Transfers of a business shares

The form of the General Meeting's consent to the transfer of business share to a person outside the company one of the questionable issues which arose in connection with the recodification of Czech private law.

While the earlier Commercial Code in its Sec. 141 explicitly stated that such a decision must be certified by notarial deed, the Law no. 90/2012 Coll., the Business Corporations Act (hereinafter the “Law”) regulates the issue differently and only sets down a general rule that decision resulting in an amendment of the memorandum of association shall be certified with an public instrument. Until the end of 2015 the courts decided the question inconsistently. Prudent business corporations were indirectly forced to take notarial deeds which both increased transaction costs and were more time demanding.

At the beginning of 2016 the Supreme Court of the Czech Republic concluded that such decision of the General Meeting of Limited Liability Company is not a decision resulting in an amendment of the Memorandum of Association in the meaning of Sec. 171 paragraph 1 let. b) of the Law and therefore is it needs not to be certified with a public instrument (e.g. notarial deed) under Sec. 172 paragraph 2 of the Law. The amendment of the Memorandum of Association shall be effective upon the completion of the transfer. The Supreme Court also stated that in the case of transfer of share of a sole member no consent of the General Meeting (respectively of the sole member acting in the capacity of the general meeting) shall be needed.