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News

Will coronavirus stop general meetings from happening in large companies in the Czech republic?

23.03.2020
Company: bpv Braun Partners s.r.o.

How will the declared state of emergency and associated restrictions on free movement 
affect General Meetings and corporate management? Many corporations are asking this 
question at the moment

What can happen to companies that fail to convene General Meetings, typically held in order to 
approve financial statements?
Limited liability and joint stock companies (s.r.o. and a.s.) are required to hold an annual General 
Meeting to approve the financial statement no later than six months after the end of the previous 
accounting period. However, the Act on Corporations does not stipulate any explicit fines for 
companies or their shareholders/stakeholders for failing to meet that obligation. 
In the vast majority of cases the General Meeting is convened by the statutory body, which is 
required to act with due professional care. If the General Meeting is not convened on time in 
order to approve the financial statement and any other related materials, then the question is 
whether the statutory body has breached its obligation to act with due professional care. 
We could imagine a situation where a company (s.r.o.) has two shareholders and one managing 
director who recently tested negative for SARS CoV-2. In that case nothing would prevent them 
from holding the General Meeting with the shareholders present, provided of course that they 
follow all recommended hygiene rules and that no prohibition has been made limiting free 
movement. The valid and effective Czech Government Resolution No. 215, issued on March 15 
this year enacting crisis measures prohibiting the free movement of individuals throughout the 
Czech Republic with multiple exceptions, does not make it entirely clear whether participation 
in General Meetings is also prohibited (compare for instance the exception allowing the 
performance of business or other similar activities in point I.a). Another point to consider is the 
possible participation of foreign nationals, if they are shareholders or stakeholders, or if they are 
representing foreign or local legal entities.
Notwithstanding the above, in the current circumstances it can be assumed that the statutory 
body would be able to defend failure to convene the General Meeting to approve the financial 
statement in the coming days as acting with due professional care, unless the situation changes. 
According to the Act on Accounting, after approval companies are obliged to publish the financial 
statement, annual report and auditor’s report, if required, within 30 days of approval by the 
General Meeting, within 12 months at the latest. The above can be interpreted to mean that if a 
General Meeting does not meet with a quorum within six months of the last day of the previous 
accounting period, the deadline for meeting the obligation to publish the financial materials in 
the collection of deeds at the Commercial Register will be 12 months after the last day of the 
previous accounting period. Only then will the relevant tax authority impose a fine of up to 3% 
of the value of the company’s assets, or the registration court can impose a fine of up to CZK 
100,000 and in the worst case can even commence proceedings on dissolution of the company 
with liquidation.

The decision on the distribution of profits is typically made upon approval of the financial 
statements, i.e. within six months of the end of the accounting period. In light of current case law 
of the Czech Supreme Court, however, as of January 1, 2014 an annual financial report prepared 
for the previous accounting period can serve as a material for the General Meeting decision 
on distribution of profits for a company (s.r.o. or a.s.) until the end of the following accounting 
period.

 

Decision-making outside the General Meeting (per rollam) as an option for holding a General 
Meeting (s.r.o. or a.s.) even without the shareholders or stakeholders being physically present
Decision-making outside the General Meeting, also called “per rollam”, is always permitted as 
long as it is not prohibited by the Memorandum of Association for a limited liability company 
(s.r.o.). For joint stock companies and associations (in Czech: družstva), this method of decision-
making is permitted if the Articles of Association for the joint stock company or association 
explicitly so permit. For joint stock companies this is typically the case. 
This method of decision-making, which can fully replace the General Meeting and shareholders’ 
assembly, represents an opportunity to manage the corporation at a shareholder/stakeholder/
association member level even without their physical presence at the General Meeting or 
shareholders’ assembly. It can take a variety of forms, including postal correspondence and 
email. 
Other possibilities also exist, however, both for holding the General Assembly and for making 
decisions outside the General Assembly. The Act on Corporations allows voting at the General 
Meeting or decision-making outside the General Meeting by technological means under certain 
circumstances (not for associations), such as holding the General Meeting as a teleconference 
or video conference. This form of decision-making is possible under the condition that the 
Memorandum of Association or Articles of Association of the company allow it, and these 
documents (or the statutory body) must also designate the conditions allowing the company 
to verify the identity of those authorized to exercise voting rights and designate the shares/
ownership interest associated with the voting rights. If this is not done the votes and participation 
of the shareholders/stakeholders voting in this manner must be disregarded. These conditions 
must be stated in the invitation to the General Meeting or proposal for making decision outside 
the General Assembly (per rollam). 
In the event of making decision outside the General Assembly (per rollam), the person authorized to 
convene the General Meeting (typically the statutory body or qualified shareholder/stakeholder) 
sends the proposed decision to the address given in the list of shareholders/stakeholders or 
by other means designated in the Memorandum of Association. For a limited liability company 
(s.r.o.) the proposed decision must always contain a) the deadline for delivering the statement 
of the shareholder designated by the Memorandum of Association, otherwise 15 days, b) all 
materials needed for enacting the decision, and c) any other information stipulated by the 
Memorandum of Association. 

If a shareholder does not deliver its consent to the proposed resolution to the person authorized 
to convene the General Meeting by the stipulated deadline, then the shareholder is deemed not 
to consent. It is also important to stress that the majority required to enact decisions is logically 
calculated based on the total number of votes of all shareholders, which makes it possible to 
address some nonsensical discrepancies in the required numbers for having a quorum and 
enacting decisions of the General Meeting that we encounter from time to time. The company 
or person authorized to convene the General Meeting of the company announces the decision 
enacted outside the General Assembly (per rollam) to all shareholders without undue delay after 
it is made, including the day of making the decision. The same rules apply with minor exceptions 
for joint stock companies (a.s.) and associations. 
What about owners’ associations (in Czech: SVJ)? Can an owners’ association make decisions 
outside the owners’ association assembly?
Owners’ associations can only make decisions outside the owners’ association assembly (per 
rollam) if expressly permitted in their Articles of Association. If the Articles of Association for the 
owners’ association do not permit this decision-making method, it cannot be used except under 
the single exception given below.
It is possible to have the person entitled to convene the owners’ association assembly (the 
statutory body - committee or unit owners (in Czech: vlastníci jednotek) with more than one 
fourth of all votes) propose in writing that unit owners (owners’ association members) decide 
on a given matter in writing outside the assembly. However, this is only possible if a previously 
convened owners’ association assembly did not have a quorum. 
Thus it is possible to call an owners’ association assembly that will not have a quorum due to the 
absence of the members. Then the owners’ association members can decide on the same matters 
outside the owners’ association assembly (per rollam), provided that the features stipulated by 
law are met. Decision-making outside the owners’ association assembly (per rollam) is subject 
to the same rules as described above for corporations.

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