Directors’ Duties in the Czech Republic

>> Liabilities and Penalties in the Czech Republic

Breaches of a director’s obligations and duties can and may result in the:

  • director’s liability for any damage suffered by the company as a result of the breach
  • return of their remuneration received over the previous two (2) years
  • provision of a guarantee for the company’s debts
  • exclusion of the director from office by a court
  • financial liability for the late filing of an insolvency petition
  • criminal liability

Further, in relation to section 10 above, please see the below specific sanctions and fines:

  • Sanctions under the Act on Public Registries: if the company fails to submit the respective documents even after the Commercial Court called upon it to do so, it could be repeatedly fined CZK 100,000 (approx. EUR 3,700). If the breach could have serious consequences to third parties and there is a legal interest, the court may also initiate proceedings to dissolve the company.
  • Sanctions under the Act on Accounting: if the company fails to file its annual accounts with the Collection of Deeds, the respective authority could impose a penalty of up to 3% of the total assets of the company.
  • Sanctions under the Act on Offences: if a company does not submit the required documents with the Collection of Deeds, the respective authority could impose a penalty of up to CZK 50,000 (approx. EUR 1,850) and impose a prohibition of business for a period of up to one year.
  • Sanctions under the Criminal Code: if a company does not submit the required documents with the Collection of Deeds and this breach causes or endangers the rights of third parties, it could also be considered a crime of misrepresentation of financial data.
  • Sanctions under the Civil Code: a person who breaches a legal duty, such as failing to submit the relevant report with the Collection of Deeds, ie the director and company, may be liable for any damage caused by not submitting what is legally required.

Limitation of liability

Any agreement between the company and the executive or any provision of the Articles of Association excluding or limiting the liability of the executive for damages will be null and void.

Limitation of liability is generally not possible. An indemnity clause, where the company is making any commitment or waiving any rights that it would otherwise have, could be deemed as circumventing the intent of the law and would be null and void.

Nevertheless, it could be possible to conclude an indemnity agreement between an executive on one side and a company from within the group on the other side as an indemnity provider.

Delegation of authorities

Generally, you may delegate your powers in individual cases. However regarding granting a general power of attorney, opinions on whether a director may grant one differ. The wording of a power of attorney only be written after consultation and assistance from a lawyer.

Directors and officers (“D&O”) insurance

Directors may obtain D&O insurance to cover  any losses and liabilities as a result of their position as directors.


Latest version updated 22nd March 2018

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