It is common knowledge that joint-stock firms serve as an important and legitimate company structure. Their unique ability to let anyone to invest in and take part in the administration of a firm makes them an essential element of the global economy. This article will examine the background, features, and legal framework of Czech legislation concerning joint-stock enterprises.
Historical Development of Joint-Stock Companies
Origins of Joint-Stock Companies
The ancient Greeks, Romans, and Chinese all used joint-stock firms to run their businesses. Cities throughout the Middle Ages saw the emergence of organisations with features reminiscent of current joint-stock businesses. The Dutch East India Company, founded in 1602, was essential in the idea’s development. The Dutch government allowed this firm a monopoly on commerce, and its early owners were able to partake in the company’s earnings and sell their shares on the stock market.
Early Joint-Stock Companies in Czech Republic
The Czech Republic is also home to the idea of joint-stock enterprises. In 1792, the KK Privilegirte Zucker-Raffinerie zu Königsaal bey Prag opened as one of the first recognised businesses. Zbraslav Sugar Refinery, located close to Prague, was one of the earliest examples of a regional joint-stock business. The Prague Joint Stock Steamboat Company, founded in 1822, was only one of several subsequent initiatives in a variety of disciplines.
Historical Legal Regulation
The legal position of joint-stock enterprises throughout Czech history has experienced several rules. The basic structure was established in 1852 with the Law on Societies, and in 1899 the ministerial rule known as Akciov regulativem was enacted. However, from 1950 and 1990, a patchwork Act No. 243/1949 Coll. governed joint-stock firms; this law was revised as a result of a change in political government in 1990. Since then, joint-stock firms have been controlled by the Commercial Code and, as of January 1, 2014, the Business Corporations Act.
Characteristics of Joint-Stock Companies in Czech Law
Legal Entity with Limited Liability
Under Czech law, a joint-stock corporation is a separate entity whose board of directors serves as its legal representation. Shareholders’ financial exposure is capped at their total investment. The shareholders of a corporation are not individually responsible for the debts or losses of the corporation. The restricted liability of joint-stock businesses is a key characteristic that safeguards investor capital.
A joint-stock company’s shares are a representation of ownership in the company’s capital. Shareholders, also known as stockholders, have certain privileges, such as voting power and the opportunity to receive dividend payments from the company’s earnings. Shareholder involvement and good corporate governance rely heavily on these rights and the responsibilities that come with them.
Shares in a joint-stock business trade on the open market, where their value rises and falls according to supply and demand. This indicates that there is a high degree of volatility in both the total value of the company and the value of each shareholder’s stake. Joint-stock firms rely heavily on the stock market since it is the primary factor in determining the value of shares.
Joint-stock enterprises were obligated to set up a loss reserve fund before 2014. However, this mandate has been lifted, and reserve funds are now entirely optional for businesses. This modification reflects the dynamic nature of Czech law regarding joint-stock businesses.
Foundation and Formation of Joint-Stock Companies
In the Czech Republic, a joint-stock company must first be founded, and then it must be formed. The first stage in establishing a new business is for its founders to adopt the articles of association. These pieces should have the formality of a public record, implying openness and responsibility.
A minimum amount of capital must be contributed by the founders in order to form a joint stock corporation. Share premiums must be repaid and at least 30% of the value of the subscribed shares must be contributed within the time period set out in the articles of organisation. A joint-stock corporation must have at least CZK 2,000,000 in share capital, or EUR 80,000 if its books are kept in euros. The company’s long-term financial health depends on meeting these criteria.
Registration in the Commercial Register
The commercial register entry is considered the “birthday” of a joint-stock company. The company’s existence and corporate capacity are officially recognised by law upon registration.
Company Bodies in Czech Joint-Stock Companies
Similarly to the European or continental model, Czech law has typically adopted a dualistic approach for the internal organisation of joint-stock enterprises. The business is governed by two separate entities under this structure:
When it comes to making major business decisions, a joint-stock company’s general meeting is where it’s at. Meetings of the shareholders are called at crucial times, such as when the business is first formed, when the articles of association are amended, when new company bodies are elected, when profit distribution is approved, and when financial accounts are reviewed. The voting power of shareholders is directly related to the number of shares each shareholder owns.
Board of Directors
The company’s day-to-day operations, including making decisions about those activities and keeping financial records, are the purview of the board of directors, the statutory body charged with doing so. The articles of organisation of a corporation may provide a different number of directors than the standard three. In rare situations, the general meeting may have the right to elect or fire members of the board of directors.
The supervisory board is responsible for monitoring the board of directors and ensuring that its powers are being properly used. It has the authority to review any and all firm records, including financial ones. The supervisory board is similar to the board of directors in that it consists of three people who serve for three-year terms. The number of supervisory board members must be divisible by three, and in bigger enterprises with more than 500 workers, one-third of the supervisory board members are voted by the employees.
The Law on Business Corporations allows for the adoption of a monist system in addition to the dualistic system, which is the norm for Czech joint-stock corporations. In this alternate organisational setup, the board of directors serves as both the company’s management and its supervisor. Companies can tailor their internal structure to their needs under the monist system, which is consistent with the Anglo-Saxon or Anglo-American style of corporate governance.
The Czech economic community is built on a foundation of joint-stock businesses, which have a long and storied history. Their legal system strikes a good balance between protecting investors, encouraging participation by shareholders, and regulating corporations responsibly. The dualistic and monist systems allow firms to adjust their internal structure to suit unique requirements and preferences, yet the idea of limited liability remains a basic cornerstone of this legal entity. Anyone or any company interested in forming a joint-stock company in the Czech Republic would do well to familiarise themselves with the history and framework of such entities under Czech law.