Regulated gender ratio in companies

Who will be affected by the new obligations?

The new obligations will apply to joint-stock companies whose shares are publicly traded on a regulated market in the EU. Another condition is that the issuer must have at least 250 employees and at the same time an annual net turnover of EUR 50 million or assets of more than EUR 43 million. The new obligations will thus not affect medium-sized, small or micro-enterprises, even if their shares are traded on an EU regulated market. 

Key obligations of issuers

Issuers will be required to set a target gender balance for members of its governing body (board of directors, management board or supervisory board) assuring that at least 40% of its non-executive board members or at least 33% of all board members are women. The issuers will also have to publish on their websites (e.g., as part of their annual report) information regarding the achievement of these targets. The Czech National Bank will also publish a list of issuers meeting the targets.

The issuer shall first assess the suitability of a candidate for the position of a board member from the viewpoint of the set gender balance targets. In making this pre-selection, the issuer must give preference to a candidate of the less represented gender if they have the same or comparable qualifications (qualification, competences and expected performance). Exceptionally, the issuer may select another candidate, possibly to meet other diversity policy objectives or for reasons of special consideration. At the request of a candidate who was not pre-selected, the issuer shall provide information on the qualification criteria for the selection, an objective comparative assessment of the candidates, and the reasons that led to the selection of the candidate belonging to the under-represented gender. Candidates who pass this pre-selection process will then as a rule be voted on by the general meeting.

The issuer will also have the duty to inform their shareholders (or employees) of the set targets and the penalties it faces for breaching the rules.

Sanctions

Failure to meet the set targets will not in itself be an offence, but the following will be:

• The annual report does not contain the required information.
• The issuer has not set any gender balance targets.
• The issuer has breached the rules for the pre-selection of a candidate for a member of the governing body.
• Despite their request, an unsuccessful candidate was not provided by the issuer with information on the reasons for their exclusion from the selection.

The issuer can be fined up to CZK 1 million for the above offences.

Effective date of the act

There is still time to prepare for the new responsibilities, as the law is now going through the comment procedure and will have to advance through the legislative process. The amendment expects to take effect on 28 December 2024, which is the date on which the transposition deadline set by the European Directive expires.