On 4th September, 2015, a group of Chamber of Deputies MPs submitted Parliamentary Bulletin No. 592, a bill amending Act No. 90/2012 Coll. on business corporations and cooperatives (the Business Corporations Act or “BCA”).

The bill addresses the election of members of a joint stock company’s Supervisory Board by its employees. The aim of the draft is de facto to renew the legal position that  existed prior to 1st January 2014, i.e. before the BCA entered into force, in which joint stock companies with more than 50 employees were legally obliged to enable their employees to elect one third of Supervisory Board members.

The Articles of Association may stipulate a higher number of employee-elected Supervisory Board members, though the total may not exceed the number of members elected by the General Meeting. The bill also provides for the possibility of having employee-elected Supervisory Board members in companies with fewer than 50 employees.

Only those employees who have a legal employment relationship with a company will have  the right, either directly or (where  the election rules so allow) via voting employees, to elect Supervisory Board members. Only natural persons who have an employment relationship with the company at the time of the election or a representative or member of a representative body of the employees may be elected to the Supervisory Board.

The bill provides that Supervisory Board members elected by employees may be recalled by the employees in the same manner as their election.

If employee-elected Supervisory Board members have a difference of opinion with the other Supervisory Board members, this shall be reported to the General Meeting together with the conclusions of the other Supervisory Board members. The bill also introduces the duty to include the differing opinion of the employee-elected Supervisory Board members in the minutes of the respective Supervisory Board meeting.

Given that many joint stock companies removed the election of Supervisory Board members from their Articles of Association after the BCA entered into force and thereby ceased to elect such members, if the bill passes we can expect joint stock companies will incur costs associated with amending their Articles and changing their election procedures.

Particular attention should be given to the proposed temporary provision that establishes the obligation for affected joint stock companies to bring the membership composition of their Supervisory Boards into compliance with the law within 1 year of its effective date. This, coupled with the fact that the law enters into force on the 15th day following its promulgation (the absence of a longer period between the date of the law’s promulgation and the date it enters into effect is warranted by the fact that it “is only restoring commonly recognised legislation”), would lead in the event of the law’s approval to a pressing need either to i) increase the number of

The explanatory memorandum states that employees should also participate in the election of members of a Board of Directors of a joint stock company with a single-tier system, though the BCA provisions regulating the Administrative Board have not been expressly amended. In our view, arguing by invoking the provision of § 456(2) of the BCA is not the most welcome of approaches here. Indeed, were this provision to be applied, an Administrative Board would be required to have at least three members in the manner of a Supervisory Board.Supervisory Board members, or  ii) recall some members before their tenure has ended and replace them with members elected by the employees (possibly further entailing an obligation to provide recalled Supervisory Board members with performance, which will have been agreed for such a case in the respective service contract).