New tools for the recovery of arrears
Starting this year, the tax authorities are not limited by local jurisdiction when recovering tax arrears. At the same time, from 1 July 2025, the customs administration can use a new power in the event of an u…
Legal News [January 2025]: When can a membership contribution agreement be considered usurious?
Last month, the Supreme Court issued three noteworthy judgments. One decision clarified that a call for the performance of an obligation under Section 204(1) of the Business Corporations Act, may, under certain conditions, be made by a shareholder who has not been expelled, if subsequently approved by the company. The Court also emphasised the importance of formalising derivative actions. Another judgment addressed whether a membership contribution agreement can be considered usurious, focusing on the comparison between the value of the cooperative share and the subject of the contribution, particularly in cases of gross disproportion in performance. In a third case concerning the felling of trees, the Court ruled that the damage extended beyond the value of the harvested timber to include the reduction in the usual arm’s length value of the land, ultimately sending the case back for further consideration.
- In its judgment, file no. 27 Cdo 3786/2023, the Supreme Court addressed whether a call for the performance of an obligation under Section 204(1) of the Business Corporations Act (BCA) could be made by a shareholder acting either under a statutory “authorisation” as referred to in Section 157(2)(d) of the BCA or with authorisation from the company where another shareholder was to be expelled. The dispute centred on the expulsion of one of the company’s two shareholders, where the call under Section 204(1) of the BCA was initiated not by the company but by one of its shareholders. A notable aspect of the case was that two of the company’s three executive directors were also partners of the other (non-expelled) shareholder. These executive directors explicitly stated they would not initiate legal proceedings on behalf of the plaintiff. The Supreme Court reaffirmed its established position that derivative actions are highly formalised mechanisms, intended to be employed only as a last resort (ultima ratio).
Additionally, the Court criticised the Appellate Court for overlooking the consequences of conduct without representative authorisation (affecting the represented person) as regulated by law when considering the absence of the call as anticipated by Section 204(1) of the BCA. While the Appellate Court had concluded that the non-expelled shareholder lacked the authority to represent the company in issuing the call under Section 204(1) of the BCA, the Supreme Court emphasised the need to assess whether the company subsequently approved the shareholder’s actions. This approval could be inferred from the convening of a general meeting, which included on its agenda a resolution to expel a shareholder based on the grounds outlined in the non-expelled shareholder’s call, in accordance with Section 440 of Act No. 89/2012 Coll., the Civil Code. The Supreme Court also noted that, given the specific circumstances of the case, the non-expelled shareholder was not required to comply strictly with the procedural requirements of Section 158 of the BCA (which was also rightly concluded by the Appellate Court). Specifically, there was no need to notify the third executive director in writing of their intention, as this director had a conflict of interest that precluded their ability to act impartially and would not have initiated the expulsion proceedings. - In its judgment file no. 27 Cdo 3807/2023, the Supreme Court addressed the issue of what consideration a member of a cooperative receives for providing the subject of their contribution to the cooperative’s registered capital. The case centred on determining the ownership of real estate based on the relative invalidity of an agreement concerning an additional membership contribution. This agreement was found to meet both criteria for usury under Section 1796 of the Civil Code, specifically focusing on the gross disproportion of performance (the objective characteristic of usury). To determine whether such an agreement qualifies as a usurious contract, particularly whether the objective element of usury is present, it is essential to establish the value of the cooperative share acquired by the housing cooperative member in exchange for assuming and fulfilling the obligation to make the additional membership contribution. This value must then be compared to the value of the subject of the additional contribution, considering any defects affecting it. The crucial factor for the comparison is the time of the contract’s conclusion. The value of both the cooperative share and the subject of the additional contribution is determined based on their arm’s length price under Section 492(1) of the Civil Code. This valuation depends not only on factors such as the market situation, supply, and demand but also on the nature and quality of the rights and obligations attached to the cooperative share.
- In its judgment file no. 25 Cdo 1673/2024, the Supreme Court addressed the issue of determining the amount of compensation for damage caused by the felling of trees. The dispute involved the plaintiffs’ claim for damages for eight birch trees that the defendant, the owner of the neighbouring property, had felled without their consent. The defendant also caused damage to the plaintiffs’ wire fence during the felling. The Appellate Court awarded the plaintiffs compensation of CZK 5,836.80 for the timber and CZK 5,171 for the damaged fence. However, it deemed the costs incurred to determine the extent of the damage as being costs of the legal proceedings incurred efficiently. The Supreme Court criticised the Appellate Court for narrowly defining the actual damage caused by the unlawful felling as merely the value of the wood that the defendant retained. According to the Supreme Court, the actual damage from the felling of trees (unless the trees form part of a forestry stand governed by special legislation, such as Act No. 289/1995 Coll., on Forests) should be assessed as the difference between the usual arm’s length value of the property (land) including the trees at the time the damage occurred and the value of the property after their removal. For this reason, the Supreme Court returned the case to the Court of First Instance for further proceedings.
