How can control over a company and access to company information be ensured for shareholders? How can effective corporate control be implemented in a way that prevents the misuse of information while also avoiding potential conflicts?
Introduction: Why are control and access to information key to a sound functioning of a company?
Transparency and effective access to corporate information constitute a cornerstone of sound corporate governance and healthy relationships among shareholders. In the absence of no proper and regular oversight and sufficient access to information, misunderstandings may arise, trust may erode, relationships within the company may be adversely affected, and, in extreme cases, financial and legal issues – or even disputes – may occur. This process is essential not only for minority shareholders or partners (for more details on the statutory differences in access to information between shareholders and partners, see below), in order to ensure equal access, but also for majority owners, enabling them to manage the company effectively and prevent disputes.
Well-structured information governance further supports efficient decision-making, facilitates strategic planning, and reinforces confidence among all stakeholders. At the same time, the modern business environment increasingly requires companies to respond proactively to challenges arising from digitalisation and cybersecurity.
Rights of shareholders and partners to information
(1) Legal framework for access to information
Czech law gives shareholders and partners the right to obtain information about the company and to inspect its documents. This includes the right to review and verify the information contained in key company records, in particular:
- financial statements
- minutes of general meetings and resolutions of the company’s governing bodies
- contracts
Access to these documents is often essential for understanding how the company operates and for assessing whether it is acting in accordance with the law, its constitutional documents, and its business strategy.
The duty to provide information is not only a statutory requirement. It also plays an important role in building trust in the company’s management.
At the same time, access to information enables shareholders and partners to make informed decisions and to exercise their voting rights effectively at general meetings.
(2) Information rights of partners or shareholders
Partners in a limited liability company generally enjoy relatively broad information rights. They are entitled to request information about the company, inspect the company’s books and records, and verify the data contained in the documents provided.
By contrast, shareholders in a joint-stock company have significantly more limited statutory information rights. As a rule, a shareholder may request and receive only explanations of matters relating to the company where such explanations are necessary, based on the agenda of the general meeting, either to assess the items included on the agenda or to exercise the shareholder’s rights at that meeting.
These information rights provide partners and shareholders with an important tool for exercising a certain degree of control over the company. They enable owners to make informed decisions in relation to the management of the company and help maintain a fair balance between the various ownership interests.
Openness is therefore key to preventing conflicts and ensuring fair treatment of all partners.
(3) Limits on access to information
Although the right to information is relatively broad, it is not unlimited. Certain restrictions apply, in particular where the protection of confidential or sensitive information is concerned.
When setting out the rights and obligations of partners or shareholders, it is always advisable to consider whether the statutory framework provides an appropriate level of access to information for the specific company. If the default legal regime is not suitable, the right to information may be adjusted in the company’s constitutional documents – most commonly by extending it in the articles of association or, where applicable, in a shareholders’ or partners’ agreement. This approach can help avoid disputes.
Control mechanisms within a company
(1) Supervisory Board
The supervisory board is a key body responsible for overseeing the company’s activities and the actions of its executive body. It monitors the company’s business management, reviews strategic decisions, and safeguards the interests of shareholders and partners.
In a two-tier joint-stock company structure, the establishment of a supervisory board is mandatory, while in limited liability companies it is optional.
(2) External audits
Regular audits carried out by independent professionals provide an objective view of the company’s financial position and overall operations. Audits help identify potential issues and enhance trust between the company and its shareholders or partners. Modern audits go beyond traditional financial review and increasingly include assessments of risk management and the effectiveness of the company’s internal processes.
(3) Internal control mechanisms
Companies can implement internal processes that allow for regular monitoring of key aspects of their operations, for example through periodic reports and updates provided to shareholders. When properly designed, internal controls can minimise the risk of errors and discrepancies.
Digital tools, such as document management and reporting software, can significantly streamline internal control processes and strengthen trust among shareholders.
Challenges related to access to information
(1) Misuse of information
There is a risk that partners may use the information they obtain for their own purposes, such as competitive activities.
Preventing misuse requires clearly defined rules and penalties, typically set out in a partners’ agreement, to ensure that confidentiality is maintained.
(2) Conflicts among partners or shareholders
Unclear rules regarding access to information can lead to distrust and conflicts – either between shareholders or partners themselves, or between them and the company. Transparency and clearly defined procedures for providing information are essential to prevent such disputes. Mediation and other forms of alternative dispute resolution can help reduce tensions and reach mutually acceptable solutions.
(3) Technological challenges
Digitalisation introduces new requirements for the secure storage and sharing of information. Companies should consider appropriate investments in cybersecurity and effective information systems.
Practical examples
(1) Successful implementation of internal mechanisms
A medium-sized manufacturing company introduced regular monthly performance reports accessible to all partners. This measure improved transparency and eliminated concerns about insufficient access to information.
Feedback from partners allowed the company to optimise operational processes and increase overall efficiency.
(2) Trade secret protection
A technology company faced a situation where one of the partners requested access to sensitive data regarding the development of a new product. With clearly defined rules in the partners’ agreement and the company’s memorandum of association, the company was able to strike a balance between protecting confidential information and respecting the partner’s right to access information.
Recommendations for effective access to information
(1) Clear rules in constitutional documents and shareholders’ or partners’ agreements
Rights and obligations regarding access to information should be explicitly set out in the company’s constitutional documents and in any shareholders’ or partners’ agreement. Clearly defining access rights helps minimise the risk of disputes.
(2) Transparent communication
Regularly sharing key information fosters trust and helps prevent conflicts. Transparency also includes keeping shareholders and partners informed about changes in legislation or the company’s strategy.
(3) Investment in technology
Modern information systems ensure secure and efficient access to data. Automating reporting and information-sharing processes allows for faster access to relevant information and improves overall productivity.
Conclusion
Control and access to information are fundamental pillars for the proper functioning of any company. Openness, regular sharing of information, and effective control mechanisms strengthen trust among partners and shareholders – both with each other and in relation to the company. At the same time, they protect the company from potential issues such as misuse of information or internal distrust.
At HAVEL & PARTNERS, we have extensive experience in designing effective control systems and information processes. We can help you create an environment that fosters collaboration and supports the sustainable growth of your company.
