Exceptions from limited liability of shareholders
In general, shareholders of Czech limited liability companies and joint-stock companies are not liable for the debts of the company. However, the new Czech law on business corporations (Act No. 90/2012 Coll., “BCA”) effective from 1st January 2014 contains a few exceptions.
Liability of Influential / Controlling Entities
An influential entity is defined in Section 71 Par. 1 BCA as “Anyone who uses his or her influence in a business corporation to influence, in a decisive and significant manner, the behavior of a business corporation”, e.g. a shadow director. A controlling entity is specified in Section 74 et sqq. BCA, in most cases a majority shareholders (in some cases even 30% are sufficient).
The influential / controlling entity shall be liable towards the creditors of the influenced entity for the payment of the debts, which cannot be partially or fully paid to them by the influenced entity as a result of the influence, if the influential / controlling entity cannot prove that he or she could have in good faith and reasonably assumed, in his or her influencing actions, to be acting on an informed basis and in a justifiable interest of the influenced entity. The influential / controlling entity may be released from such liability under the following conditions (Section 72 BCA):
- the dominant entity proves that debt / damage occurred in his / her interest or in the interest of another entity with whom it constitutes a corporate group (concern), and was or will be settled within the concern; and
- the dependent entity does not go bankrupt as a result of acts by the dominant entity towards the dependent entity.
At the same time this liability exemption is applicable only if the existence of the concern is publicly announced on the web page of the company (Section 79 Par. 3 in connection with Section 7 BCA).
Application of Section 68 BCA
According to Section 68 BCA the court may decide (upon a petition filed by the insolvency administrator or the company’s creditor) that a member or a former member of the business corporation’s statutory body is liable for the fulfillment of all its obligations, if he knew or should and could have known that the business corporation was facing an imminent threat of bankruptcy and, in breach of the duty of due care, failed to take all necessary and reasonably foreseeable steps to prevent the bankruptcy. This should also apply mutatis mutandis to influential / controlling entities.