1. Commercial Law and International Transactions Basic Information on the Course Time & Location: –Thursday; room 303 10-12 a.m. Commercial Law (lecturer Alena Bányaiová, alena.banyaiova@bvlaw.cz, tel: +420 222 517088)alena.banyaiova@bvlaw.cz 12 – 14 p.m. International Transactions (lecturer Monika Pauknerová, pauknero@prf.cuni.cz, tel: +420 221 005 519) pauknero@prf.cuni.cz Grading – criteria: –Participation in lectures - 50% Presentations Discussion –Test - three types – 50% Two questions private int. law and two questions commercial law Four questions private international law Four questions commercial law –Term of test - April 30, 2013 at 4 pm, substitute term - May 7, 2013 at 4 pm / one hour –Results available - May 13, 2013 1

2. 2 GENERAL PRINCIPLES OF COMMERCIAL LAW Commercial law – Concept, Main Principles Commercial law - component of Czech private law Re-introduced into Czech body of law in 1991 by: enactment of the Commercial Code (Act No. 513/1991 Coll.) massive amendments to the Civil Code (Act No. 40/1964 Coll.) Subject matter of commercial law in the Czech Republic: legal forms and position of entrepreneurs legal forms and structure of business companies basic conditions of carrying out business activities – protection of economic competition commercial contracts and other aspects of commercial obligations other related issues, in particular securities regulations and capital markets

3. 3 GENERAL PRINCIPLES OF COMMERCIAL LAW Sources of Commercial Law Commercial Code “This Code regulates the status of entrepreneurs, business obligations and some other activities connected with business activities. (Section 1 (1) of the Commercial Code)” Structure of Commercial Code: General provisions: legal status of entrepreneurs, types of entrepreneurs business activities of foreigners in the Czech Republic Commercial Register – its functioning and maintaining protection against unfair competition

4. 4 GENERAL PRINCIPLES OF COMMERCIAL LAW Business companies: rules applicable to all business companies rules applicable to individual legal forms of business companies Commercial relations (contracts): general aspects of contractual process certain types of commercial contracts and other legal acts liability for breach of obligations Final provisions

5. 5 GENERAL PRINCIPLES OF COMMERCIAL LAW Civil Code The general source of the Czech private law. Applicable in commercial relations in the absence of specific regulation in the Commercial Code EC Law EC law became part of the Czech body of law following the accession of the Czech Republic to the European Union Treaties and Regulations are directly applicable. Directives dealing with commercial relations have been mostly implemented into Czech national legislation even before accession of the Czech Republic to the EU

6. 6 GENERAL PRINCIPLES OF COMMERCIAL LAW Specific laws protecting economic competition, laws on capital markets Antitrust regulation – Act No. 143/2001 Coll., on Protection of Economic Competition Capital markets – Act No. 256/2004 Coll., on Business Activities within Capital Markets

7. GENERAL PRINCIPLES OF COMMERCIAL LAW New Codification of Czech Private Law New Civil Code (Act No 89/2012 Coll) Act on Commercial Corporations (Act No. 90/2012 Coll.) New Act on Private International Law (Act No. 91/2012 Coll.) All affective as of 1 January 2014 7

8. GENERAL PRINCIPLES OF COMMERCIAL LAW New Codification – Concept Civil Code – main general source of Czech private law Applicable to full extent to commercial relations including Legal forms and position of participants to commercial relations (entrepreneurs, companies, cooperatives) Protection against unfair competition Legal acting including commercial obligations (contracts, liability for breach of obligations) Specifics of commercial companies included in Act on Commercial companies 8

9. GENERAL PRINCIPLES OF COMMERCIAL LAW This course will follow the structure of existing legislature, i.e. the Commercial Code and will address in a general way all three areas regulated thereby, and Will include explanation of main changes brought about by new codification 9

10. 10 GENERAL PRINCIPLES OF COMMERCIAL LAW Entrepreneurs – Term, Legal Position Commercial law - law of professionals (entrepreneurs) Entrepreneur is a person (entity) professionally engaged in a business activity Business activity is: a continuous activity carried out by an entrepreneur independently in his own name at his own account (responsibility) for the purpose of gaining profit Professionally engaged means: the business activity is carried out on the basis of authorization granted in accordance with specific public laws. The most often authorization is a trade authorization / trade licence

11. GENERAL PRINCIPLES OF COMMERCIAL LAW Entrepreneurs Individuals (sole entrepreneurs) Legal entities (business companies – corporations, cooperatives) Distinguishing features of entrepreneurs Seat (registered office) / place of doing business Trade name 11

12. GENERAL PRINCIPLES OF COMMERCIAL LAW Trade name Name under which entrepreneur is obligated to do business Must not be open to confusion with name of another entrepreneur Must not be misleading (deceitful) Specific protection against unlawful use of trade name Claim to desistance from further use Claim to damages and unjust enrichment Claim to appropriate satisfaction including monetary satisfaction 12

13. 13 GENERAL PRINCIPLES OF COMMERCIAL LAW Business Activities of Foreigners in the Czech Republic Main rule: Foreign persons may engage in business activities in the Czech Republic under the same conditions and to the same extent as Czech persons, unless the law stipulates otherwise. (Section 21(1) of the Commercial Code) Foreigner may carry out the business by: establishing its own enterprise in the Czech Republic (individuals) establishing a branch in the Czech Republic (legal entities) creating or participating in creation of a Czech company or another legal entity

14. 14 GENERAL PRINCIPLES OF COMMERCIAL LAW Specific protection of foreign persons involved in business activity in the territory of the Czech Republic Property of a foreign person and the property of a legal entity with foreign capital participation may be expropriated only: on the basis of law in public interest, provided this interest cannot be satisfied otherwise and only for compensation Administrative decision on expropriation is subject to court review Compensation must be provided without delay, correspond to the full value of the property and must be freely transferable abroad

15. 15 GENERAL PRINCIPLES OF COMMERCIAL LAW Business Companies Business company - a legal entity established for the purposes of carrying the business, unless EC law or other law state otherwise. (Section 56 (1) of the Commercial Code) The following entities are considered business companies in the Czech Republic: general partnership limited partnership limited liability company joint stock company European company European interest grouping

16. 16 GENERAL PRINCIPLES OF COMMERCIAL LAW The European company and the European interest grouping are governed by EC Regulations and by special national laws; they will not be addressed in this course All business companies under Czech law have legal personality, i.e. may be party to legal relations, may enjoy rights and have obligations Czech law divides companies into two groups: personal companies capital companies

17. 17 GENERAL PRINCIPLES OF COMMERCIAL LAW Personal companies – general partnership, limited partnership Main features: partners (members) are personally engaged in company’s matters – all of them are authorized to act on behalf of a company no corporate bodies are created, partners decide collectively, as a rule unanimously capital contributions into company’s assets - only voluntary share (participation) in the company is not, as a rule, transferable death or termination of a partner (member) affects the existence of a company partners are fully liable for obligations of a company with their own assets

18. 18 GENERAL PRINCIPLES OF COMMERCIAL LAW Capital companies – limited liability company, joint stock company Most of applicable EU Directives implemented into the Czech legal system Main features: mandatory contributions of partners (shareholders) into the registered capital of the company; the minimal amount of the registered capital is set forth by law participation of each partner (shareholder), his rights and obligations are determined by the amount of his capital contribution partners (members) are not personally engaged in the company’s matters, the corporate governance is ensured by specialized bodies the structure of which is prescribed by law liability of partners (shareholders) for company’s obligations is limited or excluded

19. 19 GENERAL PRINCIPLES OF COMMERCIAL LAW Establishment of a Czech company: legal act of founders (founding agreement or founding deed) inscription into the Commercial Register (incorporation) Company’s assets, registered capital: start-up capital necessary for the company to start carrying out the business monetary expression of assets contributed to the company by its founders and shareholders information to third parties about the assets of the company financed from its own resources creation of registered capital and contributions of founders into it are mandatory only for capital companies

20. 20 GENERAL PRINCIPLES OF COMMERCIAL LAW Contributions into registered capital: monetary, or in kind; any asset the value of which can be objectively measured and which can be used for company’s business purpose Contributions cannot be returned or forgiven to partners (shareholders) during the life of the company Profits of the company can be distributed to partners (shareholders) only in excess of the registered capital Company cannot provide loans to shareholders for the purpose of acquisition of its own shares (prohibited financial assistance) Changes in registered capital are subject to rules set forth in the Commercial Code

21. 21 GENERAL PRINCIPLES OF COMMERCIAL LAW Share, ownership interest in the company Members (shareholders) are not owners of the company. They own share (ownership interest) representing their participation in the company Termination of a company Several forms of termination divided by different criteria: with liquidation or without liquidation voluntary or enforced Liquidation - out of court settlement of all company’s assets and liabilities based on a decision of the company itself or a decision of a court. After completion of liquidation company is erased from the Commercial Register and cease to exist without a legal successor

22. 22 GENERAL PRINCIPLES OF COMMERCIAL LAW Termination without liquidation - three forms of transformation: merger: one or more companies are terminated and their assets and liabilities are transferred to one surviving company - their legal successor amalgamation: two or more companies are terminated and their assets and liabilities are transferred to a newly established company - legal successor of all terminated companies division: company is terminated and its assets and liabilities are transferred to several newly created successor companies

23. 23 GENERAL PRINCIPLES OF COMMERCIAL LAW Acting on Behalf of Entrepreneurs Entrepreneurs - individuals can act: by their own acts (directly), or through a legal representative acting on the basis of a power of attorney Entrepreneurs – legal entities (companies) can act also: by their own acts – through statutory bodies (directly), or through a legal representative

24. 24 GENERAL PRINCIPLES OF COMMERCIAL LAW Statutory body: Corporate body determined by law which is authorized to act on behalf of a legal entity (company) in all matters. (Section 20 of the Civil Code) The scope of statutory body’s authority cannot be restricted by internal regulations of a legal entity Acting through a representative : on the basis of a power of attorney by operation of law- anyone who is entrusted with performance of a certain activity within a company is authorized to undertake all legal acts (contracts) which usually occur in the course of this activity - employees

25. 25 GENERAL PRINCIPLES OF COMMERCIAL LAW Special General Power of Attorney – Procuration Procurator is authorized to perform on behalf of a company all acts in law which occur in the operation of the business even though a special power of attorney might be otherwise required. (Section 14 of the Commercial Code) Procurator is authorized to act in everything what is aimed at carrying out the business Right to sell or encumber real estate is not automatically included in procuration Procuration must be registered in the Commercial Register