A cross-border transfer of the registered office as stipulated in the Czech Transformation Act has recently experienced a mild but noticeable development. The key limit of the Transformation Act is the fact that it only relates to cross-border transformations with the EU (or EEA) states. Under this Act, no cross-border transformation has been possible to date with countries such as Switzerland, the USA or Russia and will not be possible with Great Britain after its exit from the EU. However, general guidance on the cross-border transfer of the registered office of any legal entity under the current Civil Code might be an interesting solution.
The transfer of the registered office as stipulated in Czech Act no. 125/2008 Coll., on transformations of commercial companies and cooperatives, as amended (the “Transformation Act”) has recently experienced a mild but noticeable development resulting from the case-law of the Court of Justice of the European Union. Application of the Transformation Act is limited as it only relates to cross-border transformations with the states (corporations from the states) of the European Union or the European Economic Area.
No transformations are thus possible with a number of jurisdictions that are economically significant, such as:
This basic limitation of the Transformation Act could be overcome thanks to the changes introduced into Czech law by the Civil Code effective since 1 January 2014 (the “Civil Code”). The Civil Code contains a general provision regulating the cross-border transfer of the registered office of any legal entity that may also be used to transfer the registered office of a legal entity (a commercial corporation) between the Czech Republic and any country outside of the EU (EEA).
An option for the cross-border transfer of the registered office with non-EU countries under the Civil Code
The existence of the guidance stipulated in Section 138 et seq. of the Civil Code seems to provide legal entities from third countries with an opportunity to transfer their registered offices to the Czech Republic (and vice versa) without this opportunity being included in an international treaty as was the case with the previous wording of the Commercial Code.
The provision is general, applicable to all legal entities and as such it relates to all commercial corporations unless a special legal regulation contains a specific provision. The special regulation is the above-mentioned Transformation Act that explicitly provides for transformations of (Czech) commercial corporations but its applicability to cross-border transformations is limited to other EU (EEA) member states only. For legal entities (and namely commercial corporations from an economic point of view) from third countries, there is no provision in any other legal regulation. It thus may be inferred that these legal entities may transfer their registered offices pursuant to the Civil Code.
Are we going to transfer registered offices of companies instead of making cross-border mergers with Great Britain after Brexit?
Companies willing to transfer the centres of their businesses to the EU or vice versa in respect of Brexit should ideally start addressing the situation now. The processes of cross-border mergers and registered office transfers may take several months to complete and effective from Great Britain’s exit from the EU, British companies are likely to lose all legal advantages of EU harmonisation (predominantly, they will lose the option to make cross-border mergers that have been relatively popular today).
If they miss the deadline, the general transfer of the registered office under the Civil Code may become a solution to the legally complicated situation. Application of this provision might not only be limited to transfers of companies between Great Britain and the Czech Republic. Theoretically, the Czech Republic could be a “gateway” or an “interchange station” through which British (but also American, Swiss, Russian, Chinese and other) companies could enter the EU to subsequently place their registered offices to the final country, using the harmonised mechanisms of cross-border mergers or (intra-European) transfers of registered offices.
Considerations with respect to cross-border registered office transfers should include the tax regime that includes several obstacles at the moment
Limits of cross-border transfers of registered offices under the Civil Code
The Civil Code defines several limits for the relocation of registered offices:
The question is what the “intention” should include. As opposed to the Transformation Act, the Civil Code does not provide for the project of registered office transfer, does not require an expert opinion, does not contain any specific rules for accounting documents, etc. The question is whether the incomplete information contained in the Civil Code should be supported by other rules, eg whether the provisions of the Transformation Act should be applied analogically (although the interpretation above does not indicate so).
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