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  • Defining the scope of business / changes to the Commercial Register

    06. 09. 2021

    Please pay attention to the information below. You will find out whether you also need to make changes to your business entry in the Commercial Register.

    If your Articles of Incorporation, Memorandum of Association or Articles of Association define the purpose and scope of your business as "manufacturing, trade and services not listed in Annexes 1 to 3 of the Trade Licensing Act" you must, according to the decision of the Supreme Court, change this designation and indicate exactly what activities your company is engaged in. In particular, companies that have this purpose and scope of business as the only one should make corrections promptly.

    Until the Supreme Court judgment No. 27 Cdo 3549/2020 of 12 May 2021, it was legitimate to define the purpose and scope of business as "manufacturing, trade and services not listed in Annexes 1 to 3 of the Trade Licensing Act". This definition currently covers 81 types of unqualified trade. However, the Supreme Court held that the purpose and scope of business so defined in the Memorandum or Articles of Association does not meet the requirement of certainty, since it is unclear what the purpose of business of the company really is, nor can it be construed from it. Such a definition is too general and therefore invalid. The court administering the Commercial Register may require the company to change its purpose and scope of business and, if the company fails to do so, may even order its winding up. The judgment does not pertain to the definitions of trades in the Trade Register.

    Supreme Court judgment No. 27 Cdo 3549/2020

    [1] The provision of the Articles of Association, defining the company's business as manufacturing, trade and services not listed in Annexes 1 to 3 of the Trade Licensing Act, does not meet the requirement of certainty, since it is not clear from it what the company's business really is, nor can it be construed from it. Therefore, such a provisions is superficial due to the vagueness of its content (Section 553 of the Civil Code) and it is not to be taken into account (Section 554 of the Civil Code) [in the legal regime in force until 31 December 2013, it was an absolutely invalid provision pursuant to Section 37(1) of Act No. 40/1964 Coll., Civil Code]. Therefore, the purpose and scope of business in this form of words cannot be entered in the Commercial Register.

    [2] No reasonable person in the position of a partner or member of a business corporation could infer from such a definition that it was the intent of the partners to engage in all of the expressly listed activities identified in the Annex, and thus the intention is that the purpose and scope of business will be an undefined range of activities.

    [3] If manufacturing, trade and services not listed in Annexes 1 to 3 of the Trade Licensing Act is mentioned in the Memorandum of Association, and possibly entered in the Commercial Register as the purpose of business, then such an entry contravenes Section 25(1)(b) of the Act on Public Registries and must be remedied in accordance with Section 9(1) of the same Act.

    We stand prepared to assist you in defining the purpose and scope of your business properly and registering it in the Commercial Register.

    Felix a spol.

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