At the end of November, the Czech Supreme Court further elaborated on its existing opinion as to how specific and precise a company’s scope of business must be, particularly as regards the frequent entry “production, trade and services not listed in Annexes 1 to 3 to the Trade Act.”
In its recent decision (File No. 27 Cdo 3391/2023), the Supreme Court stressed that an entry must be comprehensible, reflecting the juridical act aimed at formation of the company and not generally referring to the Trade Register, the Trade Act, documents or wordings of other statutes.
Cases that the Supreme Court has now ruled to be non-compliant:
❌ Universal reference to the Trade Act: According to the Court, entries like “production, trade and services not listed in Annexes 1 to 3 to the Trade Act” do not allow third parties to find out the company’s actual scope of business.
❌ Reference to the Trade Register: Wordings like “in the scope of trades entered in the Trade Register” are inadmissible because they force third parties to view other sources of information, reducing the informative value of the Commercial Register.
❌ Reference to numerical lists of activity fields: Entries like “in the scope of activity fields nos. 1 to 81” are also incorrect because they do not show right away what the numbers mean. Third parties would have to search the content of the respective annex to the Trade Act as amended on the date of the juridical act aimed at formation of the company in question, which does not conform to the required comprehensibility of an entry.
❌ Incomplete or misleading entries: The Court has also ruled that entries in the Commercial Register are incorrect if they only contain some of the activities defined within the juridical act aimed at formation of the company in question (such as only some of unqualified trade fields) without properly corresponding to that juridical act.
According to the Supreme Court, the practical issue of such entries is that without using a reference included in the public register to search other sources of information, third parties cannot easily and clearly find out what the company does in fact.
The Supreme Court emphasised that entries in the public register must contain activities defined by the founders (members or shareholders), and not various pre-defined subsets with scopes of business picked up and notified to the Trade Authority by members of the company’s governing body.
What are the implications of the Supreme Court’s decision? As the Supreme Court further tightens the stringent requirements for the specificity of their scope of business, companies should check whether their Commercial Register entry includes specific activities and no general wordings.
We therefore recommend a thorough revision of the documents establishing your company and of its entries in the Commercial Register. If you rectify your entries in time, you may avoid potential interventions by your register court or potential complaints by the “founders” of your company on the grounds that you as the company’s governing body fail to meet your obligations.
