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Can a Czech Company’s General Meeting Be Held Abroad?

Can a Czech Company’s General Meeting Be Held Abroad?

Czech Republic

The Corporations Act provides that the venue, date and time of a general meeting must be set in such a manner that shareholders’ rights to attend (and vote) are not unreasonably limited. Would this statutory requirement be met if the general meeting were held in a foreign country? If so, under what circumstances?

The general meeting is the highest corporate body of a Czech company, whether a joint stock or limited liability. Accordingly, one of the most important rights conferred by the ownership of shares in such a company is the right to attend and vote at general meetings.

So what if some or all of the shareholders of a Czech company are from a foreign country? Must they – by plane, train or automobile – make their way to this country in order to enjoy these rights?

First a little bit of history. Back in the Wild East of the early 1990s a number of unscrupulous business people started a practice of deliberately convening general meetings in remote and hard to reach places with a view to preventing certain (often minority) shareholders from attending. Pursuant to the “grand amendment” of the then Commercial Code in 1996, a requirement was imposed for the choice of venue to “…limit the chances for shareholders to attend the general meeting as little as possible”.

In following case law the Czech Supreme Court ruled that the primary criterion should be the accessibility of the venue. The Court later recognised, however, that finding a venue which suits all of the shareholders may be difficult, for instance for companies whose shareholders are spread out geographically. Moreover, companies may have, according to the Court, legitimate objectives other than accessibility, such as finding affordable meeting rooms.

The Commercial Code is no more but today’s Corporations Act still protects shareholders from the obstructions of those who convene general meetings. The lawmakers have used a slightly different formulation than in the past. Rather than limiting “the chances for shareholders to attend the general meeting as little as possible” they stated that the venue should not “unreasonably limit the chances of shareholders to attend the general meeting”. The law therefore admits that, within reason, this right can be limited depending on a particular company’s circumstances and shareholding structure. In this way, the Corporations Act gives a little more freedom (for good or evil) than the old Commercial Code.

So can a Czech company’s general meeting be held abroad? The answer (the one which clients always love) is that “it depends”.  If one or a small number of shareholders came from a more exotic location, while the rest did not, then holding the general meeting thousands of kilometres away would be likely “unreasonably” to limit the rights of the latter to attend. 

If, on the other hand, a company had premises close to the Czech border, it may well be easier for both Czech and foreign shareholders to meet abroad. Getting, for instance, from Liberec in Northern Bohemia to Zittau in Saxony could be less of a hassle for all involved than coming to Prague. 

So it’s a question that can only be answered on the particular facts of the matter. In order, however, for any such arrangement to be foreseeable and fair, it would be wise for the shareholders expressly to provide for it in the company’s articles of association.

By Christian Blatchford, Partner, and Tomas Zach, Junior Lawyer, Kocian Solc Balastik