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done directly by a notary public, the company may be registered within one day. 3. Governance, regulation and ongoing maintenance 3.1 Corporate governance Corporate governance is vested in the company’s bodies and varies by the type and size of company. For capital companies, the supreme body is always the general meeting of shareholders. In a limited liability company, the obligatory company bodies are the general meeting and one or more executive directors or board of executive directors if allowed by the foundation documents; establishing a supervisory board is optional. Executive directors must act with due diligence and care and follow the principles and resolutions passed by the company's general meeting in compliance with law and the Memorandum of Association or Foundation Deed. They may not disclose sensitive and confidential information to third parties. If they breach these obligations, they are personally liable for all damage caused by the breach. They must also respect the non-competition clause envisaged by the Act on Business Corporations. The Memorandum of Association or Foundation Deed may however extend the list of prohibited activities or, conversely, shorten it, to exclude all restrictions altogether, or to determine the conditions under which their exercise will be prohibited. Joint-stock companies may choose between the dualistic model and the monistic model of corporate governance. The dualistic model requires the establishment of a board of directors and a supervisory board, whereas the monistic model means only a board of administrators. Business management is therefore executed either by
a board of directors (in the dualistic model) or by an administrative board (in the monistic model), which also performs a supervisory role and decides on the strategic orientation of the business management. The supreme body of a partnership (both a limited liability partnership and a general partnership) is constituted of all partners, who are all equal and hold one vote each, unless stated otherwise in the partnership agreement. Business management is generally executed by either every partner in a general partnership, or every partner with unlimited personal liability in a limited liability partnership. Establishing a supervisory board is voluntary. Corporate governance rules are rigid in the Czech Republic. Members of statutory bodies are obliged to perform their offices with the required loyalty, knowledge and care – with due diligence. A corrective to the strict rules of due diligence, called the business judgment rule, states that a member of the statutory body is acting with due care and with necessary knowledge if he/she can in good faith reasonably assume when making his/her business decisions that he/she has acted in a well-informed manner and in the defensible business interests of the business corporation. If a member of the statutory body breaches his/her obligations, he/she must return any profit obtained in connection with such breach or, as the case may be, provide indemnification of material and non-material damage in cash. There is an obligation of the member of the statutory body to return the profit obtained under a contract on the performance of the office and all other profits from the company received in the two years preceding a decision on bankruptcy, if he/she was aware
ILN Corporate Group – Establishing a Business Entity Series
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