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Glossary of terms

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Foundation of the firm

This term is used in business practice with the term company foundation. In fact, the term of the foundation of the firm is wider and includes not only the foundation of companies as legal entities, but also, for example, the registration  of a natural person in the Commercial Register, which is also mandatory for a natural person in certain cases. The term firm is not equal to the term company, but is the name under which a person (whether natural or legal) is registered in the Commercial Register.

Founding of public trading company (founding of v.o.s.)

Founders (partners) v.o.s. are both natural person and legal person (except for special laws, e.g. bank), domestic and foreign, min.  2, the maximum number is not fixed, but it is true for the same law that one can be an unlimited guarantor only in one company (but does not refer to the societas or the silent participation).

Natural person must meet general conditions for operation of the trade according to the special law and it must not be impeded by the pursuit of the trade (irrespective of the scope of business of the company).

If partner is a legal person, his rights and duties are associated with participation in v.o.s., or authorized representative (but must meet the conditions set for the natural person).

Social Contract (SS)

Form - written with officially verified signatures (SS may also be concluded by an agent with a written power of attorney with officially verified signature of the principal - he / she will join the SS)

  • Firm and registered office - firm with a mandatory supplement (see above)
  • Partners - firm or name and registered office of natural persons (ID) or name and domicile of natural person (personal ID)
  • Scope of business - within the limits of § 2/1
  • Signatures

Establishment of v.o.s .:

  • Social contract
  • Before the filing of an application for registration in the Commercial Register, the partners must be authorized to exercise business activity (the founders have to prove the trade, the foundation of the v.o.s and set up a competent responsible representative for the performance of the trade, the company will get a trade license on the day it is created itself), v.o.s. can also be established for the purpose of pursuing the free professions = business whose performance is by law only allowed to natural persons (can only be done by persons authorized to do so, §56 / 3)
  • The v.o.s. is established by the day on which it was registered in the Commercial Register - the proposal is signed by all partners, social contract is attached (+ documents certifying the data entered in the Commercial Register - §28 / 1.2). In case that the application is not filed 90 days from the founding of the v.o.s. or from the delivery of the trade licence or other authorization, it is no longer possible to file an application for registration.
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Founding of the company and its establishment

Ways of founding

  • System of free formation - the company is founded and as a legal person is created simultaneously with the signing of the social contract
  • Concession system - valid founding depends on permission
  • Normative (registration) system - social contract is sufficient for founding, but the company as a legal person is established only after the registration in the public register

Founding in the Czech Republic - Founding in the Czech Republic is a legal action, which creates a basic prerequisite for the establishment of a company as a legal person

The legal act underlying founding of the company is

  • Social contract
  • Founding agreement and the statutes (JSC)
  • Founding charter (Ltd, JSC, if there is 1 founder, the form is notarial deed)

The essential elements of all these documents must be identical, the authenticity of the signatures of the persons who have founded the company must be authenticated (legalization, social contract of the Ltd. and founding agreement of the JSC must take the form of a notarial deed. Notarial Order introduces as a new type of notarial deed the report on decision of the statutory body of the legal person - the notary is newly responsible for the compliance of the recorded facts with legislation). The social contract can be signed by the founder's agent if it is equipped with a written power of attorney with an officially signed signature of the principal.

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The legal effects of mergers occur on the date of their entry into the Commercial Register.

There are two types of fusions:

  • Mergers - the dissolution of the company (preceded by dissolution without liquidation), and its assets are transferred to another company (A, B> B canceled and the property is passed to A> A), the shareholders of the acquired company become shareholders of the acquiring company, both the dissolving and the successor business company is involved
  • Fusions - the dissolution of 2 or more companies, the assets transferred to the successor company (A, B> both canceled > C rise), even here the partners remain, only the dissolving companies are involved.