Category: Czech Republic

Havel & Partners has advised HP Invest on its full acquisition of HP Tronic from Genesis Private Equity Fund III.

HP Tronic is engaged mainly in the sale of electronics in brick-and-mortar stores and online in the Czech Republic, Slovakia, Hungary, Poland, and Germany. According to Havel & Partners, thanks to the transaction, “Datart, the leading national network of electrical appliance stores, has once again a single owner, namely HP Invest.”

HP Invest was established in 2007 and is a professional and independent investment fund.

The Havel & Partners team included Partner Vaclav Audes, Senior Associate Ivo Skolil, and Associate Tomas Hansa.

Clifford Chance has advised Ceskoslovenska Obchodni Banka and Ceska Sporitelna on the financing for Oriens group member Central European Retail Holding’s acquisition of the Hruska retail chain through the full acquisition of Hruska and Sempronemo. Clifford Chance also advised Oriens on the acquisition transaction.

According to Clifford Chance, with over 500 stores, Hruska is a “significant player in the Moravian and Eastern Bohemian regions. The acquisition strengthens Oriens group’s presence in the Czech retail market.”

Previously, Clifford Chance advised Ceska Sporitelna on the financing for Oriens Group’s acquisition of S&K Tools (as reported by CEE Legal Matters on March 29, 2024) as well as on the financing for its acquisition of Sanborn (as reported by CEE Legal Matters on December 6, 2023).

The Clifford Chance team included Managing Partner Milos Felgr, Counsels Michal Jasek and Petr Sebesta, Senior Associates Hana Cekalova and Tomas Prochazka, and Junior Lawyers Sara Bartlova, Martin Hrachovina, Jiri Krejca, and Petr Rysina, with further team members in Luxembourg.

Clifford Chance did not respond to our inquiry on the matter.

We bring you a brief overview of important legislative news from the Czech Republic that should not escape your attention.

Increase of the minimum wage and of the lowest levels of guaranteed wages

As of 1 January 2024, the minimum wage was increased from CZK 103.80 to CZK 112.50 per hour, or from CZK 17,300 to CZK 18,900 per month. There was also an increase in the guaranteed salary for the 1st to 3rd group of jobs of CZK 1,600 per month and for the 8th group of jobs of CZK 3,200 per month. Other groups of jobs remain unchanged.

Simplifying the employment of foreigners

Employers employing nationals of third countries (outside the EU) will no longer have to undergo the so-called labour market test. Now an employer who wants to employ such an employee must announce a vacant position to the Employment Office and, after a period of up to 30 days, wait (verify) whether a citizen of the Czech Republic could fill the position in question. From 1 July 2024, the employer will still be required to report the position to the Employment Office, but it will be possible to employ foreigners immediately without the need to wait.

Duly justified invitation to the general meeting

The Supreme Court decided that an invitation to the general meeting of a joint-stock company, which by law must contain, among other things, the draft resolution of the general meeting, including its justification, only has to state the basic information for which the adoption of the resolution is proposed, while additional information is to be provided directly at the general meeting.

Private limited liability companies are not required to distribute all their profits

The Supreme Court concluded that the jurisprudence establishing the obligation of a joint-stock company to distribute its entire profit to shareholders is not immediately transferable to the circumstances of a private limited liability company. Private limited liability companies are therefore not obliged to distribute their entire profit to its members, even where they do not have an important reason for not distributing the profit in full.

Is a super-office being established in Brno?

At a time of rising food prices, the government called on the Office for the Protection of Competition to propose new powers. The Office did so in January in the form of a substantive plan, which has now been submitted to the Legislative Council of the Government. The substantive plan includes, among other things, the right to (1) order corrective measures even though there has been no violation (the Office as a regulator instead of market protector?), (2) carry out random dawn raids without any indication of a violation (legalisation of so-called fishing expeditions, which according to existing jurisprudence are an inadmissible invasion of privacy?), (3) obtain location data directly from telecommunications operators, (4) impose sanctions also on members of statutory bodies, employees and other natural persons, (5) assess ex-post also connections that are not subject to notification criteria, (6) reward whistleblowers, and (7) share information with other state authorities.

Conflict of interests of the statutory body in the light of new caselaw

Where there is a conflict of interests between a member of an elected body and the company, it is sufficient if the member of the elected body informs each shareholder about the content of the contract and all shareholders expressly agree to it or take note of it and waive the right to discuss such a conflict of interest at the general meeting (NS 27 Cdo 1206/2022).

In the event of a conflict of interests, the competent authority can only be informed of a part of the contract, but provided that this authority has enough information based on the submitted part of the contract to consider the possibility of suspending the statutory body or prohibiting it from concluding the contract, and that the unsubmitted part of the contract does not contain so-called unexpected conditions (NS 27 Cdo 2699/2021).

By Michal Hrabovsky, Counsel, Barbora Safarikova and Lola Florianova, Senior Associates, and Martina Vodickova, Jan Houlik and Barbora Bugova, Associates, Eversheds Sutherland

In 2024, the conditions for obtaining an employment agency permit will be further tightened.

This mainly involves a doubling of the security deposit to CZK 1 million in the case of agencies temporarily assigning their employees to users (existing agencies had to pay the security deposit by the end of March 2024), the tightening of the conditions for proving the responsible representative’s professional competence (creditable professional experience of 20 hours per week in the last 10 years is now required) or the condition of being debt free.

The employment agency must demonstrate that it has no arrears of taxes or levies to the financial administration, customs administration, social security authorities and health insurance companies at the time of application and every six months after obtaining the permit. There is also a certain enhancement in the protection of temporarily assigned employees, as users can no longer terminate temporary assignment by notifying the agency at any time (if the agreement with the agency allowed it to do so). Now it is also necessary to deliver such unilateral termination to the employee at least 14 days in advance (does not apply to temporary assignments created before the end of 2023).

Among other noteworthy changes is the expansion of the content of the annual mandatory reports to also include data on users and the number of temporarily assigned employees, new requirements for marking and identifying the agency’s registered office (before submitting an application and throughout the entire period of activity) and, finally, moving the entire agenda related to employment mediation from the Employment Office to the Ministry of Labour and Social Affairs.

By Radek Matous, Partner, Eversheds Sutherland

Former Home Credit International Legal Manager Martin Seda has been promoted to the Chief Legal & Compliance Officer position for the group.

Seda has been with Home Credit International since 2017 and is based in Prague. Before joining the international consumer finance provider, Seda spent almost two and a half years with Kinstellar, split evenly between Managing Associate and Senior Associate positions, and over ten years with Hogan Lovells, between 2004 and 2014.

Originally reported by CEE In-House Matters.

Glatzova & Co has helped Pale Fire Capital obtain a license from the Czech National Bank for an investment company authorized to exceed the so-called “decisive limit.”

Pale Fire Capital is a private equity investment group supporting technological innovation across multiple industries. 

Previously, in 2022, Glatzova & Co advised Pale FIre Capital on its acquisition of Arpem Networks (as reported by CEE Legal Matters on February 14, 2022).

The Glatzova & Co team included Partner Libor Nemec, Senior Attorney Andrea Pisvejcova, and Associate Jan Losenicky.

PwC Legal has advised Orlen Unipetrol Group on Orlen Projekt’s acquisition of design and engineering activities from Brno-based UNIS and UNIS Power. Forlex advised the seller.

“With this acquisition, the ORLEN Unipetrol Group will substantially reinforce its possibilities and capacities to implement its extensive investment plan, strategic development, and transformation toward a sustainable future,” an Orlen press statement read, adding that the acquisition was scheduled to close on May 2, to be followed by an integration process of several months.

“Each year, we execute billions worth of investments as part of our gradual transformation into a multi-energy group and transition to a sustainable, zero-emission future,” commented Orlen Unipetrol Group member of the Board of Directors Maciej Romanow. “The requirements for expert management of our extensive investments keep increasing. That is why we are now expanding the competencies of our engineering and supplier company Orlen Projekt CR. We welcome all of the more than 130 experts from UNIS and UNIS Power to our group. Most of them know our group because they were engaged in preparing our investment projects as external suppliers in the past. Becoming stronger with this acquisition, we will continue to pursue our path toward a sustainable future faster, more flexibly, and more efficiently.”

The PwC Legal team was led by Managing Associate Daniel Pikal and supervised by Partners Olga Kaizar and Petr Kincl. It also included Attorneys Martina Stolba Sedlackova, Jiri Brabec, Lenka Michalcova, and Milos Sochor, and a Junior Associate Klara Zikmundova.

The Forlex team included Partner Ivan Barabas, Senior Associate Lukas Marek, and Junior Associate Jiri Vecerka.

Glatzova & Co has advised Bohemia Properties on the sale of land in Strizkov to be used for a residential project to Daramis.

Bohemia Properties operates in the hotel industry. Daramis is a development company.

According to Glatzova & Co, “the transaction involved a non-standard settlement of the purchase price, where the client is entitled to a purchase price of CZK 390 million determined by a share of the purchase prices from the sold residential units. This allows the client to achieve a higher purchase price than in a standard land sale, but the payment of the main part of the purchase price is deferred in time, and its final amount will depend on the selling prices of the residential units.”

The Glatzova & Co team included Partner Erik Kolan.

Glatzova & Co could not provide additional information on the deal.

Kinstellar has advised Dig Ventures on its strategic investment into Czech mobile application security start-up Talsec.

According to the firm, the transaction is part of Dig Ventures’ efforts to expand its global presence and support further innovation in its security solutions portfolio.

Talsec originated as a spin-off from Brno-based technology company Monet+. The company develops specialized tools that protect mobile applications from hacking threats, conceal sensitive information, and identify malicious software. “Talsec’s solutions are already helping to secure over a thousand apps from various companies, including insurers like Generali and VIG, fintech enterprises such as Novucard, and governmental bodies like the Czech Ministry of the Interior,” Kinstellar reported.

The Kinstellar team was led by Partner Jan Juroska and included Managing Associate Petr Bratsky and Senior Associate Martina Mazurkova.

This Top 10 Corporate Law Judgments 2023 summary provides a clear and concise overview of key Supreme Court decisions in corporate law for 2023.

27 Cdo 1293/2023 (26 October 2023)

Consequences of the absence of the general meeting’s consent to an agreement on performance of office

In this decision, the Supreme Court addressed the intricacies surrounding the concluded agreement on performance of office and concurrent employment contract within the jurisdiction of a statutory body. Adhering to settled case law, the Supreme Court has concluded that an employment contract which is negotiated alongside an agreement on performance of office is considered an amendment to the agreement. In such a case, it must be approved by a general meeting. Until the general meeting approves the agreement on performance of office or its amendment, the unapproved part is ineffective according to Section 59(2) of the Business Corporations Act. This provision takes precedence over Section 48  with regard to the consequences of the lack of approval by the general meeting of the agreement on performance of office, according to which a legal act requiring the general meeting approval is relatively invalid without such approval.

27 Cdo 1206/2022 (10. 1. 2023)

Informing individual shareholders about contract content in conflicts of interest

In this judgment, the Supreme Court summarized the main conclusions of the established case law on statutory body conflict of interest and also concluded that it is exceptionally permissible not to convene a general meeting to announce a conflict of interest. In such a case, however, the court held that it is necessary to notify the individual shareholders who agree to the conclusion of the contract or at least acknowledge it and at the same time waive the right to convene a general meeting to discuss the conflict of interest. However, it is not clear from the decision under what circumstances this exception is permissible.

27 Cdo 241/2023 (24. 10. 2023)

Content of the invitation to the general meeting in a joint stock company

According to the Supreme Court, the invitation to a general meeting in a joint stock company should, as a rule, contain clear and concise reasons for adoption, i.e. basic information regarding the reasons for adoption.

This does not mean, however, that the invitation should replace the general meeting, where shareholders will learn more detailed information and have the right to an explanation pursuant to Section 357 of the Business Corporations Act. The invitation should only indicate why a certain matter is to be decided and why in the proposed manner.

27 Cdo 238/2022 (18. 1. 2023)

Due managerial care: the general meeting’s instructions to the strategic decision-making of a statutory body

The Supreme Court has reiterated that strategic decisions, which do not constitute business management, fall within the competence of the statutory body, unless the constituent acts provide otherwise. In the circumstances of this case, an investment was being made.

Under Section 51(2) of the Business Corporations Act, a statutory body can request instructions from the general meeting regarding business management. Since strategic decision-making involves more fundamental decisions than business management, the court concluded, interpreting a minori ad maius, that if it is possible to request instructions on business management, it is all the more possible to request  instructions in connection with strategic decision-making.

27 Cdo 2232/2022 (26 April 2023)

Breach of corporate loyalty

The Supreme Court pointed to the case law according to which a shareholder must follow the decisions of the general meeting, not just in form but in substance.

The purpose of liquidation is to settle assets, settle debts and distribute the liquidation balance. Therefore, if a shareholder abuses his voting rights by promoting a close person as a liquidator who unnecessarily prolongs the liquidation and does not pursue its purpose of fully settling the shareholder’s loan receivables, the shareholder violates corporate loyalty.

27 Cdo 948/2022 (25 April 2023)

Partial profit allocation to ring-fenced funds

The Supreme Court dealt with the provision of the articles of association according to which profits are allocated to ring-fenced funds, which are created based on a decision of the board of directors. By law, the decision on the distribution of profits is within the competence of the general meeting. Thus, the articles of association cannot determine that the board of directors may decide on the creation of ring-fenced funds when it is not agreed what amount of money is to be allocated to those funds or to what maximum amount the relevant fund is to be filled. In effect, the allocation of profits to these funds would be left to the board of directors.

As such a decision would be contrary to the coercive provisions of the law, the decision of the general meeting regarding such an amendment to the articles of association would be regarded as not having been taken pursuant to Section 45 of the Business Corporations Act in conjunction with Section 245 and the articles of association provision would not be binding on the general meeting.

However, this would be different if they were not ring-fenced funds. In such a case, their creation could be left to the board of directors, as profits could still be distributed from them based on the decision of the general meeting.

Therefore, if the founding legal act determines that a part of profit is to be allocated to ring-
fenced funds, it must at least define the amount to which these funds are to be filled or determine what part of the profit is to be allocated to these funds and further specify the funds’ purpose.

27 Cdo 1858/2022 (16. 2. 2023)

Preliminary contract validity and transfer agreement with condition precedent

The Supreme Court stated that one deed may contain more than one legal act under Section 1727 of the Civil Code. Therefore, it is possible for a single deed to contain both (i) a preliminary contract for the transfer of a cooperative share and (ii) an agreement on the transfer of the cooperative share with a deferred transfer effect, on the condition that the execution of the contract for the transfer of the cooperative share based on the preliminary contract is not concluded by a certain time. That fact does not invalidate those legal acts.

In this context, the court reiterated that a legal act is interpreted according to the intention of the person acting, which was or should have been known to the addressee. This interpretation takes precedence over the objective meaning of the words. If such an interpretation is not possible, the interpretation which a person in the position of the addressee would normally give to it is applied. It also emphasized that the interpretation leading to the validity of a legal act takes precedence over the interpretation leading to its invalidity.

27 Cdo 955/2022 (9. 2. 2023)

Extension of the general meeting scope

The Supreme Court concluded that the decision of the general meeting to authorise a company’s directors to proceed with the preparation of a project for the de-merger of the company by spin-off was valid, as the provision of the articles of association under which the decision was taken did not interfere with the business management of the statutory body and thus extended the powers of the general meeting in accordance with the coercive provisions of the law. According to the articles of association, the general meeting has the power to give instructions to the director and to approve business plans, unless they are contrary to the law.

The articles of association may therefore extend the powers of the general meeting to the extent that this does not conflict with the coercive provisions of the law. Therefore, the general meeting cannot have the authority to instruct the statutory body on the business management or any issue related to business management.

At the same time, the court stated that such a decision is not vague as vagueness cannot be confused with generality.

27 Cdo 1915/2022 (17 May 2023)

Unlimited office term of elected body members and effectiveness of extension of office terms

The Supreme Court stated that because the general meeting may dismiss members of elected bodies at any time without giving any reason and with immediate effect, it saw no reason why the length of office terms of elected body members could not be set as unlimited.

It also stated that the decision of the general meeting to extend the office terms by amending the articles of association is effective against the current and future members of the elected bodies upon its adoption or at a later moment specified in such a decision. If the decision is made by a sole shareholder, the decision is effective against the existing and future members of the bodies upon its receipt by the company or at a later moment specified.

27 Cdo 2554/2022 (18 May 2023)

Shortening elected body member office terms

The Supreme Court stated that, as is the case with the extension of elected body member office terms, the decision of the general meeting of a joint stock company to shorten office terms by amending the articles of association is effective against the current and future members of elected bodies upon the adoption of the decision or at a later moment specified in the decision.

However, if this would mean that their office term would end “retroactively”, the moment of the decision, or the moment specified in the decision, is the moment of the dismissal of the elected body members.

By Petra Konecna, Partner, and Lola Florianova, Senior Associate, Eversheds Sutherland