The transformation process follows a strict timeline and requires several key legal documents. The central document is the Transformation Project, which must detail all participating companies, the exchange ratio of shares where applicable, the legal and economic consequences for employees, and other essential information. This project must be filed in the Collection of Deeds of the Commercial Register at least one month before the general meeting that is scheduled to approve it. For a limited liability company (s.r.o.), the transformation must be approved by at least three-quarters of the votes of shareholders present at the general meeting. For a joint-stock company (a.s.), a quorum of shareholders owning shares that exceed 30% of the registered capital is typically required for the general meeting to make decisions. The decision of the general meeting approving the transformation must be documented in a notarial record.

Part of the process also involves securing approval from the relevant tax administrator. The company must prove it has no outstanding tax arrears, which is another condition for the successful completion of the transformation and for obtaining the notarial certificate. Without this approval, the process cannot be finalized.

In the Czech legal system, a notary plays a crucial gatekeeping role in the cross-border transformation process. Before a transformation can be registered in the destination country, a Czech notary must issue a pre-transformation certificate. To do this, the notary conducts a thorough verification to confirm that all requirements under Czech law have been met. This includes examining the transformation project, confirming that stakeholder protection rules have been followed, and ensuring the general meeting’s approval was validly obtained. Without this notarial certificate, the foreign commercial register will not complete the transformation, effectively halting the entire procedure.

Our law firm usually cooperates with the Czech notary on the implementation of the Cross-Border Transformations from the beginning until the very end to ensure, that the whole project is efficient and done properly.

Furthermore, the notary now has pursuant to Section 59x(7) of the Czech Act on Transformations of Commercial Companies an explicit duty to refuse to issue the certificate if it is determined that the purpose of the cross-border transformation is abusive or fraudulent. This provision is designed to prevent transformations aimed at evading or circumventing national or EU laws, or for committing criminal acts. The notary therefore acts as a key check on the integrity of the entire process.

Czech law provides safeguards for stakeholders who may be affected by a transformation. Creditors whose claims may be less collectible as a result of the transformation have the right to demand adequate security. They must exercise this right within three months of the publication of the transformation project. Companies also have a duty to inform their employees or their representatives about the transformation at least 30 days before it becomes effective, detailing the reasons and the legal, economic, and social consequences. Shareholders who dissent from the transformation have the right to vote against it and are entitled to full information about the process. While specific buyout rights depend on the company’s articles and the type of transformation, the legal framework provides protection against the abuse of the majority.

Failing to adhere to the strict procedural requirements can lead to severe consequences. The main consequence is that either the Cross-Border Transformations will not be registered or if registered, the court can declare the entire transformation invalid, even after it has been registered, if fundamental legal requirements were violated. This can occur if mandatory forms, such as a notarial deed, were not used, or if decisions were made by unauthorized persons. Such an outcome can reverse all changes and create significant legal and financial disruption, underscoring the importance of precise legal execution from the outset.

Correctly navigating a cross-border transformation is a critical legal and administrative challenge. Our team of experts provides a comprehensive service that covers everything from drafting the Transformation Project to representing you before notaries and authorities, ensuring your compliance with both Czech and EU regulations. By entrusting this task to us, you can be confident that your cross-border restructuring will be managed efficiently, correctly, and without costly errors. Contact our team for personalized advice or book an online consultation directly through our platform.

The Czech law firm ECOVIS ježek focuses its practice primarily on commercial law, real estate law, litigation, but also finance and banking law and provides full-service advice in all areas. This creates an alternative for clients of international law firms. The international dimension of the services provided is ensured through experience and cooperation with leading law firms in most European countries, the USA, and other jurisdictions. This cooperation occurs within the network ECOVIS, which operates in 75 countries worldwide. ECOVIS ježek team members have many years of experience from leading international law and tax firms. They provide legal advice to multinational corporations, large Czech companies, medium-sized companies, and individual clients. For more information please visit www.ecovislegal.cz.