Contact between related parties in the new design


The good news spread among businessman during the preparation for the new legal order – the bogey in the form of strict conditions for contracts between related parties (§ 196a of the Commercial Code) will, from January 2014, become significantly slimmer.

It will only haunt the joint-stock companies (limited liability companies will be out of reach) and will focus only on the purchase of assets by the company. It will no longer be concerned with loans, donations, the sale of company assets or collateral obligations. Of all property purchases, only purchases of the property from the founders or shareholders will be in their interest. Although appraisal experts will still be called into this game, it will be without their formal appointment by the court, and the purchase price will no longer have to correspond to the amount determined by an appraisal expert. It may even be lower and the best of all prices – “the mandate” of this “bogey” is limited to two years after the establishment of a company. Companies and statutory bodies can therefore stop worrying. But is it really so? Are there any other § 196a of the Commercial Code hiding in the new legislation?

YES, there are. We can find one of them in the new Act on Corporations, specifically in the rules on conflict of interest. And what do we find in the new regulation on conflicts of interest? It will apply to all firms and cooperatives (corporations). It includes all contracts that will be concluded between corporations and related entities at any time during the life of the corporation, which for these purposes means: board members, relatives of members of the institutions, persons affected (controlled) by board members and company proxies. And what, in connection with the closing of monitored contracts, does this new “bogey” require from the related parties?

To inform the authority of which they are a member (the regulatory authority (if established), the highest respective authority (unless the supervisory authority is missing, or if you directly contact the person with the highest priority)) about every intention to conclude such contract; to disclose the terms of such proposed agreement when fulfilling the information requirements; and to respect any prohibition intended to conclude a contract, if such a prohibition is issued by the highest authority.

And what if the mandatory persons do not obey? The conclusion of the contract despite the interdiction of the competent authority may indicate the invalidity of such a contract.

And most importantly – violation of the conditions described will be the breach of care and diligence with all the associated consequences. What are they? Follow future issues of the newsletter to find out more.


Author: Jana Kopáčková

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