The amendment to the Act on Transformations of Commercial Companies and Cooperatives, effective as of 19 July 2024, is based mainly on Directive 2019/2121 of the European Parliament and the Council of the EU. The amendment does not only deal with the cross-border aspects of transformations (e.g. clarification of the rules for cross-border mergers, new regulation of cross-border divisions, and cross-border conversions), but also introduces several significant changes required by practice that could simplify and streamline the processes of domestic transformations. Below is an overview of the most important news and changes.

 New Form of Transformation – Division by Separation

  • In addition to the current forms of division, which are the full division and the partial division, a new form of division by separation is emerging. The company to be divided does not cease to exist upon division by separation, and the separated part of the assets is transferred to the newly created or already existing company in exchange for a share in the respective company.
  • In the case of separation with the creation of a new company, the company being divided will become the sole shareholder of this newly established company. In practice, this method can be used as one of the ways of forming a subsidiary.
  • On the contrary, separation to an existing company will allow companies to inject some of their assets into another company in exchange for shares in it. If the company being divided is already the sole shareholder of the successor company, the exchange for a share does not have to take place, as it does not affect the ownership structure of the successor company.

Simplification of Processes and Reduction of Administrative Burden

  • Elimination of the Obligation to Publish a Notice in the Business Bulletin – the amendment eliminates the obligation to publish information in the Business Bulletin. Instead, it is sufficient to file the transformation project in the Collection of Deeds of the Commercial Register, newly supplemented by a notice for creditors of their rights (originally published in the Business Bulletin), as well as extended by a notice of the rights of other persons (especially employees and shareholders).
  • Removal of Court-Appointed Expert Requirement – the court no longer has to formally appoint an expert for the valuation of assets, the company will now choose an expert directly from the list of recognized experts. In some cases, it will be possible to avoid an expert altogether and use a so-called generally recognized expert (a regulation already known from the Business Corporations Act).
  • Shortened Deadline for Exercising Creditors’ Rights – the deadline for creditor to exercise their right to sufficient security has been reduced to 3 months (from the original 6 months), starting from the publication date of the transformation project in the Collection of Deeds of the Commercial Register.
  • Multiple Transformations on same date of the account – the amendment permits multiple simultaneous transformations to be conducted on the same date of the accounts, offering companies greater flexibility.

 

We will be happy to provide you with more information about the entire process. If you are interested, please reach out to your contact person in our office or Jiří Absolon and Denisa Bučilová.

This document is a general overview only and does not constitute legal advice on specific matters.