The most important pieces of legislation on company transformations are the Commercial Code and the Act on the transformation of companies.
Transfers of certain companies are subject to the approval of the Office for the Protection of Competition.
This only applies to mergers above a certain turnover threshold, as set by the Act on the protection of competition. The permission of the Office is also required for mergers between competitors which fulfil the following turnover criteria:
Mergers between competitors are subject to a permit from the Office if:
- the overall net turnover of all the merging competitors on the Czech market exceeded CZK 1.5 billion in the last accounting period and at least two of the merging competitors achieved a turnover on the Czech market exceeding CZK 250 million in the last accounting period, or
- the overall net turnover on the Czech market of at least one of the parties to the merger exceeded CZK 1,500,000,000 in the last accounting period and at the same time the net global turnover achieved by the other merging competitors in the last accounting period exceeded CZK 1,500,000,000.
Companies with a lower turnover may merge without the approval of the Office.
Types of merger
A merger is a union of two or more companies into one, either by integration or combination. In the case of integration, one of the companies remains as the successor organisation. In the case of combination, a brand new company is formed. A merger can occur between national entities, as well as between companies from different EU countries, in the form of a cross-border merger.
Merger by integration
Merger by integration results in the dissolution of the company or cooperative(s) preceded by a termination without liquidation; the assets of the dissolved company or cooperative are transferred to the other company or cooperative.
Another form of merger by integration is when a joint stock company or limited liability company is dissolved and then integrated into a successor joint stock company or limited liability company which is its sole shareholder.
Merger by combination
A merger by combination involves the dissolution of two or more companies or cooperatives, which is preceded by their termination without liquidation; the assets of the dissolved companies or cooperatives are transferred to a newly-formed successor company or cooperative.
Buying an existing company, with an already established structure, can be a good way of expanding your business.
Merging competitors must submit a merger approval application to the Office, the particulars of which are set out in the appropriate implementing regulation.
The statutory body of every participating company or cooperative in a merger, demerger or change in legal form records the transformation in the Commercial Register at least one month prior to the date on which the transformation is to be approved.
The statutory body of the successor company may perform this obligation on behalf of the statutory body of the company or cooperative that is closing down in a merger or demerger.
Starting from the publication date of the notice on the lodging of a transformation project in the relevant volume of documents, every shareholder or member may request information relating to the other participating companies or cooperatives that are important from the standpoint of the transformation.
The following governmental and non-governmental institutions and web portals offer further information and useful services related to the takeover of a firm or company.