The Czech Parliament adopted an Act which is also known as „Lex Covid“. This Act is intended to solve the practical problems arising out of pandemic disease Covid-19 in the area of court proceedings,  insolvency as well as functioning of legal entities. The purpose of this newsletter is to present  the content of the Act relating to the functioning of legal entities. 

Decision-making of legal entitiesʼ bodies outside the physical meeting
The essential change being brought by Lex Covid is the extension of the regulation for  decision-making bodies  of legal entities outside their personal meeting – either in written form  (per rollam) or by using technical means. The body of a legal entity may now decide even if the foundation legal act (particularly the  Articles of Association or Memorandum of Association) does not permit such procedure. This option  applies not only to the General Meetings, but also, for example, to the meetings of the Board of  Directors or the Supervisory Board. 

Therefore, Lex Covid in fact temporarily supplements (for the duration of the emergency measure) the Articles of Association or Memorandums of Association by allowing flexible actions to be taken  by the bodies of legal entities in case this option has not been allowed in these documents yet.  This should be very beneficial e. g. for joint-stock companies which are not obligated to hold  general meetings with large number of people under difficult conditions, but instead the general  meetingʼs decisions may be taken in the form of per rollam. 

 

Extension of the term of office of a body member
The extension of the term of office brought by Lex Covid relates to those client members of elected bodies  whose term of office would expire during the effectiveness of the emergency measure or within 1  month from the day following the date of its expiration. In that case, the term of office shall be  extended until the lapse of three months following the end of the emergency measure. Automatic  extension can be prevented by a client member of the elected body delivering his disagreement to the legal  entity before the expiry of the term of office. 

Lex Covid also lays down the conditions for the resumption of the office if such term of office has expired between the adoption of the emergency measure and the date on which Lex Covid comes into  force. The resumption of the function of a client member of the body shall take place only if the member  delivers his consent and if no other client member has been elected in the meantime. The term of office  shall expire 3 months after the day following the date of termination of the emergency measure. 

Lex Covid allows, under specified conditions, the co-optation of client members of the legal entityʼs body, even if this possibility is not allowed within the foundation legal act. The co-optation  represents a way in which the missing client members of a particular body are elected by that body itself,  with the effect until the next meeting of the body which is otherwise authorised to elect those  members. 

Deadlines for discussion the ordinary financial statements
Lex Covid also solves the practical problem residing in the obligation of general meetings of most companies to discuss the financial statements by the end of June. In this context, Lex Covid  extends the deadline for discussing the ordinary financial statements of a private limited  liability company, a joint-stock company or a cooperative – so that in case this deadline should  expire earlier than 3 months after the date of termination of the emergency measure, it will expire  up to 3 months after the termination of the emergency measure, but no later than on 31 December  2020. In fact, the companies are given more time to discuss the financial statements. 

The above options are, of course, temporary and last during the emergency measures related to the Covid-19 epidemic. In case of any questions regarding the functioning of legal entities, and not only during the state  of emergency, please contact Mgr. Michal Pálinkás at Michal.Palinkas (at) randalegal.com.

Řanda Havel Legal

Prague office
Truhlàřskà 13-15
110 00
Prague
Czech Republic
+420 222 537 500-501
+420 222 537 510
Martin.Randa@randalegal.com