Each year, Czech companies must comply with a number of disclosure requirements as part of their corporate governance. Although the scope and timing of each requirement may vary depending on the type, business activity or accounting period of each company, the general rules apply equally. Below is a general overview of the main annual corporate compliance obligations.
Report on relations within the group
The statutory body of each company must draw up a report on relations within three months of the end of the financial year. The report on relations must disclose, among other things, the structure of relations between the company and its affiliated companies, including a description of the methods and means of control and the company’s role within the group. The report should also provide a summary of reciprocal contracts and an overview of actions taken at the instigation (or in the interests) of the controlling person exceeding 10% of the company’s equity value in the most recent financial statements.
The statutory body must also comment on the potential advantages, disadvantages and risks arising from the company’s participation within the group and if any damage has been caused to the company as a result including how it should be compensated.
The report on relations may present information subject to a trade secret in a reasonable degree of generalisation. The report on relations must be filed to the Collection of Deeds (i.e. publicly available files of the Commercial Register).
Financial statements, annual report
The financial statements are prepared as of the last day of the financial year. The statutory body must prepare the financial statements and submit them to the shareholder for review and discussion within six months after the end of the financial year. If a company has a supervisory board, the supervisory board must also examine the financial statements and submit its opinion to the shareholder.
Once the financial statements have been approved by the shareholder, the shareholder must decide on the distribution of dividends / settlement of losses from the previous year and also can decide on the distribution of other financial sources. The resolution approving the financial statements must be filed along with the financial statements with the Collection of Deeds within 30 days after its adoption but no later than 12 months after the end of the financial year irrespective of whether the financial statements have been approved. The financial statements must also be published on the company‘s website if they have one (joint-stock companies are obligated to have a website). According to recent case-law (file no. 27 Cdo 2536/2021), a company’s economic inactivity does not exempt it from the obligation to prepare and publish its financial statements.
If the company is subject to an audit, the financial statements form a part of an annual report, which further contains, among other parts, the auditor’s report not only regarding the financial statements but also the report on relations.
Report on the company’s business activities
Joint-stock companies have additional annual disclosure requirements. Board of directors must prepare a report on the company’s business activities and the state of its assets, which not only evaluates the current state of the company’s assets and business activity, but also provides a prediction of their expected development in the future.
This report usually forms part of the annual report. If the relevant joint-stock company is not subject to an audit (i.e. an annual report is not prepared) the report must be filed with the Collection of Deeds independently.
Apart from the above-mentioned obligations, we recommend that, as part of the annual secretarial check, reviews be conducted of other corporate information disclosed in the public registers, particularly the Commercial Register, the Collection of Deeds and the UBO register, regarding any changes to the composition of the corporate bodies or other structural changes that occurred during the year.
For more information on corporate governance obligations of Czech companies, contact your CMS client partner or local CMS experts: Lukáš Janíček, Magda Ullmann, Lukáš Reichmann, Huyen Vuová.