LIMITED LIABILITY COMPANY General characteristics Legal entity Created by one or more founders (individuals or legal entities); May be created for business but also for other purposes Must have registered capital in the amount at least 1 CZK or the amount determined by founding agreement; members required to make capital contributions in the amount stated in founding agreement, no minimal amount stated by law Internal corporate structure prescribed by law Liability of members for obligations of the company is limited

LIMITED LIABILITY COMPANY Establishment Legal act necessary for establishment - founding agreement or founding deed Incorporation - upon registration in the Commercial Register. Members obligated to make capital contributions each in the amount stated in founding agreement Repeated performance (works) or services cannot be used as capital contribution No other limitations as for legal position or number of members

LIMITED LIABILITY COMPANY Members’ participation in company Rights and duties of members incorporated (embodied) in ownership interest Ownership interest represents Right to participate in management of the company Right to share in profits of the company Right to share in liquidation balance in case of company’s liquidation Extent of member’s rights is determined by the size of the member’s capital contribution, unless the founding agreement states otherwise Ownership interest is transferable to other members or persons outside the company; transferability may be restricted by founding agreement

LIMITED LIABILITY COMPANY Transfer of ownership interest to other member is possible without limitations Transfer of ownership interest to person outside comapny is subject to approval by general meeting Founding agreement may stipulate more kinds of ownership interests (with different rights) Each member may have more ownership interests Ownership interest may be represented by share certificate – security issued in the name of its holder Transferability of ownership interest evidenced by share certificate cannot be restricted Company maintains list of members (shareholders)

LIMITED LIABILITY COMPANY Corporate structure Corporate governance is carried on by specialized corporate bodies General meeting Executive director(s) Supervisory board

LIMITED LIABILITY COMPANY General Meeting Supreme body comprised all members of company Powers of general meeting Decisions pertaining to existence of company Changes in the founding agreement if required by founding agreement Increase or decrease of the registered capital Termination of a company if required by founding agreement Decisions concerning rights and obligations of members Participation in profits Determination of voting requirements Imposing duty to contribute to company’s assets amounts in excess of capital contributions

LIMITED LIABILITY COMPANY Decisions concerning corporate governance Election of executive directors or members of supervisory board Remuneration of executive directors and members of supervisory board Convocation and proceedings of general meeting are subject to strict rules guaranteeing equal treatment of all members Notice of convocation must be sent to members within legally prescribed deadline Only matters included in the agenda contained in the notice of convocation can be discussed and decided Member may waive the right to the timely notice of convocation

LIMITED LIABILITY COMPANY Each member has 1 vote corresponding to his contribution equal to CZK 1 Voting can be exercised at the general meeting or outside general meeting through technical means (telephone, electronic communication) or after the general meeting within 7 days after the date of general meeting Member is not allowed to vote In matters relating to his position in company (his in kind contribution, remedies in case of breach of his duties) Cumulative voting allowed for purposes of election of other corporate bodies (executive director or supervisory board)

LIMITED LIABILITY COMPANY Executive Director Statutory body – decides all matters not entrusted to general meeting, acts on behalf of company Elected by general meeting - one or more executive directors Supervisory Board Controlling body – its existence is not mandatory Elected by general meeting Duty of care and duty of loyalty for executive directors and members of supervisory board

LIMITED LIABILITY COMPANY Duties of members Obligation to make capital contribution In the amount prescribed in the founding agreement (no minimum amount stated by law) Defaulting member Shall pay a default interest May be expelled from company Obligation to refrain from competitive conduct, if stipulated by the founding agreement Other obligations Obligation to pay amounts in excess of capital contribution, if requested by general meeting Member who did not vote for this obligation may resign from company provided he paid his capital contribution in full

LIMITED LIABILITY COMPANY Member may decide to provide additional contribution (voluntary contribution) even if not explicitely permitted by founding agreement; consent of executive director required Voluntary contribution may be monetary or in-kind Additional contributions may be returned upon decision of general meeting provided they exceed losses of company

LIMITED LIABILITY COMPANY Liability of members for obligations of company Limited by the aggregate amount of unpaid capital contributions as registered in the Commercial Register Liability is joint and several

LIMITED LIABILITY COMPANY Rights of members Members have Right to participate in management of company Property rights Members participate in management of company At general meting – discuss and vote on company matters Outside general meeting - adopt decisions on company matters subject to certain procedural rules Draft resolution sent in writing to all members Approval must be delivered within one month No reaction = refusal

LIMITED LIABILITY COMPANY Each member has the right To inspect company’s books To ask questions and require information and explanations about company’s matters from executive directors Information may be refused if it is subject to concealment under law Is trade secret subject to refusal?

LIMITED LIABILITY COMPANY Each member may Request the court to declare the resolution of general meeting invalid if the resolution is adopted in contradiction with law or founding agreement Sue on behalf of the company executive directors for damages incurred as a result of breach of their duties Sue on behalf of company another member in case of delay with payment of capital contribution

LIMITED LIABILITY COMPANY Property rights of members Right to share in profits of company proportionate to members contribution unless founding agreement sets otherwise Share in profits is paid in money unless founding agreement or resolution of general meeting sets otherwise Profit can be distributed upon decision of general meeting Share in profits cannot exceed economic results for preceding financial year decreased by losses for previous financial years

LIMITED LIABILITY COMPANY Right to liquidation balance Provided in case company is liquidated In the amount proportionate to contributions provided Financial assistance (self financing) Company may not provide advance payments, loans or secure loans for purposes of acquisition of its own shares if it may cause bankruptcy of company If financial assistance is permitted it must be provided under fair conditions executive director prepares report justifying such assistance

LIMITED LIABILITY COMPANY Termination of membership in company Resignation from company by member who at general meeting did not agree with Material change of business objects of company Extension of term of existence of company Obligation to provide additional contribution into company’s assets By agreement among all members of company By court decision upon company’s proposal regarding member who grossly violates his duties By court decision upon proposal of member if it is not fair to insist on continuation of his membership in company In case of member’s bankruptcy by termination of bankruptcy proceedings for lack of member’s assets

LIMITED LIABILITY COMPANY Disposition with ownership interest of member who terminated his membership Company shall sell this ownership interest Other members have preemptive right proportionate to their ownership interests Terminated member shall receive settlement share Proportionate to his ownership interest Calculated on the basis of company’s financial account as of the date of member’s termination

LIMITED LIABILITY COMPANY Termination of limited liability company By decision of all members unless founding agreement grants this authority to general meeting By transformation Merger Amalgamation Dissolution