ILN: BUYING AND SELLING REAL ESTATE - AN INTERNATIONAL GUIDE

[BUYING AND SELLING REAL ESTATE IN CZECH REPUBLIC]

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avoid having to declare bankruptcy due to lack of funds early on. It is thus recommended to set up a company with registered capital in the amount of at least CZK 100,000 (€3,700). m. At least 30% of each shareholder’s monetary contribution to the registered capital must be paid to a special bank account before the company's registration in the Commercial Register. If the company’s registered capital is lower than CZK 20.000, contributions to the registered capital are not required to be paid to a special bank account but may be paid to a contribution administrator. e) Limited Liability • The shareholders of the entity are not personally liable for the company's debts. The shareholders' liability is joint and several and is limited by the extent of the shareholders’ unpaid contributions to the registered capital registered in the Commercial Register at the time they are invited by the company’s creditor to satisfy the company’s debt. n. The limitation of liability arises once the s.r.o. has been registered in the Commercial Register. Note: If the corporate share is not yet fully paid, the shareholders must, if need be, pay the outstanding amount privately in full. o. The company's statutory body is comprised of one or more executive directors. The executive directors act in all matters on behalf of the company. The manner in which the executive directors are to act on behalf of the company is also registered in the Commercial Register. The Foundation Deed and the Memorandum of Association may

state that the executive directors constitute a collective body. p. Any internal restrictions of the executive directors' powers are not effective against a third party. Under Czech law, a violation of these restrictions by an executive director will not affect the validity of a contract with a third party, but the s.r.o. may hold the executive director in question liable for damages. 2. Czech Joint-Stock Company – a.s. q. An a.s. (akciová spol ečnost) is a legal entity in which the shareholders are not liable for the debts of the company during its existence. r. It is much more complicated to form and to operate than an s.r.o. s. Hence, the rules governing an a.s. are generally less flexible compared to the rules for forming a limited liability company. a) Formation t. At least one founding shareholder is required; this may be either an individual or a legal entity. u. The minimum share capital is CZK 2,000,000 (EUR 80,000). v. The Articles of Association must be notarized and contain certain mandatory information. w. Application for registration in the Commercial Register is to be filed with the court with local jurisdiction (i.e., the place where the company is located). Note: Previously, the founding shareholders had to pay a minimum contribution. In the case of cash contributions: each of the founders had to pay at least 30% of the subscribed registered capital by the time of the submission of the proposal to the Commercial Register.

ILN Real Estate Group – Buying and Selling Real Estate Series

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