Czech Republic: Acquisition of Companies

The legislation on the acquisition of companies can be found in Act No. 90/2012 Coll., on Commercial Companies and Cooperatives, as amended (the „Business Corporations Act“). In the following paragraphs, we will focus primarily on the acquisition of Limited Liability Companies (in Czech: Společnost s ručením omezeným) (the “LLC”) and acquisition of Joint Stock Companies (in Czech: Akciová společnost) (the “JSC”). By acquisition, we understand acquiring 100% participation in the company.

LLC

Acquisition of an existing LLC can be executed via an Agreement on the transfer of Business Share. First and foremost, it is important to identify if, according to deed of association, business shares of a specific LLC are transferable to third parties and if so, if there are any pre-emption rights of other shareholders and if any prior consent of the general meeting is required. The transfer of the business share becomes effective towards the LLC as of delivery of the agreement to the LLC (unless otherwise agreed).

JSC

Since the right of the shareholders of JSCs are represented by shares themselves, the acquisition of a JSC can be executed via acquisition of shares of the respective JSC. First and foremost, it is necessary to identify, if the transferability of the shares is limited or if the respective shares are encumbered with any right of third parties.  Once the respective shares have been identified as transferable or, in case of limited transferability approved by the competent body of subject company, the transfer itself will depend on the share’s form, if it is either booked share or deed share.  If the share is in the form of a deed, it is customary to realize the transfer through an agreement with a following handover protocol and an inscription on the back of the share, evidencing its transfer. Following the transfer, it is necessary to evidence such transfer to the JSC itself, for such transfer to be effective towards the JSC. Still, to execute the shareholder’s rights, the acquirer must be registered in the list of shareholders of JSC in question led by Central Securities Depository. If the share is in the form of a booked share, the whole process shall be realized electronically, by filing an order to transfer the shares between the security accounts of transferor and transferee typically with the bank and the registration is done by the Central Securities Depository.