How to set up a limited liability company in the Czech Republic
Limited liability company is the most common type of trading company in the Czech Republic. It’s a good choice for small and medium-sized businesses looking for personal liability protection and flexibility. In simple cases, the creation and incorporation of a limited liability company – known in Czech as společnost s ručením omezeným or sro – can be done in a few days. But the process can be a bit complicated if you do it yourself, as it requires a lot of steps and documentation.
These step-by-step guidelines explain everything you need to know about how to successfully set up a limited liability company in the Czech Republic and how to make the most common business changes.
The first step is to meet with a notary to establish a deed of incorporation (or a deed of foundation in the case of a one-person company) in the form of a notarial deed. A company is constituted by an act of incorporation signed by all of its founders or future shareholders.
This memorandum must include the basic information on the company required by law, in particular the company name, the registered office, the field of activity, the amount of the share capital, the identification of the shareholders, the nature of the shares, the amount contributions and the number of managers. Notary fees generally do not exceed 10,000 CZK plus VAT.
TRICK: It is important to be careful when choosing the name of your business. The name of the company should not create confusion with an already existing company name, nor should it give a misleading impression. To check if a name is already in use, visit www.justice.cz, which gives access to the electronic commercial register. If the business name contains the name of a natural person, you must obtain consent to use their name.
One advantage of the limited liability company is that you don’t have to invest a large amount of money in the registered capital of the business. The minimum amount of the contribution is 1 CZK for each shareholder. Shareholders must designate in their constitution a contribution administrator (see above) who receives and manages the contributions, which may be in cash or in kind. The contribution administrator then opens a designated account for the purpose of depositing monetary contributions.
NOTE: Since January 1, 2021, it is no longer compulsory to open a special account to deposit monetary contributions if the amount of share capital does not exceed 20,000 CZK. Contributions in kind must be assessed by an expert. Before submitting the application for registration of the company in the commercial register, all contributions in kind must be fully paid and at least 30 percent of each monetary contribution must be paid, unless the memorandum further determines. This is proven by a declaration from the contribution manager and a bank certificate.
It is more likely than not that a business will need a specific license to operate its business or any other activity. The next step is to obtain the appropriate business license. You must send the request, together with the required documents, to the Commercial Licenses Office, which will issue an extract from the Register of Commercial Licenses (výpis z ivnostenského rejstříku) in a few days. The administrative costs are usually around 1000 CZK. Depending on the type of business activity, your business may need a license or special permit.
Additional documents are required to register the company. It is necessary to have a fair title for the use of the premises where the head office of the company is located. Fair title is usually proven with the consent of the property owner via an officially verified signature.
Persons registered in the commercial register, such as the executive, must consent in writing to their registration with an officially verified signature. In addition, the members of the organs of the company must also declare that they meet the conditions provided by law to exercise the function.
It may be necessary to present a power of attorney, an extract from the public register or an equivalent document issued by the competent foreign authority or an extract from the criminal record or an equivalent document issued by the competent foreign authority. Documents in foreign languages must have a legally certified translation. For some types of foreign documents, a special form of superior authentication is required.
Once you have prepared all the necessary documents, you can finally submit the application for registration of the company in the commercial register kept by a competent court. It is more convenient to register the company directly with the notary as the costs in this case are only CZK 2,700, otherwise the costs are CZK 6,000.
NOTE: Once the company is registered, do not forget to register with the Czech Financial Authority and fulfill other legal obligations.
The transfer of company shares is carried out by written agreement with officially verified signatures. Before signing the agreement, you must check whether the constituting act makes this transfer subject to the agreement of a specific body, such as the general meeting. If consent is required, you must first obtain it.
A share can be represented by an ordinary certificate. In this case, the shares are transferred by an amendment. However, it is strongly recommended that you also sign a written agreement.
The change of shareholder of the company must be entered in the commercial register. The company must submit the application with the relevant documents. The administrative costs are 2000 CZK.
The general assembly (or the sole shareholder) has the right to dismiss and appoint the executive. The change of person of the manager will be entered in the commercial register. The company must submit the application attached to the minutes of the general meeting (or to the decision of the sole shareholder) with its annexes and with the declaration of the appointed manager attesting that he agrees with its entry in the register. trade and complies with legal requirements, and other relevant documents, if necessary. The administrative costs are 2000 CZK.
To change the name of a company, you have to convene a general meeting and secure the services of a notary. The general meeting decides by notarial deed on the modification of the articles of association concerning the name of the company. In a one-person company, the sole partner also takes this decision in the form of a notarial deed. Notary fees generally do not exceed 10,000 CZK plus VAT.
The company must submit the request to the Trade Register accompanied by the minutes of the general meeting (or the decision of the sole shareholder) with its appendices. It is more convenient to register the change directly with the notary because the costs in this case are only 1000 CZK, otherwise the costs are 2000 CZK.
In the constituting act, it is possible to indicate an entire city or a specific address as the registered office. If the company wishes to change the registered office defined in the memorandum of association, the process is similar to the case of a change of company name. If the change does not affect the constituting act, the decision of the executive (s) will be sufficient.
Do not overlook the fact that the company must have a fair title to use the premises where the head office of the company is located. Fair title is usually proven by consent of the owner to the location of the head office with an officially verified signature or an extract from the Real Estate Cadastre if the company is the owner.
The company must submit the application to the commercial register together with the relevant documents such as the decision of the manager and the title of use of the premises. The administrative costs are 2000 CZK.
This article was written in cooperation with lawyers based in Prague Sniehotta & Vajda Legal, an English-speaking law firm that provides comprehensive legal support to businesses and expatriates in all areas of law. The firm can assist you in the creation and incorporation of the company, as well as in the aforementioned business changes. Learn more about our partner content policies here.