Be careful with the so called free or “unqualified trade” – according to the Czech Supreme Court, the company’s line of business must be specified in more detail

6. 8. 2021

All companies that have only the unqualified trade as their line of business or activity, i.e. “production, trade and services not listed in Annexes 1 to 3 to the Trade Licensing Act”, are subject to a new decision of the Supreme Court of the Czech Republic of 12 May 2021 – pursuant to this decision, the line of business thus defined does not meet the requirement of definiteness, because it does not clearly specify what exactly the company’s business consists in. The fact is that the category of unqualified trade contains 80 different fields. According to the court, if the line of business is described in this way, it cannot be determined what it means, so the company must eliminate this problem. This decision affects the vast majority of Czech companies.

If the specification “production, trade and services not listed in Annexes 1 to 3 to the Trade Licensing Act” is stated in the Articles of Association and registered in the Commercial Register as the line of business, it is contrary to the Public Registers Act and it must be rectified in accordance with this Act. Business corporations must therefore amend their Memorandum/Articles of Association by stating the specific line of business (either using the field codes, such as No. 47 – Intermediation of Trade and Services or No. 48 – Wholesale and Retail under the Trade Licensing Act, or otherwise, in their own words). A notarial deed is therefore required for this amendment.

If a company does not ensure the amendment, the competent register court may request them to change the line of business within a specified period of time. After the expiration of this period, the business corporation may be imposed a disciplinary fine of up to CZK 100,000, and in extreme cases, the business corporation may be dissolved with liquidation.

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