Supervisory and Control Activities of the Office for Personal Data Protection for the second half of 2020

We would like to inform you that the Office for Personal Data Protection (“Office”) has published an overview of its supervisory and control activities for the second half of 2020 on its websites. Below, please find a summary of the Office’s most important conclusions and statements therefrom. All records of the inspections performed for the above time-period may be found on the Office’s websites here: Kontrolní činnost v oblasti ochrany osobních údajů – 2. pololetí: Kontroly za rok 2020: Úřad pro ochranu osobních údajů (uoou.cz).

Verification of Identity and Making Copies of Identity Cards

As part of the inspection carried out (UOOU-02511/19), the Office stated that for the processing of personal data for the purposes of obtaining a copy of the data subject’s identity card and verifying the identity of the data subject, the consent of the data subject pursuant to Article 6 (1) (a) of the GDPR is required, which must comply with the formal and material requirements set in Articles 4 (11) and 7 of the GDPR (free and informed consent, which the controller is able to provide as evidence, etc.). The Office also reiterated that the personal data processed may be stored only for the necessary time-period and only to the extent necessary in relation to the purpose of the processing of such data.

Processing of Personal Data in Direct Marketing

As part of the inspections carried out (UOOU-00660/20 and UOOU-03074/20), the Office stated that for the processing of personal data in direct marketing, the conclusion of an appropriate agreement between the controller and the processor of such personal data is required, whereas such agreement may not be used to process personal data for another controller. The Office also reiterated that such processing of personal data cannot be based solely on Article 6 (1) (f) of the GDPR (i.e. processing is necessary for the purposes of the legitimate interests of the relevant controller or a third party) as, in the opinion of the Office, it is not a legitimate title to the processing of personal data in direct marketing.

Biometrics in Document Signing

As part of the inspection carried out (UOOU-09654/18), the Office stated that the collection and storage of dynamic biometric signatures in connection with the conclusion of written agreements constitutes a breach of Article 5 (1) (c) of the GDPR (i.e. the violation of the principle of minimizing the processing of personal data). Regarding this, the Office pointed out the fact that neither the Civil Code nor any special legal regulation requires the dynamic biometric signature for the validity of legal acts in writing. The collection and storage of such signatures are thus not necessary for the purposes of concluding and storing the contractual documentation as a simple image of the data subject’s signature on the dematerialized contractual documentation is sufficient.

Consent to the Processing of Personal Data in the State of an Emergency Related to the Occurrence of the Coronavirus

As part of the inspection carried out (UOOU-01419/20), the Office stated that the legal title for the processing of personal data defined in Article 6 (1) (d) of the GDPR (i.e. the processing is necessary for the protection of the vital interests of the data subject or another natural person) cannot be automatically accepted as a legitimate legal title for such processing of personal data simply because a state of emergency has been declared in connection with the occurrence of the Coronavirus, respectively, that such legal title cannot automatically replace the data subject’s consent to the processing of personal data pursuant to Article 6(1) (a) of the GDPR. Within such state of emergency, it is thus still necessary to comply with all provisions of the GDPR, in particular, the information obligations of the personal data controller pursuant to Articles 13 and 14 of the GDPR.

Keeping Records of Access to Personal Data

As part of the inspection carried out (UOOU-02100/20), the Office stated that keeping records of the controller on access to personal data of data subjects is not stated in the GDPR as an obligation of the controller, but such conduct is considered standard part of the protection of personal data. The Office further pointed out that the choice of the controller not to keep such records leads to greater responsibility for the measures taken to secure personal data. Therefore, in the event of unauthorized access to or misuse of personal data, when the controller is not able to prove who, when and for what purpose accessed the personal data, the controller is fully liable for any unlawful consequences.

Processing of Personal Data on Websites in the Form of Flipping Data from Public Registers

As part of the inspection carried out (UOOU-00196/20), the Office stated that simple flipping personal data from publicly accessible registers (e.g. ARES, commercial register, etc.) to other websites constitutes a breach of the relevant provisions of the GDPR, as the disclosing entity does not have any legal title to such conduct (the legal title referred to in Article 6 (1) (f) of the GDPR cannot be applied in such situation). The Office also pointed out that in the case of simple flipping of personal data, the controller insufficiently fulfils its information obligation towards data subjects (mere publication of information on the website cannot be considered as fulfilment of the information obligation).

Publication of Photographs of Employees on Employer’s Websites

As part of the inspection carried out (UOOU-03225/19), the Office stated that the legal title for the publication of a photograph of an employee, in general, may also be the legitimate interest of the controller as defined in Article 6 (1) (f) the GDPR, but only if the controller actually demonstrated a legitimate interest in the processing of such personal data which would override the interests or fundamental rights and freedoms of the data subject. Therefore, if the controller publishing the photographs of the employees does not duly prove another legal title to such processing of personal data, such activity may take place only with the proper consent of the data subject to such processing.

Use of Cookies

As part of the inspection carried out (UOOU-00374/20), the Office stated that the website administrator is obliged to provide users/visitors of the websites with information on the use of cookies in an easily accessible way so that the users/visitors do not need to actively search for such information.

As part of another inspection carried out (UOOU-00381/20), the Office pointed out that in connection with the processing of cookies, it is necessary to comply with all principles of personal data processing arising from national and European legislation, especially the principle of personal data processing only to the extent necessary and only for the necessary time. If circumstances allow, the controller should also proceed to anonymize or pseudonymize the processed data to the maximum extent possible.

As part of another inspection carried out (UOOU-00350/20), the Office drew attention to the fact that the Czech Republic had insufficiently transposed the amended EU directives, as after changing the regime from OPT-OUT to OPT-IN, the Czech legislator continued to work with the OPT-OUT regime, i.e. with the regime in which the personal data controller has the possibility to process the personal data of data subjects automatically (subject to the condition of proper information) and only implement the subsequently expressed wishes of data subjects not to process their personal data. The Office further stated and reaffirmed that a general consent to the processing of cookies granted through the settings of an internet browser can be considered as consent meeting the defining features pursuant to Article 4 (11) of the GDPR.

In case of any question or comment, please do not hesitate to contact us.

Amendment to the Rules on the Registration of Beneficial Owners of Legal Entities

We would like to inform you that following the adoption of the Directive (EU) of the European Parliament and of the Council 2018/843 of 30 May 2018 (hereinafter referred to as “Directive AML V”), the existing Czech legislation in the field of registration of beneficial owners of legal entities has been amended.

In this regard, we would like to remind you that Directive AML V has amended the original EU Directive concerning the AML (i.e. the Anti-money laundering), namely Directive (EU) 2015/849 of the European Parliament and of the Council of 20 May 2015 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing (hereinafter referred to as “Directive AML”). The reason for such amendment was the fact that the original legislation in this area contained several shortcomings (e.g. the effective sanctions for breach of the obligation to notify a beneficial owner were missing), which caused the negligence in fulfilment of the obligations related to keeping records of beneficial owners. In addition to the above-mentioned sanction obligations, Directive AML V  introduces another major innovation for Member States that are obliged to implement the Directive AML V in their legal systems, namely the obligation to ensure the transparency of data entered in the register of beneficial owners in the form of public access to certain recorded data.

In connection with the implementation of Directive AMLV into the Czech law, Act on the Registration of Beneficial Owners (hereinafter referred to as the “Act”) was approved, which comprehensively regulate the area of registration of beneficial owners. The Act has already been submitted to the President of the Czech Republic for his signature. 

Definition of a beneficial owner

The Act contains the comprehensive definition of a beneficial owner, according to which the beneficial owner is “any person who is the final beneficiary or a person with ultimate influence”. For the purposes of the Bill, the final beneficiary means “any person who can directly or indirectly obtain more than 25% of the total property benefit generated during activity or liquidation of a legal entity, and does not pass on this benefit”, respectively, “any person who directly or indirectly has the right to a share in the profits, other own resources or liquidation balance of a business corporation of more than 25% and does not pass on that share”. According to the Bill, the person with ultimate influence is “a natural person who is a controlling person according to the law regulating the legal relations of business corporations”.

Based on the above-mentioned Bill, the relevant legal entity will be obliged to register all persons who would meet the above-mentioned defining features of the beneficial owner. The Bill also provides an exhaustive list of legal entities that do not have a real owner (e.g. public corporations, associations of unit owners, etc.).

Transparency of records

In connection with the intention of greater transparency of the register of beneficial owners, according to the Act, the Ministry of Justice of the Czech Republic will be obliged to set up a public register of beneficial owners on its website, from which the public will be allowed to obtain a so-called partial extract of valid data on the beneficial owner in the scope of: the name of the beneficial owner; the state of residence of the beneficial owner; year and month of birth of the beneficial owner; the nationality of the beneficial owner; the indication of the nature of the position of the beneficial owner; the date from which the natural person is the beneficial owner; the day until which the natural person was the beneficial owner. The partial extract of valid data on the beneficial owner may also include other data for the publication of which the beneficial owner has given his consent. However, in the cases set out in the Bill, the beneficial owner will be allowed to request non-disclosure of such data (e.g. if the beneficial owner is a person who has not acquired full legal capacity or disclosure would entail a disproportionate risk for the beneficial owner).

According to the Act, registration in the register of beneficial owners will take place on the basis of an electronic proposal for registration in the register of beneficial owners. However, the Act states that in cases where the real owner will be apparent from the entry in the Commercial Register, the relevant data from the Commercial Register will be automatically transferred to the register of beneficial owners (so-called automatic transcript). Based on the just mentioned, e.g. in the case of a limited liability company, a member keeping a share of more than 25 % or the actual owner of a legal entity that is a member keeping a share of more than 25 % will be automatically entered in the register of beneficial owners.

However, the mechanism of the automatic transcript does not release the registrant (a legal entity with the beneficial owner) from the obligation to register other beneficial owners, and in the event that another person meets the definition of the beneficial owner, the registrant will be obliged to submit a relevant proposal for registration of such person. For the sake of completeness, we only add that the automatic transcript takes place without the submission of any proposal by the registrant.

Sanctions in connection with non-fulfilment of registration obligations 

The proposed sanctions connected with non-fulfilment of the above-mentioned registration obligation of the registrant arising from the Bill are not only financial penalties (i.e. fine up to CZK 500,000, which the competent administrative body (a Municipal Office of the Municipality with Extended Powers) may impose on the beneficial owner, too, if such person does not cooperate in registering records of beneficial owners), but also aim to (at least partially) prevent the real functioning of the legal entity that will not fulfil its registration obligations, for example in the form of (i) a restriction of the payment of a share in the profit for as long as the beneficial owner is not registered (i.e. in the form of a prohibition of paying a share in the profit of a legal entity to the beneficial owner or other legal persons of which such natural person is also the beneficial owner); or (ii) a restriction of the voting right (i.e. in the form of a prohibition of exercising the voting right of the unregistered beneficial owner, or another person acting on the instructions of such beneficial owner, in the decision-making of the highest body of the relevant legal entity).

News on Registration of Beneficial Owners of Legal Entities

We would like to inform you that following the adoption of the Directive (EU) of the European Parliament and of the Council 2018/843 of 30 May 2018 (hereinafter referred to as “Directive AML V”), the Czech legislator has proceeded to the amendment of the existing Czech legislation in the field of registration of beneficial owners of legal entities.

In this regard, we would like to remind you that Directive AML V has amended the original EU Directive concerning the AML (i.e. the Anti-money laundering), namely Directive (EU) 2015/849 of the European Parliament and of the Council of 20 May 2015 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing (hereinafter referred to as “Directive AML”). The reason for such amendment was the fact that the original legislation in this area contained several shortcomings (e.g. the absence of regulation of sanctions for breach of the obligation to notify a beneficial owner), which caused the negligence in fulfilment of the obligations related to keeping records of beneficial owners. In addition to the above-mentioned sanction obligations, Directive AML V  introduces another major innovation for Member States that are obliged to implement the Directive AML V in their legal systems, namely the obligation to ensure the transparency of data entered in the register of beneficial owners in the form of public access to certain recorded data.

In connection with the implementation of Directive AMLV into the Czech law, a Bill on the Registration of Beneficial Owners (hereinafter referred to as the “Bill”) was submitted, which would constitute a comprehensive legal regulation regulating the area of registration of beneficial owners, thereby eliminating the current fragmentation of regulation of this legal institute. This Bill is currently being discussed by the Chamber of Deputies of the Parliament of the Czech Republic (Chamber of Deputies Press No. 886).

During the implementation of Directive AML V, Act No. 253/2008 Coll., On Certain Measures against the Legalization of Proceeds from Crime and Terrorist Financing, as well as other related acts (e.g. the Act on Gambling, Trade Licensing Act, the Act on Auditors, etc.) have been amended. The amendments of individual acts will become effective gradually, in the course of year 2021, respectively, on the date of the effectiveness of the Bill on the Registration of Beneficial Owners.

Definition of a beneficial owner

The Bill on the Registration of Beneficial Owners contains the proposed definition of a beneficial owner, according to which the beneficial owner is “any person who is the final beneficiary or a person with ultimate influence”. For the purposes of the Bill, the final beneficiary means “any person who can directly or indirectly obtain more than 25% of the total property benefit generated during activity or liquidation of a legal entity, and does not pass on this benefit”, respectively, “any person who directly or indirectly has the right to a share in the profits, other own resources or liquidation balance of a business corporation of more than 25% and does not pass on that share”. According to the Bill, the person with ultimate influence is “a natural person who is a controlling person according to the law regulating the legal relations of business corporations”.

Based on the above-mentioned Bill, the relevant legal entity will be obliged to register all persons who would meet the above-mentioned defining features of the beneficial owner. The Bill also provides an exhaustive list of legal entities that do not have a real owner (e.g. public corporations, associations of unit owners, etc.).

Transparency of records

In connection with the intention of greater transparency of the register of beneficial owners, according to the Bill, the Ministry of Justice of the Czech Republic will be obliged to set up a public register of beneficial owners on its website, from which the public will be allowed to obtain a so-called partial extract of valid data on the beneficial owner in the scope of: the name of the beneficial owner; the state of residence of the beneficial owner; year and month of birth of the beneficial owner; the nationality of the beneficial owner; the indication of the nature of the position of the beneficial owner; the date from which the natural person is the beneficial owner; the day until which the natural person was the beneficial owner. The partial extract of valid data on the beneficial owner may also include other data for the publication of which the beneficial owner has given his consent. However, in the cases set out in the Bill, the beneficial owner will be allowed to request non-disclosure of such data (e.g. if the beneficial owner is a person who has not acquired full legal capacity or disclosure would entail a disproportionate risk for the beneficial owner).

According to the Bill, registration in the register of beneficial owners will take place on the basis of an electronic proposal for registration in the register of beneficial owners. However, the Bill states that in cases where the real owner will be apparent from the entry in the Commercial Register, the relevant data from the Commercial Register will be automatically transferred to the register of beneficial owners (so-called automatic transcript). Based on the just mentioned, e.g. in the case of a limited liability company, a member keeping a share of more than 25 % or the actual owner of a legal entity that is a member keeping a share of more than 25 % will be automatically entered in the register of beneficial owners.

However, the mechanism of automatic transcript does not release the registrant (legal entity with the beneficial owner) from the obligation to register other beneficial owners, and in the event that another person meets the definition of beneficial owner, the registrant will be obliged to submit a relevant proposal for registration of such person. For the sake of completeness, we only add that the automatic transcript takes place without the submission of any proposal by the registrant.

Sanctions in connection with non-fulfilment of registration obligations 

The proposed sanctions connected with non-fulfilment of the above-mentioned registration obligation of the registrant arising from the Bill are not only financial penalties (i.e. fine up to CZK 500,000, which the competent administrative body may impose on the beneficial owner, too, if such person does not cooperate in registering records of beneficial owners), but also aim to (at least partially) prevent the real functioning of the legal entity that will not fulfil its registration obligations, for example in the form of (i) a restriction of the payment of a share in the profit for as long as the beneficial owner is not registered (i.e. in the form of a prohibition of paying a share in the profit of a legal entity to the beneficial owner or other legal persons of which such natural person is also the beneficial owner); or (ii) a restriction of the voting right (i.e. in the form of a prohibition of exercising the voting right of the unregistered beneficial owner, or another person acting on the instructions of such beneficial owner, in the decision-making of the highest body of the relevant legal entity).

Finally, we would like to point out that due to the ongoing legislative process, it is possible that the text of the Bill may change and the information above may not correspond to the final wording of the bill approved by the Parliament and published in the Collection of Laws.

New rules on meal vouchers for employees

We would like to inform you that on Thursday 19 November 2020, the Chamber of Deputies approved the so-called tax package (a law, which amending certain laws in the area of tax and other laws), which should, if the legislative process will be successfully completed, come into force on 1 January 2021. Part of this tax package is the adjustment of the so-called meal voucher tax regime, which aimto increase the number of people using a tax-advantaged subsidy for employee meals, reduce the administration related to contributing to employees‘ meals, and reduce employers tax costs connected to such support (especially costs and fees associated with meal vouchers).

Meal voucher flat rate complements the existing options of tax-advantage benefits provided by the employer in connection with the diet of employees. Newly, employers will be able to provide to employees, besides the company meals or meal vouchers, also subsidy to diet directly and in the form of cash. In addition, such subsidy will be exempt from all taxes on the part of the employee (only up to 70% of the upper limit of the meal voucher that can be paid to employees who are remunerated on a business trip lasting 5 to 12 hours).

According to the current rules, the employer can claim up to 55% of the price of the food or meal voucher provided per shift as a tax-deductible expense. The remaining 45% of the price is paid either by the employee himself or the entire amount is paid by the employer (Whereas the mentioned 45% of the price can no longer be claimed by the employer as a tax-deductible expense). This tax-advantaged remains at meals voucher flat rate – however, the employer will now be able to pay off this amount directly to his employee in form of cash.

Similarly, as in meal vouchers, the meal vouchers flat rate has a maximum amount that the employer can claim as a tax-deductible expense. Such limit is 70% of the upper limit of the specified diet provided in connection with a business trip of employee remunerated with a salary, which lasts 5 to 12 hours (the amount of the diet is every year set up by the Ministry of Labour and Social Affairs in the relevant decree). Therefore, if the employer decided to pay off the maximum possible amount of the subsidy to diet, at a situation where there is a 22 working days per month, the maximum amount of the allowance that could be claimed as a tax-deductible expense would be CZK 1,584 per month.

The advantage of the meal voucher flat rate is also the fact that the employee will not have to prove to the employer that the granted subsidy spent on lunches. Therefore, the employer will not arise the costs related to the obligation to control the use of the provided subsidy.

More information about the meal voucher flat rate you will also find in the statement of the Ministry of Finance of the Czech Republic: https://www.mfcr.cz/cs/aktualne/tiskove-zpravy/2020/prehledne-co-prinasi-stravenkovy-pausal-39391.

News in judicial decisions on reimbursement of medicinal products

The Supreme Administrative Court of the Czech Republic (the “SAC”) addressed the issue of reimbursement of medical products in one of its recent decisions. In his decision, the SAC assessed the decision of the State Institute for Drug Control (the “SIDC”) of 5 September 2013, case SUKLS263940/2012 and came to several conclusions which are concerning the following areas: (i) review of the agreement on the agreed highest producers´ price by administrative authorities; and (ii) determination of the basic reimbursement of products during the vesting period. Below you can see a more detailed analysis of the assessed questions.

Review of the agreement on the agreed highest producers’ price by administrative authorities

In this matter, the SAC referred to an earlier judgment of the Constitutional Court of the Czech Republic, which stated that in relation to research in the public interest carried out at the determination of the amount and conditions of reimbursement of the medicinal product is the responsibility of the administrative authority (State Institute for Drugs Control) to verify, whether the agreement on the agreed price contains an obligation to ensure the availability of the product on the Czech Republics market.

In this case, the administrative authority during the assessment of agreement on the highest price (i) did not consider whether there is a realistic presumption of actual availability of the reference product and (ii) if this agreement consists an obligation to ensure availability, (iii) nor did they verify whether the subject, which executed the agreement in last two years, had not committed an offence under Section 39q (1) letters b) and c) of the Public Health Insurance Act. According to the mentioned judgment of the Constitutional Court of the Czech Republic, administrative authorities have a legal obligation to assess the public interest, i.e. they have obligation to verify whether the agreement contains an obligation to ensure product availability and that even in a situation where they intend base from the presumption of the product availability. According to the SAC, if such an obligation was not explicitly agreed in the agreement, the presumption of the availability of the product cannot be applied and it cannot be guaranteed that this reference product will be actually present in the Czech Republic´s market. In the event that the administrative authorities did not verify whether the assessment agreement contains an obligation of availability and was based only on the presumption of availability, they would have acted in clear violation of the judgment of the Constitutional Court of the Czech Republic.

The SAC stated that the condition for applying the conclusive presumption of availability is that the relevant agreement on agreed price contains unambiguous and undoubted commitment of the marketing authorization holder of the mentioned product, that he ensure availability of this product on the Czech Republic´s market in the sufficient amount throughout the efficiency of the agreement.

Determination of the basic reimbursement of products during the vesting period

In the assessed situation, SIDC set out the amount of reimbursement of the medicinal product according to Section 39c (2) letter a) of the Public Health Insurance Act. Under other provisions of the mentioned Act by implementing legislation should be stipulated, among other things, the vesting period for assessing the availability and determining the price of the producer. By this regulation is a decree, which implements certain provisions of the Public Health Insurance Act, according to which the price of a product for determining the basic reimbursement of other products is found out to the extent of 21 days from the date of initiation of the subject administrative procedure.

It is also important, that the quoted decree in Section 12 (2) explicitly excludes thus defined the vesting period for the case of the procedure according to Section 39c (2) letters c) or d) Public Health Insurance Act, but not for the procedure pursuant to Section 39 (2) letter a) the same law, which the administrative authorities applied in this time assessed case. By the linguistic interpretation, the SAC came to conclusion, that is necessary to strictly distinguish between these two procedures.

The erroneous procedure had in the assessed case results that administrative authorities incorrectly came out when determining the reimbursement from agreement on agreed price with agreed delayed effectiveness. The price for the reference medicinal product, which was agreed in the agreement, became effective after the expiration of the vesting period of 21 days from the initiation of the administrative procedure, SAC nevertheless took this price into account when he was assessing the price. In addition, the consideration of the mentioned agreement was possible only due to incorrect official procedure of SAC, when the decision of SAC was not issued within the period stipulated by law. This resulted in the violation of the principles of legitimate expectations, transparency, and predictability of the result of administrative proceedings.

The Supreme Administrative Court of the Czech Republic, therefore by the new case law, that the basic reimbursement could not be set out on the basis of the price agreed in the agreement on the agreed price, whose effect was to occur in the future, even though this price was lower than the price of others products, which were included in the price comparison, but only prices, which were valid during the vesting period can be taken into account. According to the SAC “Although it is possible to understand the complainant´s point of view (SAC), according to which it may be more advantageous from the term of the public health insurance system and the interest of insured persons to take into account, when determining the price the current state,  at the time, when the administrative decision is taking. However, during application of the relevant legislation, it cannot be disregarded that if the rules for determining the vesting period should fulfil their purpose, which consists, inter alia, in maintaining predictability and transparency of decision-making in a given area of the exercise of public authority, it must be in advance clearly determined the vesting period, which in addition shall be set out strictly and shall not allow any discretion of the administrative authority, that might in an unpredictable way affect to the rights of the parties in proceedings.”

The Amendment to the Business Corporations Act

We would like to inform you that, on 13 February 2020, the biggest amendment to the Business Corporations Act (Act No. 90/2012 Coll.) (the “Business Corporations Act”) amended by Act No. 486/2016 Coll. (the „Amendment“) since 2012, entered into force. Amendment, in general, is entering into effect on 1 January 2021.

In this way, we would like to inform you about the most fundamental changes that the Amendment brings. If you are interested in a more detailed overview, do not hesitate to contact us.

Between the main goals of the Amendment belongs reduction of the administrative and regulatory burden on business corporations, the regulation of mandatory provisions, the adjustment of the monistic internal structure of the joint-stock companies and others.

With the effectiveness of the Amendment, arises for the business corporations obligation to adjust their articles of association or their founding acts into the mandatory provisions of the Amendment and filed their consolidated version to the collection of deeds of the Czech Commercial Register on 1 January 2022 at the latest. Unless otherwise is stipulated by the Amendment, the business corporation must within 6 months from the effective date of the Amendment, to register in the Czech Commercial Register facts which have not been registered so far. If the business corporation fails to do so, the consequence ultimately could be even liquidation.

The reduction of the administrative burden establishment of Ltd.

The new legislation removes some administrative burdens related to the establishment of business corporations, which will ease the establishment of “low-cap” companies Ltd. Newly from 1 January 2021 for limited liability companies whose amount of the financial contribution of a shareholder in the capital corporations not exceed CZK 20,000, it will be possible to deposit the contribution in cash and directly into the hands of the administrator of the deposit and not only to a special bank account. Given the fact that the administrator of the deposit can be for example, a notary, this gives the shareholders of the business companies possibility to establish a limited liability company within one visit of a notary.

Regulation of the monistic internal structure of the joint-stock company

Part of the Amendment is also the adjustment of the setting of the monistic model of the joint-stock company´s management, which, as it turned out, does not correspond to the monistic internal system of joint-stock companies known from the legal systems of other European countries, which the model should reflect. Pursuant to the Amendment, the provision of the Business Corporations Act, which stipulates the obligation to establish the statutory director within the monistic internal structure of the joint-stock company, should be repealed. Therefore, from the efficiency of the Amendment, only obligatory bodies would be General Meeting and the Administrative Board. Administrative Board would have competence for the company´s business management and at the same time competence to control the company´s activities. This change should bring clarification in the matter of the distribution of the powers in the joint-stock company body in the monistic model structure. Both executive and supervisory powers would be concentrated in the scope of power of a single body, the Administrative Board will be thus empowered to manage and decide about all common company’s business activities.

The number of members of the Administrative Board will be maintained at 3 members, unless the Statute of the company set out a higher number, except for the admissibility of a one-member or two-member Administrative Board, in s situation where a joint-stock company has only sole shareholder. However, this possibility of a lower number of members of the Administrative Board must be regulated in the Statute of the company.

Transfer of a share in a private partnership

The Amendment breaks the mandatory provision of the current Business Corporations Act regulation, which ban the transfer of partners’ shares in a private partnership. This ban is established in the current legislation due to the personal nature of the private partnership, where the partners are jointly and severally liable for the company´s obligations. However, the legislator by this change does not want to interfere with the personal nature of the private partnership, for this reason, the ban is only broken, when the condition of the consent of all other partners to the transfer of the share, is fulfilled. Without the consent in question, the Partnership Agreement will not be efficient.

Change for legal entities in elected bodies

In accordance with Section 154 of Act No. 89/2012 Coll., The Civil Code (the “Civil Code”), it is possible, that a function in elected bodies of a legal entity perform another legal entity if this other legal entity appoints a natural person to represent her; otherwise, the legal person is represented by a member of its statutory body. Here, however, a problem arises. The mentioned statutory body may be a legal entity, then it is necessary to proceed again according to Section 154 of the Civil Code, but the same situation may occur again, and the whole process will be so-called chaining.

The Amendment newly sets out the obligation of a legal entity, who performs the function of an elected body in a capital corporation or cooperative to authorize a natural person who meets the legal prerequisites and requirements for the performance of the given function. Without the election of such a natural person, it will not be possible to register a legal entity as a member of the elected body of the legal entity in the Czech Commercial Register. The legal entity has 3 months to register the authorized representative or new authorized representative in cases when the authorized representative of the legal entity expires. If the legal entity does not fulfil this obligation, her function as a member of the elected body shall expire, ex lege.

Executive contract with the member of the statutory body

The Amendment also introduces several relatively fundamental changes in the area of the executive contracts with the member of the statutory body. The Amendment supplement a legislative “gap” in the issue of approving executive contracts with the member of the statutory body. The current legislation does not explicitly solve the consequences of omission to approve of an executive contract with a member of the statutory body by the supreme body of capital companies. However, the interpretation infers relative nullity (the agreement is valid until the entitled person invokes its invalidity). In practice, this means, that can appear a situation, where the statutory body executes his function for several years based on an agreement, which latter, based on an appeal by the entitled person, declare invalid ex tunc. This would mean that already paid remuneration would be unjust enrichment of the statutory body. The Amendment thus newly establishes, that without the approval of the supreme body, the executive contract with the member of the statutory body does not take effect. The agreement becomes effective, even retroactively to the date of its conclusion, when it is approved, but this rule is dispositive, so it is left to the discretion of the supreme body of the capital company.

Another situation and problem that will newly be explicitly regulated, in the area of the executive contract with the member of the statutory body, by the Amendment is adversarial of the executive contract with the member of the statutory body and
memorandum of association. If there will be a conflict between these two documents, the rules set out in the memorandum of association shall apply, except in the event, when executive contract with the member of the statutory body is approved by the majority of shareholders required to amend the memorandum of association, then executive contract with the member of the statutory body will apply.

Decisions per rollam

The regulation of the institute of decision-making per rollam (decision-making outside the General Meeting) is one of the parts of the Amendment that is aiming to simplification the administrative burden of companies.

The current legal regulation set out that the decision per rollam of the General Meeting of a capital company must be in the form of a public document, i.e. notarial deed. This rule means that each separate statement of a shareholder or partner must be in the form of a notarial deed. That fact entails considerable administrative costs for larger capital companies. The Amendment adjust this procedure. Therefore, it will no longer be necessary for each individual statement of a shareholder or partner to be made in the form of a notarial deed. Newly the draft itself will be in the form of a notarial deed, then this draft in question will be copied, and this copied draft will be sent to all shareholders or partners, who submit their statements on this copy of the notarial deed with an officially certified signature. The whole process will then be verified by a notarial deed of decision-making per rollam.

Distribution and payment of profits and another capital

Due to the recent case law developments in the field of distribution and payment of profits and another capital, it was appropriate to respond to these developments at the legislative level and at the same time correct the imperfect transposition of European legislation into the relevant provisions of the Business Corporations Act.

The current legal regulation brings in the area payment of the other capital large debates, due to its vagueness, because in practice this leads to a different approach, this is caused by a fact, that on the contrary, the rules for distribution and payment of profits are strictly regulated. The Amendment is trying to the mentioned vagueness in the payment of another capital fix and adding in places, where current legal regulations mention profit postscript “and another capital”. It will be possible to make a payment from another capital in the same way as a profit payment only on the basis of regular or extraordinary financial statements.

In connection to the relevant case law, according to the Amendment, it will be possible to use regular or extraordinary financial statements approved by the body of a business corporation for the distribution of resources until the end of the accounting period following the accounting period for which they were prepared.

Sets out the so-called balance test in the Amendment legislator transposes the EU legislation (Directive (EU) 2017/1132 of the European Parliament and of the Council). The balance test is already included in the current legislation, but it is not mandatory for all types of business corporations, newly it is becoming mandatory for all business corporations. This will unify the calculation for the maximum amount which is paid for all types of business corporations. At the same time, the Amendment set outs the obligation to perform a balance test before the General Meeting decides about the distributions of the profits and that under the threat of nullity of this decision.

The Amendment further obliges all types of business corporations to apply the so-called test of the equity, which should secure a telling overview of the company´s capital.

Furthermore, the rules for the return of the distributed profits will be stricter. The protection of good faith will no longer apply in relation to the distributed profits. In other words, the partners or shareholders will have to repay the profits distributed to them, in the case where the distributions of the profit were in breach of legal rules, even though they did not know about this fact. From the logical point of view, there will be an exception for shareholders, for whom the protection of good faith in relation to the distributions of profits will be retained.

End

The full wording of government proposal amendment of the Act No. 90/2012 Coll. may be found here: https://www.psp.cz/sqw/text/tiskt.sqw?O=6&CT=363&CT1=0.

In case of any questions, please do not hesitate to contact us via email info@kastnerpies.cz.

The Amendment to the Labour Code has entered into force

 

We would like to inform you that, on 26 June 2020, an amendment to the Labour Code (Act No.262/2006 Coll.) entered into force. The aim of this amendment was primarily (I) to simplify the implementation of several rights of an employer and an employee during the performance of work (in particular, by amending the legal regulation of leave and adjusting the rules for a transfer of rights and obligations in a employment relationship); (II) to simplify the performance of work itself (especially by anew regulation of the so-called job sharing by more employees); and (III) to back up and regulate communication between the parties to the employment relationship. The amendment also transposes into the Czech law certain rules of the EU law, in particular Directive of the European Parliament and of the Council (EU) No. 2018/957 amending the EU rules on the posting of workers in the framework of the provision of services.

The abovementioned amendment to the Labour Code comes into effect gradually. Changes in regulation of leave, compensation for damages, as well as the adjustment of the new institute of the job sharing will come into effect on 1 January 2021. Other amendments to the LabourCode entered into effect on 30 July 2020.

Leave

The new legislation eliminates some shortcomings of the previous regulation and provides a new way of calculating leave based on a new mathematical model based on a single unit of time – a planned and worked hour. The amendment brings equal conditions for taking leave for all employees with the same weekly working hours, regardless of the specific way of scheduling work shifts. The amendment to the Labour Code also cancels the leave for days worked and retains in force only the legal regulation of leave for a calendar year / its proportional part and an additional leave. The basic conditions for the formation of the right to leave, including the scope of obstacles at work that are or are not considered to be a work performance for the purposes of leave, as well as the rules for taking leave, have in principle been maintained in the new legislation.

Job sharing

The amendment to the Labour Code also includes the regulation of the new institute of the labour law, the so called job sharing, the aim of which is to help and support disadvantaged groups of employees on the labour market who prefer shorter working hours with greater time flexibility. According to the new legislation, the employer will be entitled to establish a so-called shared job position, which, on the basis of individual agreements with employees, will be filled with two or more employees performing the same type of work during agreed reduced working hours, and these employees will be able to schedule their working hours into shifts on the basis of their mutual agreement. However, the sum of the agreed working hours of all employees sharing one job position will not be able to exceed the specified weekly working hours. Each of the parties will be able to terminate the abovementioned agreement between the employer and each employee with a 15-day notice period, however such termination will not automatically lead to the termination of the job sharing.

Damage compensation

The amendment to the Labour Code also brought changes in compensation for injury to the health of employees during the performance of work duties. For example, there is a change in the amount of compensation for injury to health or the scope of persons entitled to such compensation for non-pecuniary damage provided to surviving relatives of an employee. The amendment also introduces into the Labour Code the institute of one-off compensation for non-pecuniary damage in the event of particularly serious injury to an employee’s health, which will be used in exceptional cases where the consequences of such injury are so extensive that these consequences are comparable to the death of an employee.

Delivery of documents

Regarding the amendment to the Labour Code, there are also changes in the regulation of delivery of documents between the employer and the employee. The amendment now allows the employer to deliver documents concerning the employment relationship to the employee via the employee’s databox if the employee agrees to such delivery. At the same time, the amendment introduces the legal fiction of delivery of a document to employee via a data box on the 10 th day from the day of delivery of the document to the data box.

When sending documents using a postal service provider, the employer will now send the documents to the address communicated in writing by the employee upon request. The employee will thus be primarily responsible for the accuracy and timeliness of his / her data for the delivery of documents. The amendment further stipulates a new legal fiction of delivery of a document to an employer who refuses to accept delivery of such document – the document will be considered delivered on the day when the employer refuses to take over the document or fails to cooperate with the employee in delivery of the document.

Other changes

In addition to the abovementioned changes, the amendment to the Labour Code also brings, for example, changes in the area of posting workers / employees of the employer from another EU Member State to the territory of the Czech Republic for the purpose of transnational provision of services. The amendment primarily regulates the rules of remuneration of posted employees(regulation of new employee rights to night supplement, travel allowances, etc.), as well as the conditions of accommodation of such employees in the Czech Republic, which the employer must comply with when posting workers.

The full wording of Act No. 285/2020 Coll., which amends the Labour Code, may be found here: https://www.psp.cz/sqw/sbirka.sqw?O=8&T=689.

In case of any questions, please do not hesitate to contact us via email (info@kastnerpies.cz).

 

Kastner & Pieš is a new member of Biolaw association

We are pleased to announce that as of 1st November 2019, we became members of Biolaw association, which associates independent law firms with focus on life sciences industry regulation. Our membership expands our existing network of corresponding law firms and allows our clients to obtain experienced legal support in more countries.

We usually reach out to our corresponding firms in case of compliance audits and programs, international questionnaires or protection of intellectual property.

If you would like to know more, please do not hesitate to contact us at info@kastnerpies.cz or check out the association’s websites http://www.jusmedico.com/biolaweurope

MoH approved Clinical Trial Agreement template in CZ and SK

We would like to inform you that, on 3rd May 2019, the Ministry of Health of the Czech Republic published on its website a Methodological Guideline on the Content of a Clinical Trial Agreement of a clinical trial of medicinal products for human use dated 30th April 2019, which includes a template Clinical Trial Agreement. The Ministry requested all clinical trial sponsors and healthcare providers involved in clinical trials to use such a template agreement as much as possible. The guideline is applicable to all Ministry-directly-managed hospitals (all of the major ones).

The template agreement is designed as a 3-party agreement between a sponsor, a site and an investigator. The agreement is bilingual (Czech and English) and reflects relevant EU and Czech legislation as well as key GDPR aspects.

The main objective of this template agreement is to shorten and simplify the process of executing a clinical trial agreement between sponsors and healthcare providers. The use of a template agreement should also lead an increase in the number of clinical trials performed in the Czech Republic and to the improvement of the Czech Republic’s position in international competition in clinical research. The Ministry’s ideal is that if the agreement will not be amended, it should be automatically accepted by the Ministry directly-managed hospitals.

The Methodological Recommendation in question is available on the website of the Ministry of Health of the Czech Republic, in the section “Legislation” and in the subsection “Clinical trial” (http://www.mzcr.cz/Legislativa/obsah/klinicke-hodnoceni_4016_11.html).

The Ministry of Health of the Slovak Republic approved a similar template Clinical Trial Agreement. The template agreement is a part of the Order of the Minister of Health No. 4/2018 and it is available on the website of the Ministry of Health of the Slovak Republic which is available on the website of the Slovak Ministry of Health (https://www.health.gov.sk/Clanok?Prikaz-4-2018). The Order of the Minister, with respect to the template agreement, is effective from 1st June 2019.

Our office was involved in the preparation of both of the agreements in the Czech Republic and Slovakia.

Please do not hesitate to contact us in case of any questions via our email (info@kastnerpies.cz).

Proposal for emergency distribution channel of pharmaceuticals in Czech Republic

The Czech Ministry of Health (“MoH”) is currently working on a draft legislation implementing an emergency distribution system (inspired by the Slovakia where something similar was introduced in April last year) that should, in the opinion of the MoH, prevent re-export of medicinal products from the Czech Republic and improve availability of the medicinal products on the Czech market. The MoH would like to introduce a specific emergency distribution channel based on which a pharmacy could order a medicinal product directly from the MAH if it cannot be reliably supplied through a standard distribution channel. The whole system is introduced in reaction to repeated complaints from pharmacies regarding unavailability of various medicinal products that are the subject of parallel trade.

The emergency distribution system should work in a way where MAH will have to establish and operate an electronic information emergency system for ordering of Rx products. If a pharmacy cannot procure a medicinal product from a distributor, it will be able to order it through the emergency system. The marketing authorization holder will be obliged, on the basis of this order, to supply the pharmacy with the required medicinal product within two working days of receipt of such order. If the marketing authorization holder fails to comply with this obligation, it will may be subject to significant fines. The draft amendment also provides exemptions from the obligation to supply a medicinal product, for example in case of the reported outage based on objective obstacles.

In relation to the emergency channel, the MoH intends to introduce additional measure that should ensure better availability of medicinal products (only for those with reimbursement) for Czech patients. Specifically, same as in Slovakia, the MoH will introduce a statutory provision based on which reimbursed medicinal products may only be exported to another country with express MAH’s consent. Therefore, the MAH will be fully responsible for assessing the availability of his medicinal product on the Czech market and, if it is not endangered, the medicinal product may be exported abroad with his consent.

The proposal of the Ministry of Health needs to go through the whole legislative process and it is expected to be effective in the course of the next year or beginning of 2020. However, especially the second part (related to consent with export of products) is criticized since it may constitute a competitive issue and violation EU competition law. From our experience in Slovakia, this right of the MAHs is rarely used as there is a potential risk of competition law consequences, even on the EU level.

The concrete text of the statutory amendments is not yet published and the information above is result of information communicated by the MoH’s representatives and thus maybe subject of additional changes.