Concurrent positions pursuant to commercial law permitted

One of the most significant changes will affect the Commercial Code. Parties will now be allowed to limit or exclude (waive) the right to compensation for damages before such damages arise, i.e. before any breach occurs. Some other crucial provisions include the new provisions of Section 66d (authorisation of the commercial management of a company), which is a response to a previous situation that caused practical problems. The possibility of holding concurrent positions as a member of a company’s statutory body and as a manager is now also expressly permitted. In addition, a company’s commercial management may now be undertaken by employees.

Other changes concern the regulation of the Commercial Register and the Document Register. As of the New Year, members of statutory bodies are no longer required to include their respective specimen signatures in the Document Register. Birth registration numbers will no longer be contained in the public part of the Commercial Register. Instead, dates of birth will be considered mandatory data. Other new items concern requirements for property-related transactions between affiliated entities pursuant to the provisions of Section 196a of the Commercial Code and financial assistance in the case of limited liability companies and joint-stock companies.

Simplified transformations of commercial companies

In three years’ time the Act on Transformations of Commercial Companies will be amended in a way that company owners and managers are likely to welcome. Transformations of commercial companies will now be easier thanks to, inter alia, a new definition of the decisive day, the possibility of carrying out a merger simultaneously with a change to a company’s legal form, extension of the forms of cross-border transformations and reliefs from information-provision duties for companies involved in transformations.

Labour law and employment

The Labour Code has also undergone a shake-up. The aim of one new amendment to the Labour Code is to impart greater flexibility to employment relationships between employers and employees. Among other things, employed work has been newly defined, a new reason for giving a notice has been introduced – an especially gross violation of the sickness regime – and the trial period for managers can be set for up to six months. Severance pay has been made proportional to the length of employment and the length of employment concluded for a definite period of time has been extended from two to three years.

An amendment to Employment Act also became effective at the start of the year. Pursuant to the amendment, stricter penalties will be enforced on those employing third country foreigners residing in the Czech Republic without a permit. Employers who are fined will also be penalized in another way: by losing the right to obtain subsidies or state contributions for a period of three years. Pursuant to an amendment to the Public Procurement Act, which was prepared at the same time as the amendment mentioned above, bidders penalized for employing third country foreigners will be deemed not to have met qualification criteria.

Tax news

VAT will be increased, with the lower rate rising from 10 to 14% as of 1 January. From the beginning of 2013, both VAT rates will be unified at 17.5%. For families with children, the new law plans to make up for the VAT hike by increasing the tax advantage for a dependant child by CZK 1,800 or by a tax credit stipulated in the Income Tax Act. The amendment also modifies the particulars of a corrective tax document and tax security.

Taxation of reinforced land (land reinforced by a structure without a vertical construction) that is used for entrepreneurial purposes, such as parking lots or roads, will also be changed. Such areas will be newly taxed via a land tax with special rates of CZK 1/m2 for primary agricultural production and forest and water management and CZK 5/m2 for other entrepreneurial activities. The new rates are lower than the former taxation measure known as construction tax.

Digital dividend

Attention should also be paid to the amendment to the Electronic Communications Act. This amendment has transposed EU legislation to the Czech legal system and, inter alia, concerns so-called digital dividends – the radiofrequency spectrum 790 – 862 MHz (originally intended for analog TV broadcasting) reserved for high-rate access to electronic communications services, particularly through mobile services.

Pursuant to the amendment, the Czech Telecommunications Office is obliged to hold an auction for new frequencies from the digital dividend within three months from the amendment’s effective date. The amendment will also affect the definition of terms, objectives and regulation principles, as well as price statements, complaints and personal data security. The Czech Telecommunications Office, not the Czech Trade Authority, shall be newly responsible for resolving consumer issues related to electronic communications.

Form for entry into the Cadastral Register

Starting at the beginning of 2012, a new form should be used when applying for an entry in the Cadastral Register. Throughout all of 2012, however, applications for an entry can also be filed using the old method, i.e. without the new form. The amendment also includes a new term: “contentious notes”. Such notes will be used when an action is filed in a situation where the owner of real estate is someone other than the person who is entered in the Cadastral Register as the owner or where the legal act that should be the basis for the entry is invalid or was cancelled.

The obligation to submit extracts from the register within the framework of the entry procedure no longer exists, provided it is possible to obtain them by remote access. A higher fee for commencing an entry procedure, from CZK 500 to CZK 1,000 per application, will be an unwelcome change from the viewpoint of the general public.

Criminal liability of companies

The New Year has bestowed a “gift” to Czech companies in the form of criminal liability. Pursuant to the new act, legal entities that have their registered office, enterprise, branch or property or perform their activities in the Czech Republic and that committed certain listed criminal acts can be criminallyy liable. Criminal liability shall pass to the legal successor. Punishments include the winding up of the legal entity; forfeiture of property, things or assets with property-related value; monetary punishment; prohibition of activities; prohibition of participation in public procurements, tenders, and license proceedings; ineligibility for subsidies and subventions; and publication of a judgment. Such prohibitions may be imposed on companies for 1 to 20 years.

More efficient defence against illegal tax inspections

The amendment to the Code of Administrative Court Proceedings brings, inter alia, a chance to fight against the legality of an administrative authority’s intervention after the event, including a tax inspection. In general, proceedings in administrative courts are expected to be simplified and accelerated, which should be helped by, inter alia, the change to the local competence of regional courts and the fact that cassation complaint proceedings will now be held at the Supreme Administrative Court, including the filing of the cassation complaint itself.