Category: Czech Republic

BPV Braun Partners has advised RSBC Real Estate, a private investment group, on the acquisition of the Platinium office building in the Brno city center from REICO IS CS, reportedly advised by Wilsons.

According to BPV Braun Partners, “the Platinium office building has approximately 9,000 square meters of total leasable area, more than 93% of which is leased. The building contains mainly office space complemented by retail and storage space. Tenants include Cyrrus, CSOB, Gardner Denver, KPMG, and Gemini Eye Clinic.”

BPV Braun Partners’ team included Partners Gabriela Spak Porupkova and Miroslav Dudek and Attorneys David Plevka, Pavlina Tejralova, and Nikola Ourodova.

Allen & Overy has advised Raiffeisenbank a.s. on its EUR 350 million issuance of senior non-preferred MREL-eligible green notes under its international debt issuance program.

According to Allen & Overy, the notes were issued under German law, but their status as senior non-preferred and MREL-eligible instruments is also governed by the applicable Czech rules. The notes were accepted for trading on the Luxembourg Stock Exchange. 

A&O’s team was led by Partner Petr Vybiral and included Associate Tomas Kafka and Junior Lawyer Josef Pavlicek.

Since the introduction of the institution of legal entities’ exemption from criminal liability in 2016, there has been discussion on the distribution of the burden of proof in proving the conditions for its application in criminal proceedings. Meanwhile, the prosecution’s view has been gradually changing.

The Prosecutor General’s Office, which within the framework of its methodology of procedure for public prosecutors from 2018 upheld an option of transferring official bodies’ obligation to prove the exemption of the legal entity from criminal liability to prosecuted legal entities, has more recently changed its view in the June 2019 Report on the Public Prosecutor’s Activities and concluded that it is primarily the bodies participating in the criminal proceedings who must prove the decisive facts that testify to the exemption. This approach corresponds to the basic principles of criminal proceedings and reinforces the legal entities’ position in the procedure.

Exemption from criminal liability

The option of exculpation is regulated in Section 8 (5) of the Act on Criminal Liability of Legal Entities, according to which a legal entity is exempted from criminal liability if it makes every effort that could justly be expected of it to prevent the persons who acts on its behalf from committing criminal acts. In particular, these efforts may consist in the implementation and enforcement of a compliance program that contributes to the creation of an anti-crime corporate culture.

Even though in case of prosecution a legal entity may be motivated to demonstrate that it made every effort possible, the entity should not be forced to prove this with respect to the basic principles of criminal proceedings. Thus, the absence of conditions for exculpation presupposes that criminal liability should be proved, and despite the problematic formulation “is exempted”, according to the principles of investigation, the responsibility for investigation and elucidation, as well as the burden of proof, lies on the bodies participating in the criminal proceedings. The legal entity in turn is protected by the principle of presumption of innocence and prohibition from being forced to incriminate itself. Thus, within the meaning of the principle of “doubts in favor of the accused“, doubts about the existence of conditions for exculpation should not ipso facto lead to the detriment of the legal entity.

Problematic methodology of the Prosecutor General’s Office

The bodies participating in criminal proceedings traditionally perceive proving the existence of facts relating to the exculpation of legal entities as problematic. Yet the Prosecutor General’s Office has accommodated them in the framework of its methodology by attempting to shape the above-mentioned principles to their benefit.

Thus, the methodology, for example, stipulated that it is the legal entity who has to provide the relevant documents to substantiate the conclusion that all efforts were made to prevent the commission of a crime, and if they are not provided even at the request of the State Attorney, in the absence of facts indicating the applicability of Sec. 8 (5) of the Act this should be considered a “resolved question“. Other passages in the methodology also allow the assumption that the Prosecuting Attorney inclines towards the option of turning the burden of proof to the legal entity’s disadvantage in the sense of its responsibility for the result of proving by saying that the institution of exculpation represents the “benefit” that might do the legal entity good only if it gets involved. However, the attempt to turn exculpation into an institution that allows more stringent treatment of legal entities has been justly criticized, for

although the liability of legal entities is primarily derived from the fault of natural persons who have acted in its interest or within its activities, the fault of the legal entity itself consists precisely in the failure to exercise due diligence and to manage operational risk. This factor must be considered a part of the subjective side of a crime, and therefore the bodies participating in the criminal proceedings may not be freed from the burden of proof regarding the proving of this factor. Proving one’s innocence is a right, not an obligation, of the person against whom the criminal proceedings are conducted.

Although the methodology also stipulates that the defendant’s guilt must be proved absolutely, and that in the end, the interpretation of the Act is always in the hands of the court, from the standpoint of defense, in some cases it could be problematic to determine whether it is appropriate to actively present statements and evidence that indicate the fulfillment of conditions of exculpation, or whether their elucidation should be left completely in the hands of the bodies participating in the criminal proceedings.

The current shift in the burden of proof

The Prosecutor General’s Office responded to the criticism of the methodology by referring to its Special Report on Findings from the Application of the Institution of Exculpation already within the framework of the Report on the Public Prosecutor’s Activities from 2019. It stated explicitly that the burden of proving that every effort has been made cannot rest on the legal entity, for this excluded the concept on which Czech procedural criminal law rests. This conclusion was accompanied by a reference to the principle of officiality and by explicit confirmation that it is primarily the bodies participating in criminal proceedings who have to prove the facts decisive for the application of Sec. 8 (5) of the Act on Criminal Liability of Legal Entities.

Although the Report then also emphasized that proving the conditions of exculpation ex officio is problematic, and the content of the above-mentioned methodology remained unchanged, the explicit refusal to shift the burden of proof away from the prosecution is definitely beneficial to legal entities from the standpoint of defense. This can be seen as a confirmation that if some doubts that the conditions of exculpation are met arise in criminal proceedings, this does not automatically prove the legal entity’s guilt, but on the contrary leads to an exemption to the principle of “doubts in favor of the accused“.

At the same time it should be emphasized that this does not result in compliance programs losing their importance, they continue to be a condition that allows the application of the institution of exculpation. Within the framework of procedural strategy, it is only necessary to assess to what extent the legal entity should be involved in proving that they have been duly implemented.

Legal entities may be expected to cooperate with the bodies participating in criminal proceedings while proving the conditions of exculpation, for which they should prepare themselves already at the stage of building their compliance structure.

By Lukas Duffek, Partner, and Tereza Majerova, Junior Lawyer,  Rowan Legal

Kinstellar has advised a syndicate of Raiffeisenbank, UniCredit Bank Czech Republic and Slovakia, and Komercni Banka Raiffeisen on financing it provided to Raiffeisen Leasing for that company’s acquisition of the Proton Therapy Center Czech from Immorent. Kinstellar also Raiffeisen Leasing on the underlying deal. Dentons advised Immorent. Hoffmannova Koranda reportedly also advised Immorent and Strnad Joch Lokajicek Advokati reportedly advised the Proton Therapy Center Czech.

Financial details were not disclosed.

Kinstellar’s team consisted of Partners Kvetoslav Krejci and Jan Juroska, Counsel Martina Brezinova, Managing Associate Adam Nemec, Senior Associate Vaclav Kment, and Junior Associates Matej Vecera and Igor Sebo.

Dentons’ team consisted of Partner Rainer Frank and Associate Jarmila Hager.

Havel & Partners has advised British investment firm CapVest on Czech legal aspects of its sale of Valeo Foods to Bain Capital Private Equity. Weil, Gotshal & Manges reportedly advised the buyer.

Valeo Foods is an Ireland-based producer of food and beverages. The company employs over 4,000 people across 24 branches in Ireland, the UK, Italy, the Netherlands, Germany, and the Czech Republic.

Bain Capital a US-based private equity firm that manages approximately USD 130 billion in assets. 

Havel & Partners’ team consisted Partner Jan Koval and Counsel Petr Dohnal.

PRK Partners has advised Societe Generale on an unspecified investment in and increase in its stake in Czech online insurance start-up Mutumutu.

PRK Partners’ team consisted of Partner Martin Kriz and Senior Attorney Milan Sivy.

Allen & Overy has advised CZG – Ceska Zbrojovka Group SE on its acquisition of US firearms maker Colt. Paul, Weiss, Rifkind, Wharton & Garrison advised Colt on US law matters while Baker McKenzie advised the company on Czech law.

According to Allen & Overy, “the unique nature of the transaction stems from the use of newly subscribed shares in Ceska Zbrojovka to pay a part of the purchase price to US shareholders of Colt as part of the cash & shares settlement of the transaction.” 

The A&O team was led by Partner Petr Vybiral with the assistance of Senior Associate Jana Chwaszcz and Junior Lawyer Tereza Veverkova.

Baker McKenzie’s team included Partner Tomas Skoumal, Associate Jan Kolar, and Junior Associate Michal Malkovsky.

BPV Braun Partners has advised online wine retailer 8Wines Czech Republic s.r.o. on its acquisition of a 10% stake in Purcari Wineries Plc. Peterka & Partners advised the seller.

Financial details of the transaction were not disclosed.

Purcari Wineries is a producer of wine and brandy in CEE. The company manages approximately 1,300 hectares of vineyards and operates four production platforms in Romania and Moldova.

According to BPV Braun Partners, under the agreement, 8Wines is granted the right to further increase its stake in the company on pre-determined terms.  

BPV Braun Partners’ team included Partner Pavel Vincik and Senior Associate Filip Balousek.

Peterka & Partners’ team consisted of Partner Zdenek Beranek and Senior Associate Stanislav Beran.

DLA Piper has advised digital retail finance and payments company Zip Co Ltd on the conditional acquisition of the remaining 78% of the Spotii and 90% of the Twisto buy-now, pay-later payment platforms. Schoenherr advised Twisto on the deal.

The share acquisition follows Zip Co’s initial purchase of 22% of Spotii in December of 2019 and 10% of Twisto in the fourth quarter of 2020 and the first half of 2021 (as reported by CEE Legal Matters on January 25, 2021). 

DLA Piper’s team in Prague included Managing Partner Miroslav Dubovsky and Associate Marcel Janicek.

Schoenherr’s team was led by Partner Robert Bachner and included Partners Thomas Kulnigg and Vladimir Cizek, Attorney Jiri Marek, and Associate Alexander Grubera. 

Editor’s Note: On November 15, 2021, DLA Piper announced that the transaction had successfully closed.

 

The global pandemic has impacted all markets, with subsequent ramifications for M&A. Investors are now seeking greater protection against general lock-downs and supply-chain disruptions, while governments aim to protect critical supplies and services by imposing new regulations on foreign investment in crucial or strategic industries. ​

If you are considering investment opportunities in the Czech Republic, take a look at this overview to get insight into the regulations on foreign investment in strategic industries

​The following overview is an extract from the Foreign Direct Investment in Central Europe publication, which gives insight into the regulations on foreign investment in strategic industries in the region.

Have FDI screening rules been implemented (or will they be implemented) in the country?

Yes. The Czech Act on the Screening of Foreign Investments (“Act”) No. 34/2021 Coll. entered into force on 1 May 2021.

Definition of FDI

FDI means an asset in any form which has been provided or will be provided by a foreign investor for the purpose of carrying out an economic activity in the Czech Republic and which allows the foreign investor to exercise an effective degree of control over the conduct of this economic activity.

According to the Act, an effective degree of control over the conduct of the economic activity is:

• the possibility for a foreign investor to dispose of at least a 10% share of voting rights or the possibility of exerting an appropriate influence on the person through which the economic activity is carried out (“target person”); this share also includes the shares of persons who are subject to uniform management with a foreign investor, and the shares of associations of a foreign investor;

• the membership of a foreign investor or a person close to the foreign investor in the body of the target person;

• the possibility for a foreign investor to dispose of the property rights to a thing through which the economic activity is carried out (“the target thing”); or

• another degree of control resulting in the ability of a foreign investor to gain access to information, systems or technologies that are important with respect to protecting the security of the Czech Republic or internal or public

Definition of foreign investor

A foreign investor is anyone who has made or intends to make a FDI in the Czech Republic and who::

• is not a citizen of the Czech Republic or a citizen of another Member State of the EU;

• does not have a registered office in the Czech Republic or in another Member State of the EU; or

• is directly or indirectly controlled by a person who meets the above mentioned requirements for a foreign

A foreign investor is also a trustee of a trust fund who, on behalf of that trust fund, has made or intends to make a FDI in the Czech Republic if its:

• the possibility for a foreign investor to dispose of at least a 10% share of voting rights or the possibility of exerting an appropriate influence on the person through which the economic activity is carried out (“target person”); this share also includes the shares of persons who are subject to uniform management with a foreign investor, and the shares of associations of a foreign investor;

• the membership of a foreign investor or a person close to the foreign investor in the body of the target person;

• the possibility for a foreign investor to dispose of the property rights to a thing through which the economic activity is carried out (“the target thing”); or

• another degree of control resulting in the ability of a foreign investor to gain access to information, systems or technologies that are important with respect to protecting the security of the Czech Republic or internal or public

Deadline for notification of the relevant screening body

According to the Act, there is no specific deadline for notification of the relevant screening body (Ministry of Industry and Trade). Valid permission is, however, condition precedent to the transaction.

Screening procedure

The Ministry of Industry and Trade (“Ministry”) examines FDI, consults, conducts negotiations, decides on FDI and monitors compliance with the obligations laid down by the Act and decisions issued under the Act.

In general according to the the Act, the FDI could not be realized without permission, or without conditional authorization in:

• the founder of the trust fund;

• the trustee of the trust fund;

• a person authorized to supervise the management of the trust fund, who may appoint or remove a trustee or beneficiary, or whose consent determine such appointment or removal;

• the beneficiary of the trust fund; or

• someone in whose primary interest the trust fund has been established or managed

The Ministry shall initiate the screening procedure of the FDI ex officio if the foreign investor makes a FDI in the target person, who will in 5 years become a target person in which the FDI could not be realized without permission, or without conditional authorization, or will make a contract with a person designing, creating, or modifying the nuclear facility. The Ministry shall initiate the screening procedure of the FDI ex officio if:

• a foreign investor does not submit an application for permission of a FDI; or

• it is after 5 years from the day of completion of the FDI apparent that the foreign investor has acted in such way as to cover up facts for which otherwise the screening procedure of the FDI may be initiated. For the FDI that do not meet the above mentioned requirements but are capable of endangering the security of the Czech Republic or internal or public order, the Ministry can initiate the screening procedure of FDI ex officio:

1. on the basis of the result of the consultation proposed to the Ministry by a foreign investor; or

2. within 5 years from the date of completion of the foreign investment if the foreign investor has not submitted a proposal for

Screening decision

If the Ministry does not receive an opinion or information showing that a FDI may pose a threat to the security of the Czech Republic or internal or public order, and if the Ministry has no reason to believe so, it will issue a decision approving the FDI within 90 days from the day of initiation of the procedure for examining the FDI. A period of up to 30 days shall be added to the period of 90 days in the case of a particularly complex case.

If the Ministry receives an opinion or information showing that a FDI may pose a threat to the security of the Czech Republic or internal or public order, or if the Ministry has a reason to believe so, it will submit the matter to the Czech Government for consideration before issuing a final decision within 90 days from the day of the initiation of the procedure for examining the FDI.

The Ministry shall issue without undue delay a decision on the conditional authorization of a FDI, a decision on the non-granting of a FDI permit, a decision on conditional admissibility of a FDI, a decision on the prohibition of FDI or a decision on the prohibition of further duration of a FDI if the Czech Government agrees that such decision is necessary for the protection of the security of the Czech Republic or internal or public order.

The Ministry will issue without undue delay a decision on the authorization of a FDI or a decision on the admissibility of a FDI without setting conditions if the government decides that the FDI does not pose a threat to the security of the Czech Republic or internal or public order. 

Are fines or other penalties prescribed due to failure to notify the FDI?

According to the Act, the foreign investor will commit an offence if:

1. the foreign investor fails to comply with the obligation imposed by the decision prohibiting the continuation of the FDI;

2. the foreign investor does not meet the conditions imposed by the decision on the conditional authorization of the FDI or the decision on conditional admissibility of the FDI;

3. the foreign investor makes the FDI without making an application for permission of the FDI; or

4. the foreign investor does not submit a request for consultation where the target person holds a licence for a national radio or television broadcast or a periodic publisher with a combined minimum printed cost of 100 000 copies per day for the last calendar

For the offence in the letter a) and b) a fine can be imposed up to 2% of the total net turnover achieved by a foreign investor for the last completed financial year, or from CZK 100,000 to CZK 100,000,000 if the amount of total net turnover achieved by a foreign investor for the last completed financial year cannot be determined.

For the offence in the letter c) and d) a fine of up to 1% of the total net turnover achieved by a foreign investor for the last completed financial year, or from CZK 50,000 to CZK 50,000,000 if the amount of total net turnover achieved by a foreign investor for the last completed financial year cannot be determined.

Additional comments on FDI review aspects (e.g. any peculiarities, exemptions, broader definitions etc.).

With some exceptions, the Act on the Screening of Foreign Investments shall not apply to the FDI completed before the day of the entry into force of the Act.

By Petr Suchy, Partner, Deloitte Legal