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Glossary of terms

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Reserve fund

Defined for JSC and Ltd. where it is obligatory to create the reserve fund from net income for the current accounting period after taxation.

The reserve fund is one of the liabilities in the accounting and one of own resources  of company assets. The reserve fund can only be used to cover losses.

Beyond the scope of the general provisions of the use of the reserve fund provided for in § 67 goes the provision of § 216a.

Reserve Fund may be applied under certain conditions, to increase the share capital. The loss is if the financial statements show that the company's costs are higher than its revenues. The company has no obligation to cover the loss using the reserve fund. The reserve fund may not be made up of funds deposited with a bank or fast liquid property values, may not be established since the establishment of the company.

The reserve fund can also be created by a partnership, then use of its funds is not earmarked.

Responsible representative

The prerequisites for the establishment of a trade license are determined by the fact that only natural persons can meet them - the institute of the responsible representative, i.e. the natural person appointed by the entrepreneur who:

  • Is responsible for the proper operation of the trade and for compliance with the trade licensing regulations,
  • Must comply both with the general and special conditions of the operation of the trade according to the type of business operated,
  • They must participate in the trade to the extent necessary,
  • Must have permanent residence in the territory of the Czech Republic

Obligation to appoint a Responsible Representative §11 Trade Act:

  • An entrepreneur who is a natural person and does not fulfill the special conditions of the operation of a trade (Section 7), unless it is an notifiable trade in an industrial manner,
  • An entrepreneur who is a foreign natural person and does not have a residence permit in the Czech Republic,
  • An entrepreneur who is a legal person established in the Czech Republic - appoints a member of the statutory body or a statutory body as the responsible representative who fulfils the conditions for the performance of the function of the responsible representative according to the Trade Act. If the responsible representative cannot be appointed from among these persons, the entrepreneur shall appoint a responsible representative from other persons,
  • An entrepreneur who is a foreign legal person - to the position of the responsible representative, shall appoint a head of the organizational unit located in the territory of the Czech Republic who fulfils the conditions for the performance of the function of the responsible representative under this Act; if the head of the organisational unit does not meet these conditions, the entrepreneur shall appoint a responsible representative from other persons.

However, a representative may be appointed also on  a voluntary basis (optional).

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Settlement amount

Share (usually money) that belongs to the partner whose participation in the company expired, or expired to his heirs or other successors (excluded for JSC). The company must draw up interim, regular or extraordinary financial statements as of the date of termination of the participation of this partner in the company. The settlement amount is calculated by the equity (if the social contract does not stipulate that a check of the net assets shall be based on expert opinion), the share is payable 3 months after approval of the financial Statements (or receipt of the expert's report to the company) - if companions or body do not approve the financial statements without a serious reason, the settlement is paid in the same period.


Share is a security stating that the owner put a capital to the joint-stock company. A security which gives shareholders the right to participate in the management of a joint stock company, in its profits and in the liquidation balance upon the dissolution of the company, and the pre-emptive right to newly issued shares, in accordance with the Commercial Code and the Articles of Association.

Základní kapitál akciové společnosti je rozvržen na jednotlivé akcie. Akcie je dělí na akcie listinné a zaknihované a akcie na jméno a na majitele.

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Share capital

Share capital is basic assets of the company, which must be expressed in Czech  currency and the amount of which varies depending on the type of company. The share capital consists of the founder's deposits (cash, respectively expressible by money) or during the operation of other deposits by their owner.

The creation of share capital is mandatory by law for limited partnership, for limited liability company (minimum 1, - CZK) and for joint-stock company (the minimum amount of 2,000,000 CZK without a public offering or at least CZK 20 million with public offering of shares).

Stock warrant

Stock warrant is a security replacing temporarily share. Security replacement share when the Company increased the share capital by subscription of new shares, the underwriter fully repay the issue price of shares subscribed, but the capital increase has not yet been entered in the Commercial Register.

Supervisory Board of the joint-stock company

The supervisory Board is the supervisory body of the company with controlling powers.

It is a collective body with at least 3 members who elect a chairman from among their members (The number of members must be divisible by 3). Membership in the Supervisory Board is incompatible with the membership in the Board of Directors, clerk or a person authorized to act on behalf of the JSC. Members are elected for a term according to the statutes, for a maximum of 5 years (the first term of office is one year from the creation).

Působnost Dozorčí rady akciové společnosti:

  • kontrolní
    • dohlíží na výkon působnosti představenstva a výkon podnikatelské činnosti a.s.
    • přezkoumává účetní závěrky a návrh na rozdělení zisku či úhradu ztráty; své vyjádření předloží na VH
    • respektuje žádosti akciové minority
  • řídící
    • svolá mimořádnou valnou hromadu, je-li to v zájmu a.s., a navrhuje potřebná opatření
    • stanoví-li to stanovy, může volit a odvolávat představenstvo,
  • jednatelská
    • určuje svého člena, který zastupuje a.s. v řízení před soudy a jinými orgány proti členu představenstva
    • nahlíží do všech dokladů a záznamů a prověřuje jejich správnost (kontroluje soulad se skutečným stavem i s právními předpisy a stanovami)
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Trade means the business under the Trade Licensing Act, it is therefore a narrower term than business in general, this is just the business run under the Trade Licensing Act.

Business activity excluded from the scope of Trade Licensing Act by special regulations is not a trade. Activity excluded from the scope Trade Act or activity uncontrolled by any law, even if the profession is not listed in Annexes of the Trade Licensing Act, is the trade and in this respect the Trade Licensing Act is subsidiary general arrangement for business conditions.

Activities that are not trades - an exhaustive list of § 3 and 4 Trade Act

  • Business performed only by natural persons (e.g. freelancers)
  • Business usually performed only by legal persons (such as state monopoly, banking, insurance, the so-called primary production)
  • Rental properties, apartments and commercial space is a trade, only if in addition to the rent the landlord also provides other than basic services covering the proper operation of real estate, residential and commercial space (§ 4 Trade Licensing Act)
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Trade secret

Trade secret is competitive valuable fact in running a business that is unknown to other competitors and entrepreneurs and according to the will of the entrepreneur, should remain unknown.

This includes, for example, all business  facts (e.g. lists of customers, suppliers, sales representatives, business plans, price calculations), manufacturing (e.g. procedures, methods, samples, non-patented inventions) or technical (e.g. drawings, attempts) of nature, facts related to the enterprise (exist in connection with an enterprise, its subject matter cannot be facts whose secrecy excludes the prescription or whose protection would be contrary to good morals) and others.

Trading company

The trading company is a private association of persons who come together for business purposes, i.e. for the purpose of continuing  business activity in their own names and on their own responsibility to gain  profit. For generic character is also considered that it is a legal person.

Commercial companies can be divided into capital and personal.

Among private companies belong:

  • Public company (minimum 2 persons conducting business under the conjoint name, according to § 76 et seq. Com. Code.)
  • Limited partnership (minimum 2 persons conducting business under the conjoint name of, § 93 et seq. Commercial Code).

Among capital companies belong:

  • Limited liability company (LLC, can be founded by a single person, maximum 50, § 150 et seq. Com. Code.)
  • Joint-stock company (may be established by one person, but must be legal, maximum number of people is not limited, § 154 et seq. Com. Code).

In addition to capital companies and partnerships, which are inherent to Czech law, we can still distinguish a European Company: European join-stock company and a European Economic Interest Grouping

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