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Foundation of a simple limited liability company according to the Czech law is now less costly

Foundation of a simple limited liability company according to the Czech law is now less costly

The simplification and reduction in the costs of establishment of a simple limited liability company brings us the novelization of the Czech Act No. 549/1991 Coll., on Court Fees (Act No. 161/2016 Coll.), which became effective as of 7 June 2016. Regarding the fact that a limited liability company is the most widespread type of legal entity in the Czech Republic, the new legislation in this area is of great importance.

The main aim of the above mentioned novelization is to simplify the process and cut down costs of establishment of a simple limited liability company (so called “100 Euros company”), which should boost the business environment. The novelization meets the requirements of the EU Directive and decreases the mandatory minimum costs for establishment of a limited liability company to Euro 100 from the existing CZK 11,300 (approx. EUR 420).

However, the novelization applies only to those limited liability companies whose foundation deeds include only mandatory provisions prescribed by the Czech Civil Code (Act No. 89/2012 Coll.) and the Czech Business Corporation Act (Act No. 90/2012 Coll.). Another condition is that the contribution of the founders to the registered capital must be of a monetary kind and the incorporation of the company to the commercial register must be done by a Public Notary.

The actual reduction in the costs stems from the fact that the incorporation of a company to the Commercial Register carried out by a Public Notary is exempt from the incorporation fee. The incorporation fee was CZK 2,700 till now. Furthermore the remuneration of a Public Notary for the execution of a notarial deed on the foundation of a company was decreased to CZK 2,000, from CZK 4,000. See legislative amendments to the Notarial Tariff (Decree No. 162/2016 Coll.), which become effective also as of 7 June 2016.

In addition to that the novelization of the Court Fee Act also exempts from the notarial fee for registration in the public registry any registration concerning associations, foundations and foundation funds, institutes and public beneficiary companies.

Closing word
Despite the aforementioned reduction of the costs of the establishment of a simple limited liability company, in practice the EU-required amount of Euro 100 will not be achieved (because of other notarial fees, e.g. for the certification of other documents needed for the registration of the company in the commercial register (CZK 1.000), for drawing up of another counterpart of the notarial deed necessary for the bank and the respective trades licensing office etc., and because of administrative fees paid for getting relevant trade licences (CZK 1.000 for each). Further insufficiency of the legislation can be seen in that the minimal requirements of the founding actions will not be satisfactory for companies with more than one founder that wish to agree on specific provisions of their foundation deed.

By Jiří Spousta & Magda Stárková

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