Establishing trades or corporations easily, quickly and on-line?

The deputies’ motion to amend legislation, supported by deputies across the political spectrum, aims to substantially simplify the establishment of limited liability companies and unqualified trades. Under certain conditions, both should be possible through an application designed for this purpose while using information from the public administration’s information systems and without the need to visit a notary, the trade licensing office, or a bank.  The motion targets limited liability companies that without a doubt are the most common type of corporations in the Czech Republic, in particular those having a simple basic structure to perform unqualified trades.

The incorporator would be able to establish a limited liability company using the application and a model memorandum of association while signing the petition to register the company in the Commercial Register by a qualified electronic signature or sending it via a data box. Other approvals necessary for the registration of a company in the Commercial Register (in particular, consent with the entry as well as consent with the registered office’s location) would be obtained in a similar way. Simultaneously with entering the incorporation of a company it should be possible to register the establishment of an unqualified trade for such a company in the Trade Register. Another novelty is the cancellation of the duty to make a contribution by companies with the registered capital not exceeding CZK 5 000. When registering such a company in the Commercial Register, the incorporator would not have to submit the bank’s certificate confirming the payment of a contribution. In practice, an applicant would hence really be able to establish a limited liability company from home within a few hours after paying a court fee of CZK 500.

Despite the fact that deputies from both opposition and government political parties are in consensus in this matter, some ministries have voiced concern regarding possible abuses of the proposed online application process, in particular pointing to potential abuses for criminal acts because of the insufficient identification of persons. Another reservation voiced by the ministries is giving unjust preference to a limited group of corporations. The government as a whole adopted a neutral position in this respect; however, this does not mean that entrepreneurs will entirely lose their opportunity to register a company in the Commercial Register on a remote basis using the internet if the motion is not passed. One of the reasons for the government’s rather reserved opinion is the Directive on Digitalisation in Company Law, expected to enter into force sometimes in May. Among other things, this directive aims to enable the online establishment and registration of limited liability companies in the Commercial Register as well as the simplification of registration of branches from other member states. The directive should be transposed into the Czech legal order roughly in mid-2021. According to the Ministry of Justice, however, the motion submitted by deputies does not fully correspond to the European regulation.

Considering the above, it is certain that the longed-for online establishment of companies will be feasible under certain conditions no later than in the second half of 2021. If parliament does not pass the currently proposed motion, entrepreneurs planning to establish a company online will only have to wait until the Directive on Digitalisation in Company Law is transposed into Czech law.