(Czech Supreme Court Resolution No. 29 Cdo 880/2015 of 30 September 2015)

In this case, the Supreme Court dealt with whether a member of a statutory body authorized to undertake legal acts with regard to employees pursuant to the provision of § 164(3) of Act No. 89/2012 Coll., the Civil Code (the “CC”), may be entered in the Commercial Register. This provision stipulates that if a legal entity with a collective statutory body has employees, it shall authorize one statutory body member to undertake legal acts in respect of such employees; otherwise, this power is exercised by the statutory body chair.

Citing this legal provision, the applicant for appellate review petitioned for the Commercial Register entry of a statutory body member authorized to undertake legal acts in respect of employees.

The first instance court rejected the applicant’s petition, as the company statutory body is its Board of Directors and the procedure for acting on behalf of the legal entity is already entered in the Commercial Register. In the opinion of the first instance court, the procedure for an authorized person to act in respect of employees is not a procedure for a statutory body to act on behalf of a legal entity, in which case the requirements for entry in a public register were not met.

The appellate court concurred, adding that authorization pursuant to § 164(3) of the CC may reasonably be expected to reflect a legal entity’s internal organizational regulations; this authorization is an internal matter of the applicant, as is the authorization of members of a collective statutory body to perform certain activities for a legal entity. The appellate court further found that the fact the member of a collective statutory body of a legal entity was authorized pursuant to § 164(3) of the CC was not a fact entered in the Commercial Register pursuant to § 25(1)(k) of Act No. 304/2013 Coll. on public registers of legal entities and natural persons (the “PRA”) as what’s known as an “other important fact” because the applicant had no legal interest in such an entry.

In the appeal proceeding, the applicant argued for the systematic inclusion of the provision of § 164(3) of the CC in the category of “acting on behalf of a legal entity” due, among other reasons, to its grammatical wording. She further asserted the subject provision is a special provision on operating procedure that is stipulated in a foundation legal document or the law.

Nor did the applicant agree with the appellate court’s argument concerning the nature of legal acts in employment relationships, which in her opinion do not only constitute acts performed exclusively within the company, but also mutual relationships between employee and employer, which often must be proved to third parties (e.g. for the purpose of duly executing an employment contract); therefore, she finds the mention of a person authorized to act in respect of employees pursuant to § 164(3) of the CC to be legally material.

The Supreme Court stated the new legislation governing representation of a legal entity uses the terms “represent” and “act” interchangeably, as the CC does not distinguish between a legal entity acting directly and a representative acting on its behalf. Thus, if the procedure for representing the legal entity by members of its statutory body is set out in a foundation legal document entered in a public register, then the members of the legal entity’s statutory body may represent it in this manner.

However, the Supreme Court found that, for certain legal acts, the CC regulates divergent rules governing the manner in which a statutory body represents a legal entity. Among these rules is § 164(3).

The Supreme Court also interpreted the legislators’ intent regarding § 164(3) of the CC as being to enhance the legal certainty of employees or future employees of a legal entity by newly clarifying who is authorized to represent the legal entity in labour matters. According to the Supreme Court, only a statutory body member thus designated is authorized to represent the legal entity in executing, amending or terminating employment contracts, agreements on work performed outside employment or other legal agreements with employees. Still, this shall not prejudice the right of a statutory body to delegate labour matters to other persons (particularly employees) who will thus be authorized based on statutory representation to act in respect of employees in addition to the member authorized pursuant to § 164(3) of the CC.

Based on the foregoing, the Supreme Court found that authorization pursuant to § 164(3) of the CC regulates the procedure for representing a legal entity with a collective statutory body by a member of that statutory body and, as such, must be entered in a public register under § 25(1)(g) of the PRA.

The Supreme Court went further in adding that the document that attests to authorization will generally be the minutes from a meeting of the statutory body or a document containing the authorization signed by all the members of the statutory body. Authorization may also be contained in the foundation legal documents of the company.