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Glossary of terms

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Concerted practices

The term of concerted practices is regulated by the provisions of § 66b of the Commercial Code. Acting in concert is acting of independent persons made in mutual understanding to acquire, assign or exercise voting rights on particular person for the purpose of enforcing a common influence on its management, running a business, occupation statutory or supervisory body or else influence the behaviour of such a person. Those who act in concert are obliged to fulfil the obligations arising therefrom jointly and severally.

Concerted practices must be active, it may not be concluded a special agreement and must follow the legally relevant target. Not every action is automatically acting in concert.

Acting in concert is thus a deliberate alignment that may not be permanent. The law does not define exactly acting in concert, but establishes a rebuttable presumption.

  • persons who have a relationship with the company, i.e. legal person and its statutory authority, persons in their direct control scope, a member of the supervisory board, liquidator, bankruptcy, arrangement or forced administrator
  • controlling and controlled entities
  • persons controlled by the same person
  • entities constituting the Group
  • Ltd. and its partners, public trade company and its partners, limited partnership and general partners. These partners act as persons in concert
  • relatives - as Civil Code defines in § 116
  • investment company and its investment fund or pension fund

The burden of proof that the persons mentioned above are not acting in concert carries any person who testifies presumption.

Concerted practices have, according to the Commercial Code, inter alia, the following legal consequences:

  • constitutes control of the company, if the persons acting in concert have votes enough to promote decisive influence over the management and operation of the enterprise,
  • excludes the right to claim damages for non-payment of the harm that was caused by the implementation of the instruction of the controlling entity if all shareholders were acting in concert,
  • excludes the exercise of voting rights at the AGM in cases provided by law (when deciding whether to him or another person acting in concert to be excused duty or whether he or person acting in concert to be removed from office for the infringement) unless all shareholders are acting in concert,
  • constitutes an obligation to make a takeover bid for control of the company with registered participating securities except for exceptions set by law
  • constitutes reporting duty of voting rights
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Controlling agreement

The provisions of § 66a paragraph 7 characterizes the controlling agreement (agreement on dominant influence) as a contract under which different entities undergo  a common management. In the legislation concerning the joint-stock company, the controlling agreement is further defined in § 190b - controlled entity is committed to the managing person to undergo common management.

The component of the contract may also be a clause  on liability of the controlled entity to convert gain or its part to the managing entity - refers to the profit transfer agreement - § 190a. Controlling agreement must be in writing. Cancellation may only be to the end of the reporting period, but not retroactively.

Controlled entity may withdraw from the contract - if the controlling party failed to fulfil its obligations, or if the court deems compensation standing outside shareholders as unfair. Controlling agreement must be approved by the  General Assembly by ¾ majority (or higher - according to the Articles of Association) - the decision of the General Assembly must be a notarial deed.

Controlling agreement shall become effective on the  date of publication of the notice that the contract is based in the collection of documents at the Registry  Court. From this day, the time limit starts to exercise the rights standing outside shareholders to compensation if the contract restricts the option to exercise such rights by time limit.

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Cooperative

A cooperative is a community of an unclosed number of persons established for the purpose of mutual support of its members or third parties or for the purpose of conducting business.

 


According to the Business Corporations Act (in other words "ZOK"), the cooperative is a legal entity with an unclosed number of members. In the event of an increase in their number, there is no need to amend the statutes, as is the case with companies. The ZOK   regulates the minimum number of founding persons by setting it to 3 regardless of whether they are natural or legal persons.

Those interested in establishing a cooperative shall authorize the convener in writing (which may be only a natural person) to draw up the statute of the cooperative. The statute must be in the form of an authentic instrument (notarial deed) and must contain at least the obligatory particulars (company name, registered office, subject of business or activity, amount of the membership fee, method and term of its payment. Otherwise, the court will find it void on its own motion. The adoption of the statute and its amendment is decided by the member (or constitutive) meeting, which is always public.

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Dividend

Dividend is a right of a shareholder to a part of the profits of a joint stock company which is distributed among shareholders at the decision of the General Meeting for given accounting period.

The amount of dividend is determined as a pro rata share (the ratio of nominal value of shares to the shareholders aggregate par value of all shares; other rules may be for the preference shares) on that part of the net profit of the joint-stock company for the accounting period, which is approved by the General Meeting and within the law to be distributed.

Division of the company

We can distinguish several ways of division of companies:

  • The formation of new companies - a company ceases to exist, its assets are transferred to the acquiring company and its shareholders become shareholders of the successor company (A cancelled> formation of B and C) only the cancelled company is concerned
  • The division by merger - company ceases to exist and is divided, and these parts passes to other existing companies (A cancelled and divided into two or more parts> parts will be merged into existing companies B and C) merging and acquiring companies are involved
  • a combination - being acquired and the acquiring company must have the same form

Divided Ltd. or JSC must have the asset valued appreciated by an expert on the date of processing the final financial statement (there must also be separately valued the assets to be transferred to individual successor companies); for the appointment, reward of the expert and the content of the report applies the same as for deposits.

Enterprise

For the purposes of the Commercial Code, the enterprise is understood as a set of tangible as well as personal and intangible components of the business.To the enterprise belong the rights and other property values belonging to the entrepreneur and are used for the operation of an enterprise or because of their nature they should serve the following purpose:

  • Material component (buildings, machinery, materials and other things)
  • The personalcomponent (depends mainly on the level of the entrepreneur, the managerial staff and the structure, qualification and experience of the employees and other persons involved in the business)
  • Intangible (constituted by rights and other property values)

Entrepreneur

Entrepreneur - according to the definition contained in § 2 of the Commercial Code - a business is defined as a systematic business activity conducted by an entrepreneur independently in his own name and on is own responsibility for profit. Second paragraph contains an additional criterion, making the list of four groups of entrepreneurs:

  • Entrepreneur is any person registered in the Commercial Register - commercial companies, cooperatives, other legal persons as provided by law and foreign persons. According to § 3 paragraph 2, a natural person may be registered in Commercial Registry at his own request
  • Entity running a business under a trade license
  • Entity running a business on the basis of other than trade license
  • Natural person engaged in agricultural production by optional rules


Entrepreneur is not a person who carries out a particular profession as an employee or as a companion of commercial company - does not carry it independently. With regard to the representation of another legal person, our legislation does not solve the problem, whether an agent is an entrepreneur. On the one hand, defines the business, on the other hand, sees entrepreneurs as well as those who represent another (agency agreement, contract of commercial representation are regulated as relations between businessmen).

Summary: 

Entrepreneur is a person who is authorized to carry out a business, or is registered in the Commercial Register.

Entrepreneur is a person who is authorized to carry out a business, or is registered in the Commercial Register. It should be noted, however, that a joint-stock company and Ltd. can be established without the business objective. They are registered in the Commercial Registry - they are entrepreneurs by legal form.

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Establishment

Establishment is the room in which certain business activity is carried out.

Definition of the Commercial Code is very broad, the establishment in this definition means (any) space "within which the business activities are carried out" - there is no connection with the authorization to do business in this space (resulting from the ownership or lease, etc.) and could mean that the establishment could became the space illegally occupied by entrepreneur.

In a similar way, the establishment is defined by the Trade Licensing Act, § 17 paragraph 1, although it is defined only for a trade - specifically declares a establishment also stand, mobile shop and similar devices used for the sale of goods or provision of services. Establishment within the meaning of the Trade Licensing Act does not include an establishment in which the activities other than those of the tradesmen take place. For example, doctors' or lawyers' offices, tax consultants, etc. are not trade licensing establishments, but will be establishments within the meaning of § 7 of the Commercial Code - public obligations of the Trade Licensing Act are not applicable for other than trade establishment.

The establishments must be labelled by the firm of the entrepreneurs, which may be completed by the name of the establishment or other distinctive signs.

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Establishment of a Cooperative

Those interested in establishing a cooperative shall authorize the convener in writing (which may be only a natural person) to draw up the statute of the cooperative. The statute must be in the form of an authentic instrument (notarial deed) and must contain at least the obligatory particulars (company name, registered office, subject of business or activity, amount of the membership fee, method and term of its payment. Otherwise, the court will find it void on its own motion. The adoption of the statute and its amendment is decided by the member (or constitutive) meeting, which is always public.

 

Establishment of a European company (SE)

The SE Regulation specifies how to establish the European company. It does not allow it to be based on a "green field." Establishment is only possible within the reorganization of selected existing forms of business - in addition, it is necessary to monitor which forms of companies can participate in it and what other requirements must be fulfilled.

Ways of establishing the SE:

  • Merger two or more JSC or SE, which are based on the law of the EU Member States and have their registered office in the EU, if at least 2 of them are governed by the law of different member states (establishment via fusion).
  • As a holding company over two or more existing JSC or SE or Ltd., which were established under the law of one of the states and have their registered office in the EU if at least 2 of them are established under the law of different Member States or have at least two years a subsidiary or an organizational unit of an enterprise in the territory of a Member State other than the State by the law of which it is governed (Holding e.s.).
  • As a subsidiary of at least 2 companies within the meaning of Article 48 of the SES (including SE), which were established under the law of an EU Member State and have their registered office in the EU if at least 2 of them are established under the law of different Member States or have for at least two years a subsidiary or an organizational unit of an enterprise in the territory of a Member State other than the State by the law of which it is governed (subsidiary or joint venture es)
  • Transformation of a JSC based on the law of one of the EU Member States, if its registered office are located in the EU if it has a subsidiary for at least two years in the territory of another Member State.
  • As a subsidiary of another SE

Restrictions only form a formal barrier for entities that do not meet the prescribed conditions. Conditions can be circumvented (eg by establishing formal JSC only for the purpose of establishing the SE).

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