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Amendment to Commercial Code changes rules on general meetings - International Law Office

International Law Office

Company & Commercial - Czech Republic

Amendment to Commercial Code changes rules on general meetings

February 01 2010

Introduction
Decisive Day
Notice of Convening a General Meeting
Participation and Voting Through Electronic Means
Representation Under a Power of Attorney
Shareholders' Questions and Proposals
Exercise of Voting Rights


Introduction


On December 1 2009 the new amendment to the Commercial Code (Act 513/1991 Coll) and the Capital Markets Act (256/2004 Coll) came into effect. The main purposes of the amendment are to incorporate the EU Shareholder Rights Directive (2007/36/EC) into Czech law and to facilitate the exercise of shareholders' rights in Czech companies in general. The amendment also changes important rules relating to non-listed joint stock companies.

While the amendment introduces some changes that apply only to Czech listed companies, this update focuses on the changes that apply to both Czech listed and non-listed companies.

The amendment could also speed up the process of convening general meetings of Czech companies. It gives companies the option to hold virtual general meetings, which in the long term could save costs associated with holding a general meeting. Given the potentially high initial IT costs associated with holding the first virtual general meeting, it remains to be seen whether shareholders and companies will take advantage of this option.

Decisive Day

The amendment stipulates that the concept of a 'decisive day' will also apply to joint stock companies that issue certificated shares. Previously, this concept applied only to joint stock companies that issue uncertificated shares. In addition, the invitation to a general meeting will contain an explanation of the meaning of the term 'decisive day'. Only shareholders that can prove that they were a shareholder on the decisive day may exercise their shareholders' rights at a general meeting.

Notice of Convening a General Meeting

Joint stock companies are no longer required to publish notice of their general meetings in the press. The amendment stipulates that non-listed joint stock companies may select any appropriate means of publishing the notice (including by electronic means). The obligation to publish the notice in the Commercial Gazette remains unaffected by the amendment. The timeframe for convening an extraordinary general meeting has been extended from 15 to 21 days.

Participation and Voting Through Electronic Means

The amendment allows non-listed joint stock companies to arrange for the electronic conveyance of information relating to general meetings in their articles of association (eg, publishing the notice).(1)

The amendment also allows participation and voting in general meetings of a joint stock company through electronic means (eg, remote video and real-time sound transmissions of a general meeting and real-time two-way communication between the general meeting and shareholders), and remote (correspondence) voting (ie, participation and voting in general meetings without the shareholders being present, upon verification of their identites).

Representation Under a Power of Attorney

A shareholder may be represented at a general meeting based on a power of attorney. The amendment requires that the power of attorney explicitly stipulate whether the authorization is granted in relation to only one particular general meeting or several general meetings held within a particular timeframe.

The directors and supervisory board members of a company are no longer prohibited from representing shareholders at a general meeting under a power of attorney. However, such persons may represent shareholders at the general meeting only if they disclose all facts that could be relevant for assessing their possible conflict of interest with the shareholder and such information is included in the notice.

Shareholders' Questions and Proposals

The amendment allows shareholders of a joint stock company to file proposals relating to the items to be included on the agenda of a general meeting even before such items are officially included on the agenda (ie, before the notice is published).

Such proposals should be published simultaneously with the notice. In addition, the proposals must be delivered to the company in advance.

The amendment allows joint stock companies to answer shareholders' questions in writing by publishing the answers on the company's website at least one day before the general meeting. The written answers must also be available at the general meeting.

Exercise of Voting Rights

The amendment allows a shareholder (or proxy) not to exercise all voting rights connected to its shares in the same way. Before the amendment came into force, it was unclear whether this practice was allowed under Czech law.

For further information on this topic please contact Jitka Logesová or Petr Mestanek at Kinstellar by telephone (+420 221 622 111), fax (+420 221 622 199) or email (jitka.logesova@kinstellar.com or petr.mestanek@kinstellar.com).

Endnotes

(1) Czech listed companies are required to publish certain documents relating to general meetings on their websites.


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