years old, have legal capacity and there have to be no impediments to their operating of a trade in accordance with the Trades Licensing Act and other legal regulations.

It is very important for the statutory body to act with due care and diligence when performing its role in a company. If the statutory body fails to comply with due care and diligence, it is liable for damages sustained by a company.

In order to protect the statutory bodies, insurance companies in the Czech Republic provide a commercial insurance option for damages caused by the decisions of statutory bodies.

4. What documents are required for company formation in Czech Republic?

The most important document required when establishing a company in Czech Republic is the articles of association or foundation deed. When the establishing company is a capital company (limited liability company (s.r.o.) or joint stock company (a.s.)) the document must be made in the form of notarial deed.

Other documents required are subject to circumstances. Usually the following documents are also required:

  • a trade license or license for other type of business activity,
  • a deed attesting the legal basis for use of the premises at which the company’s registered office is situated, e.g. a written consent of the owner,
  • a document attesting the fulfilment of the obligation to pay at least statutory minimum contributions into the registered capital, if applies,
  • documents attesting the fact that persons who are to be registered as members of the company’s bodies satisfy the requirements set forth by law, i.e. that they are at least 18 years old, have legal capacity, are without a criminal record related to the business, and that there are no impediments to their operating of a trade in accordance with the Trades Licensing Act and other legal regulations
  • the consent of the person being registered to their registration in the Commercial Register (members of the company’s statutory body).

5. What is the company registration process in Czech Republic?

When the company is established, then it must be registered in the Commercial Register. An established company acquires legal personality by the incorporation. The corporations are incorporated as of the date of their registration in the Commercial Register.

Other legal requirements of establishment depend on the type of company.

The Commercial Register is a register of all types of legal persons which have been established in accordance with the Czech legislation and also (under certain conditions) of sole traders. The Commercial Register is administrated by Register Courts. Submission of an application for incorporation to the Commercial Register is a subject to the court fee.

The application must be accompanied by documents that ascertain the information that should be recorded in the Commercial Register and by the documents that form the collection of documents in connection with the registration. The application must be submitted to the competent Register Court. The competent Register Court is a Regional Court, wherein district is the registered office of the corporation.

It is also possible to choose a direct registration by a notary. The notary shall arrange the incorporation in the Commercial Register, if the recorded information is based on a notarial deed. This option is often used and also recommended in event of establishment a limited liability company and joint stock company because these companies must obligatorily have the articles of association in the form of a notarial deed.

6. Are details of company ownership public in Czech Republic?

Identity of the ultimate beneficial owner of a company (as defined in the Czech AML Act) must be registered with the Commercial Register. The term ultimate beneficial owner refers to a natural person that is able to exercise, either directly or indirectly, a controlling influence in a company, meeting the qualification requirements under the Czech AML Act (i.e. a person with more than 25 percent of the capital contribution or voting rights in a company). If the ultimate beneficial owner cannot be determined (typically in a case of publicly listed joint stock companies), there is a presumption that the ultimate beneficial owner is a member of a statutory body of a company. Details of the ultimate beneficial owner are not disclosed; however, they can be in certain cases ascertained from the Commercial Register due to the disclosure requirements referred to below.

Concerning identity of managing directors and shareholders of company, it is publicly disclosed in the Commercial Register with the exception of joint stock company where identity of shareholders is not publicly disclosed (unless there is only one shareholder; in that case, identity of that shareholder is to be disclosed in the Commercial Register).

7. Can a foreign individual or company own shares in a Czech company?

There are no limitations for foreign individuals or companies when it comes to setting up companies or being shareholders of companies. A foreign natural or legal person may establish any form of company either together with other foreign or Czech persons, or alone as a sole shareholder, as well as purchase a share/s in a company. In this respect, foreign natural and legal persons enjoy the same rights and bear the same obligations as Czech persons and may not be discriminated.

8. What is the corporate tax rate in Czech Republic?

The corporate tax rate is 19% and applies to all business profits, including capital gains from the sale of shares (if not exempt under the participation exemption regime).

There is a special corporate tax rate of 15%/35% levied on dividend income of Czech tax resident entities from non-resident entities (unless subject to participation exemption).

A 5% corporate tax rate applies to income of certain investment funds, and a 0% corporate tax rate applies to pension funds.

9. What are the rules for issuing dividends from Czech companies?

A General Meeting of company decides on the distribution of dividends within six months from the end of the previous accounting period. Dividends can be distributed not only among the shareholders, but also among other persons (for example, employees, executives, etc.) – if so determined by the foundation deed.

The necessary basis for the adoption of a decision on the distribution of company dividends is the regular or extraordinary financial statements, which will provide the necessary information about the assets and liabilities of the company and the result of its economic activities.

An important rule that prevents the payment of dividends (or an advance on it) is the rule that such payment must not lead to bankruptcy of a company.

In addition, the amount to be distributed among the shareholders may not exceed the amount of the profits (economic result) of the last completed accounting period increased by retained earnings from previous periods and reduced by losses from previous periods and by allocations to reserve and other funds.