CZECH REPUBLIC ´S TELFA MEMBER

Vyskočil, Krošlak and partners

PRAGUE - CZECH REPUBLIC

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ENDLESSLY ATTRACTIVE PLACE

FOR YOUR BUSINESS

1. Introduction – overview of Russian investments and investors in the Czech Republic;

2. Revolution in Czech law – new Civil Code and Code on Corporations (effective from 1st January 2014);

3. Insight foundation and governance of business companies;

4. Insight property law – acquisition of real estate, leases;

5. Administrative requirements – visa….

1. Introduction – overview of Russian investments and investors in the Czech Republic

the Czech Republic and the Russian Federation are

traditional business partners;

23 governmental treaties, such as the Prevention of double

taxation and income and property tax outflow treaty;

from the perspective of the volume of the business turnover:

Russia is in 5th place with a 4,7 % share.

1. Introduction – overview of Russian investments and investors in the Czech Republic

The main categories of Czech exports in 2012 were:

road vehicles (27,1 % of total export),

machinery and tools generally used for industry (10,7 %),

office tools and equipment for automatic data processing (10,0 %)

The main categories of Czech imports in 2012 were:

oil (46,6 % of total import);

gas (36,4 %);

1. Introduction – overview of Russian investments and investors in the Czech Republic

the Russians are the main foreign owners of Czech businesses (17,000 companies);

small and middle size businesses as well as large Russian business

corporations; the second place in the most common foreign owners of Czech

companies belongs to Germany, third is Ukraine.

1. Introduction – overview of Russian investments and investors in the Czech Republic

6th September 2012 - the foundation of the Czech-Russian Chamber of Commerce;

the foundation initiative came from the following companies Vemex, Lukoil, Volksbank and Czech Republic Chamber of Commerce;

the relationship between the Czech Republic and the Russian Federation reaches its new level.

2. Revolution in Czech law I

New Civil Code and Code on Corporations;

New Codes effective from 1st January 2014;

replace more than 240 former regulations.

2. Revolution in Czech law II

Recodification milestones 1997 – first discussions about recodification.

2000 – the Ministry of Justice commences works on recodification.

2012 – after more than 12 years the Czech Parliament adopted New

Civil Code („NewCivil“) and New Code on Corporations („NewCorp“), this effort included 7 governments and Ministers of Justice.

2. Revolution in Czech law III

Sources NewCivil and NewCorp are based on both: (a) historical sources represented by Czechoslovak General

Commercial Code of 1937; and (b) current modern codes, mostly Europeans codes (e.g.

German, Austrian, Italian, Finland) as well as rather „exotic“ codes such as laws of the Canadian province Quebec.

New codes were aimed at getting rid of former socialist or early

post-socialist law doctrine as well as introducing modern laws.

2. Revolution in Czech law IV

Main principles of NewCivil

Discontinuation – breaking socialist or post socialist legal principles.

Contractual freedom - parties can freely agree upon their rights and obligations unless the law states or implies otherwise (i.e. breach of good morals, public order or impact on personality).

Protection of weaker party - minors, consumers, etc.

3. Insight into foundation and governance of business companies I

Legal entities, conduct of business in the Czech Republic

Legal entities.

The NewCorp recognizes the following types of business companies:

Joint-stock companies (in Czech: „akciová společnost“ / a.s.);

Limited liability companies (in Czech: „společnost s ručením omezeným“ / s.r.o.);

General commercial partnerships (in Czech: „veřejná obchodní společnost“ / v.o.s.);

Limited partnerships (in Czech: „komanditní společnost“ / k.s.);

European company (in Czech: „evropská společnost“); and

European economic association (in Czech: „evropské hospodářské zájmové sdružení“).

3. Insight into foundation and governance of business companies II

Most popular companies - Joint-stock company and limited liability company are mostly used types of companies in the Czech Republic.

Limited liability - Members / shareholders shall be liable for debts of a company up to the amount corresponding to their unpaid contributions.

The founders (and, respectively, shareholders) may be individuals or legal entities, foreign or Czech. The company may also have only a sole shareholder. The company can also be founded under a Power of Attorney.

Restriction on foreigners - In some cases the participation of foreigners is restricted - this is the case, for example, for gaming and lottery activities, and for auditing (in which case 50% of the shares must be held by an individual who is an authorised auditor under Czech law).

3. Insight into foundation and governance of business companies III Joint-stock companies (Czech abbreviation, a.s.)

Setting up a joint-stock company - A joint-stock company (as with any other company under the Czech Commercial Code) is created on the date of its entry (registration) in the Commercial Register.

The registered capital may be contributed (paid up) in cash or in kind,

Registered capital, shares - The minimum registered capital is 2,000,000 CZK (if a company keeps bookkeeping records in Euros, it may have registered capital in Euros and minimum is EUR 80,000). Some types of companies, such as banks, insurance companies, investment companies, etc. are required to have much higher registered capital.

Organs – there are two systems of corporate governance:

General Meeting (= supreme body) and:

(a) Board of Directors + Supervisory Board (each of them consisting of 3 members unless by-laws stipulate otherwise); OR.

(b) Administrative Council (having 3 members unless by-laws stipulate otherwise) + statutory director.

3. Insight into foundation and governance of business companies IV Limited liability company (Czech abbreviation, s.r.o.) Registered capital – minimum amount is CZK 1.

Organs - general meeting (=supreme body) + one or more executives (in Czech: „jednatel“).

Supervisory Board - A limited liability company may, without this being a mandatory requirement, set up a Supervisory Board.

Conduct of business

Branch office

A foreign legal entity may also register a branch office in the Czech Republic. The branch office will not be a separate legal entity.

business licence

In order to carry out any business activity in the Czech Republic, any legal person and also any branch of a foreign company (whether an individual or a company) has to obtain a business licence for each activity to be carried out.

4. Insight into property law – acquisition of real estate, leases

Acquisition of Real Estate

No restrictions on foreigners and foreign legal entities in acquiring Real Estate in the Czech Republic

Since 18 July 2011 all foreigners (individuals) and all foreign legal entities are not limited in the nature and scope of acquiring Real Estate in the Czech Republic, including agricultural land or forest.

4. Insight into property law – acquisition of real estate, leases

Checking documents related to ownership issues

current extract from the Land Register;

cadastral map;

acquisition title based on which the owner acquired Real Estate (for instance, the purchase agreement or notarial deed confirming the inheritance, or other respective documents);

certificate from the Building Inspector's Office;

insurance policy.

4. Insight into property law – acquisition of real estate, leases

Purchase Agreement

The purchase price is paid by the purchaser into the Escrow Account kept by the notary, or by the bank or the lawyer (the Escrow Agent).

The Escrow Agent shall release :

the first part upon receipt of an extract from the Land Register evidencing that the buyer is the sole owner of the Property;

the second part upon receipt of a hand over protocol;

the third part upon delivery of a written confirmation (receipt) issued by the competent Financial Office evidencing that the relevant property transfer tax for the sale of the Property has been paid in full and on time (the real estate transfer tax is 4% of the selling price or the officially assessed value, whichever is greater).

4. Insight into property law – acquisition of real estate, leases

Transfer of the deed of ownership

The Purchase Agreement has to be registered with the Land Register. The property transfer takes effect retroactively from the day of submission of the Purchase Agreement to the Land Register.

4. Insight into property law – acquisition of real estate, leases

Leases

Pursuant to Czech law, the regulation of the leases is different for non-residential premises and residential premises.

No register of lease agreements (both non-residential and residential) exists in the Czech Republic.

5. Administrative Requirements

Legal Entities

they may become founders or co-founders of a company, or may join an existing Czech company.

foreign companies may operate in the Czech Republic, either by establishing a branch office registered in the Czech Republic or by establishing a Czech company.

foreign individual who is not a citizen of an EU country has to obtain a long-term visa and work permit after being nominated to the Board of Directors (in a Czech joint stock company) or to an executive position (in a Czech limited company).

5. Administrative Requirements

Individuals

foreign individuals may also establish a company in the Czech Republic or join an existing Czech company, without being required to obtain a visa;

foreign individual who is not a citizen of an EU country has to obtain a long-term visa before starting a business in the Czech Republic in his or her own name;

5. Administrative Requirements

Obtaining a visa for a stay of over 90 days (long-term visa)

Application

An application for a long-term visa for over 90 days has to be filed at a Czech Embassy abroad. The applicant is obliged to file the application at the Czech Embassy in the state of which he is a citizen.

5. Administrative Requirements Along with the application for a long-term visa the applicant must

submit:

a) travel documents (original);

b) 2 photographs;

c) proof of accommodation;

d) document on the purpose of stay;

e) proof of funds;

upon request the applicant is further obliged to submit:

document similar to an extract from the Criminal Register record, issued by the state of which the applicant is a citizen, as well as the states in which, in the last 3 years, the applicant has resided continuously for a period longer than 6 months, or a signed affidavit in the event that this state does not issue such a document;

medical report, that the applicant does not have a serious illness.

5. Administrative Requirements

Application procedure

It is always necessary to file the application for a long-term visa in person .

Czech law sets a standard deadline of 90 days for processing an application for a long-term visa from the day it was filed. In particularly complicated cases, it is 120 days from the day of filing the application.

This visa entitles the holder to multiple departure and entry to the Czech Republic.

Czech Administration does not grand a long-term visa, if the legal requirements are not met.

Firm: Vyskočil, Krošlak and partners

Website: www.akvk.cz

Tel.: +420 224 819 141

Fax: +420 224 816 366

The content of the presentation cannot be applied as legal counselling as this will always be subject to actual and specific knowledge of the client’s situation.