CEE Legal Matters

Category: Czech Republic

  • A&O and Kinstellar Advise on Sale of Prague Business Park

    A&O and Kinstellar Advise on Sale of Prague Business Park

    Allen & Overy has advised the EPISO 4 opportunistic fund, managed by Tristan Capital Partners, and its co-investing local partner, Mint Investments, on their acquisition of the Avenir Business Park in the Nove Butovice neighborhood of Prague from debt restructuring firm Lone Star. Kinstellar advised the sellers on the deal.

    Kinstellar describes the Avenir Business Park as “a high-quality grade A office development situated in the office district of Prague 5,” and reports that “some of the tenants in the Avenir Business Park are Porsche and Sony.”

    The Allen & Overy team was led by Senior Associate Magda Pokorna, working Junior Associate Jana Svarickova.

    The Kinstellar team was led by Partners Klara Stepankova and Jan Juroska and included Associate Rudolf Schichor and Junior Associate Michal Matous.

    Image Source: avenirbp.cz

  • Dvorak Hager & Partners Represents Algotech in Hugport Investment

    Dvorak Hager & Partners Represents Algotech in Hugport Investment

    Dvorak Hager & Partners has represented Algotech in its purchase of a share of Hugport, a start-up providing digital signage solutions.

    According to Dvorak Hager & Partners, “Algotech is a leading expert in the area of contact centers, business communications, ERP systems, and cloud services.”

    The firm’s team was led by Partner Lukas Zahradka, supported by Attorney Dominika Vesela.

  • Havel, Holasek & Partners Promotes Pair to Partner

    Havel, Holasek & Partners Promotes Pair to Partner

    Havel, Holasek & Partners has appointed firm lawyers Jan Frey and Petr Sprinz to partner.

    Jan Frey started at Havel, Holasek & Partners in 2010 as a junior associate. He specializes in mergers and acquisitions, legal audits, and legal due diligence. According to Havel, Holasek, “in the field of acquisitions and divestitures, Jan has participated in a number of transactions worth billions on both the part of the seller and the purchaser in recent years, mainly in the automotive, engineering and food industries.” 

    Petr Sprinz worked with Weil, Gotshal & Manges before joining Havel, Holasek & Partners in 2014. He specializes primarily in restructuring and insolvency, litigation, contract and energy law. According to Havel, Holasek, “Petr has advised clients in complicated insolvency proceedings on both the part of creditors and debtors, as well as third parties, within asset acquisitions, and represented clients in disputes and transactions worth over tens of billions Czech crowns. Petr also gives lectures on insolvency law in the Czech Republic and abroad.”

    Following Havel, Holasek & Partners’ July 1, 2017 promotions, which included another six lawyers promoted to positions other than partner, the firm claims “a total of 51 lawyers in senior lawyer positions, of which 26 are in partner positions and 4 in counsel positions,” and it reports that, “across four offices of Havel, Holasek & Partners in Prague, Brno, Ostrava, and Bratislava, there are approximately 180 lawyers.”

    “Our goal is to cooperate with the most talented lawyers on the market and also to retain them in the long term, and as a result, we put a great emphasis on their further development and professional direction,” commented Managing Partner Jaroslav Havel. “Anybody who works hard and gets good results can grow in their career much faster than at our competitors. Current career shifts are again evidence of the fact that the vast majority of our existing partners, counsels and managing associates came from within our office, while many of them started at our firm as students or junior associates.”

    “We have already reached a certain maximum size with regard to market capacity and we do not plan any further significant personnel growth,” Havel added. “Nevertheless, we are continuously hiring — we are interested in both experienced senior lawyers, to whom we offer appropriate career positions, including a sophisticated management education system, and, of course, the incoming generation.”

  • KSB Guides Agrofert To Final Decision in Dispute with United Bakeries

    KSB Guides Agrofert To Final Decision in Dispute with United Bakeries

    Kocian Solc Balastik is reporting that the 2016 decision by the Municipal Court in Prague in favor of firm client Agrofert in its dispute with the United Bakeries Group has been upheld by the High Court in Prague, bringing the dispute to a final conclusion.

    As reported by CEE Legal Matters in June, 2016, the dispute involved “a planned, but ultimately unrealized merger of the company Penam from the Agrofert group with the United Bakeries group …. Specifically, the dispute relates to a deposit for part of the shares in the amount of CZK 100 million, the refund of which, including interest on late payment and court costs, was decided by the court in favor of KSB‘s client, on the basis that the unrealized merger was not the fault of KSB’s client.”  

    KSB is now reporting that “United Bakeries was ordered to return a CZK 100 million advance payment to Agrofert for a thwarted merger with Agrofert Group company Penam, which — according to the court — United Bakeries wrongly charged as a contractual penalty. Moreover, United Bakeries must pay default interest of CZK 36 million plus the costs of the court proceedings.”

  • Slaughter and May Advises Centrica on Sale of Power Stations to EPH

    Slaughter and May Advises Centrica on Sale of Power Stations to EPH

    Slaughter and May has advised Centrica plc on the sale of its operational Langage and South Humber Bank combined cycle gas turbine power stations with a combined capacity of 2.3GW to a subsidiary of Energeticky a prumyslovy holding, a. s. for GBP 318 million in cash (subject to customary working capital and other completion adjustments).

    The transaction remains subject to EU merger clearance and is expected to complete during the second half of 2017.

    The Slaughter & May team was led by Partners Tim Pharoah, Richard Todd, Jordan Ellison, Sandeep Maudgil, Duncan Blaikie, and Gareth Miles, Senior Counsel Sam Brady, and Associates James Odom, Oliver Gratton, Tom Inker, Rory Botros, Bronwen Hutchison, Emma Waterhouse, Lucy Duane, Nikhil Shah, and Owen Williams.

    Slaughter & May did not respond to an inquiry about counsel for the buyers.

    Editor’s Note: After this article was published White & Case announced that it had advised EP UK Investments Limited (EP UKI), the UK business of Energeticky a Prumyslovy Holding, a.s. (EPH), on the deal. The firm’s team was led by London-based White & Case Partner John Cunningham and included Partners Kirsti Massie, Victoria Landsbert, Nicholas Greenacre, Philip Trillmich, and Peita Menon, Counsel Tallat Hussain, and Associates Jee Ha Kim, James Golunski, Helen Levendi, Joanne Abbott, Laura Hoyland, Emma Roker, Katy Norman, Katherine Halliwell and Kate Russell.

  • Can a Czech Company’s General Meeting Be Held Abroad?

    The Corporations Act provides that the venue, date and time of a general meeting must be set in such a manner that shareholders’ rights to attend (and vote) are not unreasonably limited. Would this statutory requirement be met if the general meeting were held in a foreign country? If so, under what circumstances?

    The general meeting is the highest corporate body of a Czech company, whether a joint stock or limited liability. Accordingly, one of the most important rights conferred by the ownership of shares in such a company is the right to attend and vote at general meetings.

    So what if some or all of the shareholders of a Czech company are from a foreign country? Must they – by plane, train or automobile – make their way to this country in order to enjoy these rights?

    First a little bit of history. Back in the Wild East of the early 1990s a number of unscrupulous business people started a practice of deliberately convening general meetings in remote and hard to reach places with a view to preventing certain (often minority) shareholders from attending. Pursuant to the “grand amendment” of the then Commercial Code in 1996, a requirement was imposed for the choice of venue to “…limit the chances for shareholders to attend the general meeting as little as possible”.

    In following case law the Czech Supreme Court ruled that the primary criterion should be the accessibility of the venue. The Court later recognised, however, that finding a venue which suits all of the shareholders may be difficult, for instance for companies whose shareholders are spread out geographically. Moreover, companies may have, according to the Court, legitimate objectives other than accessibility, such as finding affordable meeting rooms.

    The Commercial Code is no more but today’s Corporations Act still protects shareholders from the obstructions of those who convene general meetings. The lawmakers have used a slightly different formulation than in the past. Rather than limiting “the chances for shareholders to attend the general meeting as little as possible” they stated that the venue should not “unreasonably limit the chances of shareholders to attend the general meeting”. The law therefore admits that, within reason, this right can be limited depending on a particular company’s circumstances and shareholding structure. In this way, the Corporations Act gives a little more freedom (for good or evil) than the old Commercial Code.

    So can a Czech company’s general meeting be held abroad? The answer (the one which clients always love) is that “it depends”.  If one or a small number of shareholders came from a more exotic location, while the rest did not, then holding the general meeting thousands of kilometres away would be likely “unreasonably” to limit the rights of the latter to attend. 

    If, on the other hand, a company had premises close to the Czech border, it may well be easier for both Czech and foreign shareholders to meet abroad. Getting, for instance, from Liberec in Northern Bohemia to Zittau in Saxony could be less of a hassle for all involved than coming to Prague. 

    So it’s a question that can only be answered on the particular facts of the matter. In order, however, for any such arrangement to be foreseeable and fair, it would be wise for the shareholders expressly to provide for it in the company’s articles of association.

    By Christian Blatchford, Partner, and Tomas Zach, Junior Lawyer, Kocian Solc Balastik

  • Compliance in the Czech Republic in 2017: New Challenges and Opportunities for Enterprises

    Due to the increasing activities of state authorities concerning the liability of juridical persons in general, but especially regarding corporate criminal liability, the topic of compliance is no longer seen only as a formal requirement but is becoming more and more important in the Czech Republic in almost all areas of law.

    The criminal liability of juridical persons (entities endowed with juridical personality – as contrasted to “natural persons,” i.e., human beings) was introduced in the Czech Republic by Act no. 418/2011, Coll., on Corporate Criminal Liability, effective from January 1, 2012 (the “Act”).

    Since the entry of the Act into force, the Activity of the public prosecution office has been on the increase. On the basis of the Act, juridical persons especially face the threat of the following punishments: liquidation of the juridical person, forfeiture of property, forfeiture of an item or other asset of value, and prohibition of activity. 

    Various sections of the Act are controversial as being open to misunderstanding, and calls for amendments can be identified from various sides of the political and business spectrums.

    On December 1, 2016, an amendment to the Act (the “Amendment”) became effective, introducing the possibility of excluding the liability of a juridical person when the company “made every effort that may be reasonably expected to prevent the commission of a criminal offence.” At the same time, the Amendment extended the list of criminal offences for which juridical persons can be sued. Before, a juridical person could only be sued for an enumerated list of criminal offences fixed in the Act. Pursuant to the Amendment, juridical persons are generally liable for all criminal offences, with some minor exceptions. In addition, a corporation may be held criminally liable pursuant to the Amendment only for unlawful conduct of a person in a managerial position. Previously, the definition of the liability for persons acting on behalf of the corporation was broader.

    One measure for lowering the risk of liability may be performed through a compliance program, as notably confirmed by the recent case law of the Municipal Court in Prague in the Agrotec case.

    Agrotec was suspected of illegal conduct in public procurement in respect to the Czech Post (Ceska Posta). The Municipal Court in Prague ruled that Agrotec committed the crime in question, but that due to the Amendment, and the fact that the company had made every effort to prevent the crime, because it had its own ethics code, the court dropped the criminal case against Agrotec.

    However, the Municipal State Prosecutor immediately appealed the verdict. The case is now being heard by the High Court in Prague, and it is unclear how it will decide. The question that needs to be decided by the High Court is when exactly companies have fulfilled the requirement that they “made every effort that may be reasonably expected to prevent the commission of a criminal offence.” In some opinions, Agrotec must also prove that it took all reasonable steps to ensure that employees and other persons responsible in the company fully complied with the ethics code.

    The Agrotec case, as the first precedent case, and the new regulations show that many companies’ failure to install a compliance program becomes even more risky than before, both for the companies and their management – and that, indeed, a compliance program can have a great impact on reducing costs and protecting reputations.

    Companies that already have a compliance program should update their internal compliance procedures regularly, to demonstrate to state prosecutors and the competent court that they have “made every effort that may be reasonably expected to prevent the commission of a criminal offence.” 

    As criminal liability generally passes to a legal successor of a corporation (by means of acquisitions, mergers, demergers, etc.), corporations have to keep compliance in mind not only in their own organizations but also in those they are contemplating acquiring. As a precaution, they may wish to obtain an excerpt from the Criminal Register and perform appropriate due diligence focusing on potential criminal liability before acquiring a juridical person – as well as, of course, minimizing potential risks in the share and purchase agreement by means of appropriate representations and warranties.

    In view of the above, we can conclude that the matter of compliance has become not only a legal, reputational, and ethical factor, but also an economic one, which can be crucial in today’s competitive environment.

    By Kaj Stander, Associate and Head of German Desk, Peterka & Partners Czech Republic
    This Article was originally published in Issue 4.3 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.
  • DHP Succesful for Expandia Group in Czech Arbitration Proceedings

    DHP Succesful for Expandia Group in Czech Arbitration Proceedings

    Dvorak Hager & Partners has successfully represented a member of the Expandia group in arbitration proceedings before the Arbitration Court attached to the Economic Chamber of the Czech Republic and Agricultural Chamber of the Czech Republic against an unnamed “leading Czech construction company.”

    The Expandia group invests in private and venture capital projects in the Czech Republic and across CEE. According to DHP, “the subject of the dispute was the client’s claim of unjust enrichment by the counter-party arising from a contract for work.”

    The Dvorak Hager & Partners team was led by Managing Attorney Jan Krampera, assisted by Attorney Tomas Jelinek and Associate Tereza Dosedelova.

  • The Buzz in the Czech Republic: Interview with Jiri Hornik of Kocian Solc Balastik

    The Buzz in the Czech Republic: Interview with Jiri Hornik of Kocian Solc Balastik

    “What is currently happening in Prague is the GDPR,” says Jiri Hornik, Partner at Kocian Solc Balastik in Prague, referring to the EU’s new Data Protection Regulation being implemented across Europe.

    “The new regulation that was created last year is really becoming an issue for many of our clients, including large corporations, because the penalties they face (for non-compliance) are very severe, so many clients want to make sure they’re compliant.” As a result, Hornik says, “because it requires a lot of changes in the internal systems of companies, we’re seeing a lot of requests from clients —  those requests are coming every week.” Indeed, he warns, “it usually takes a couple months to do a complete analysis and ensure they’re compliant — it requires us to go into the company and understand how it works and how the system is designed and then make the necessary changes.” Thus, he says, those companies that put off the process may not get it done in time. “The regulation is supposed to become effective and enforceable in May of next year. And it really takes a lot of time for companies to get prepared — you can’t just do it overnight.”  

    Hornik agrees that the consulting industry is, at least for a little while, benefiting from the process, calling it “good for business in every jurisdiction in the European Union, where it will generate a lot of work for lawyers and IT consultants.”   

    In general, Hornik says, “business is fine — I would say it’s growing.” Hornik says KSB’s transactional practice is doing well, but draws particular attention to the increasing significance of compliance for clients, forced to “take into account all the regulatory requirements which are currently in place.” Hornik points to a new requirement in the country that’s creating work as well: “In the Czech Republic we are dealing with a Public Contracts Registry, meaning if you’re entering into a contract with a public entity, that contract must be recorded in a public registry, and failure to register means it’s not effective. The law was implemented last year, and following a one year trial period where the failure to register did not have such impact on the contracts concerned, on July 1, 2017 it becomes fully effective. That increases the burden on the side of clients to ensure their contracts are registered.” Unfortunately, he says, “the problem we have is that the law is not very clear in defining the public entities that fall within its scope and there also are unclear exceptions to its application.”

    Hornik says that Real Estate practices are doing really well in the Czech Republic. “Real Estate is booming tremendously I would say, especially in the residential sector,” he says. “The reason is because interest rates remain really low, which generates a huge demand on the side of investors, as everybody wants to buy an apartment, either for their own needs, or to rent it out on Airbnb, which means prices have gone way up.” Hornik claims that the Czech Republic is registering the highest growth in the EU for apartment prices, and “even the Czech National Bank has noticed that the prices are a bit overheated.”  According to him, “that means there’s a lot of work in real estate, especially on the part of residential developers.” But it’s not only residential projects that are growing. Hornik points to “a growing market for industrial and logistical projects as well, because the yield from those products is even higher than it is for residential or retail, so many investors are trying to buy completed projects, because it’s a safer investment, which generates even demand for new projects.” Hornik says his firm is “working for the developers who are building new projects, and also for investors who have decided to buy such projects for the purpose of investment.” 

    Finally, Hornik says, the “upcoming general elections in October will significantly affect the market.” The current Czech government has announced plans to make large investments in country’s infrastructure, he reports, “even considering using PPP projects on the highway projects, as EU funds are difficult to get.” Past PPP attempts, Hornik reports, “were highly politicized, and eventually terminated,” and as a result “for a long time nobody even wanted to hear about PPP.” Still, recent successful PPP projects in Slovakia have encouraged their Czech neighbors to reconsider, and Hornik is hopeful that “if this project succeeds this will generate a pipeline of other projects.” Still whether or not the government gets the opportunity to try may depend on the results in October. “We’ll see how it ends up, because the elections may change that, and it will be quite difficult to make big decisions before the election.” He describes the current period as “a standard pre-election moratorium on important decisions.”

  • DLA Piper Advises Karlin Group on JV Real Estate Acquisition in Prague

    DLA Piper Advises Karlin Group on JV Real Estate Acquisition in Prague

    DLA Piper has advised the Karlin Group on the creation of a joint venture with the Shinkun & Binui developer for a residential real estate project in the Modrany part of Prague.

    DLA Piper and the Karlin Group began working on the deal in March 2016 and the transaction was completed in April 2017. The transaction was structured as a share deal, and involved a number of restructuring sub-steps, including acquisition of land, increase in share capital, a contribution outside of the share capital, and a demerger. The value of the deal is was not disclosed.

    The Karlin Group was established in 1997. The main partner of the group is Serge Borenstein, the co-creator of the group, which focuses its development activities in Karlin — a rapidly developing part of Prague — and other Prague neighborhoods, especially Modrany, Holesovice, and Smichov. 

    The Prague core team advising Karlin Group was led by Country Managing Partner Miroslav Dubovsky and included Senior Associate Petr Samec and Junior Associate Jan Metelka.