What can happen to companies that fail to convene General Meetings, typically held in order to
approve financial statements?
Limited liability and joint stock companies (s.r.o. and a.s.) are required to hold an annual General
Meeting to approve the financial statement no later than six months after the end of the previous
accounting period. However, the Act on Corporations does not stipulate any explicit fines for
companies or their shareholders/stakeholders for failing to meet that obligation.
In the vast majority of cases the General Meeting is convened by the statutory body, which is
required to act with due professional care. If the General Meeting is not convened on time in
order to approve the financial statement and any other related materials, then the question is
whether the statutory body has breached its obligation to act with due professional care.
We could imagine a situation where a company (s.r.o.) has two shareholders and one managing
director who recently tested negative for SARS CoV-2. In that case nothing would prevent them
from holding the General Meeting with the shareholders present, provided of course that they
follow all recommended hygiene rules and that no prohibition has been made limiting free
movement. The valid and effective Czech Government Resolution No. 215, issued on March 15
this year enacting crisis measures prohibiting the free movement of individuals throughout the
Czech Republic with multiple exceptions, does not make it entirely clear whether participation
in General Meetings is also prohibited (compare for instance the exception allowing the
performance of business or other similar activities in point I.a). Another point to consider is the
possible participation of foreign nationals, if they are shareholders or stakeholders, or if they are
representing foreign or local legal entities.
Notwithstanding the above, in the current circumstances it can be assumed that the statutory
body would be able to defend failure to convene the General Meeting to approve the financial
statement in the coming days as acting with due professional care, unless the situation changes.
According to the Act on Accounting, after approval companies are obliged to publish the financial
statement, annual report and auditor’s report, if required, within 30 days of approval by the
General Meeting, within 12 months at the latest. The above can be interpreted to mean that if a
General Meeting does not meet with a quorum within six months of the last day of the previous
accounting period, the deadline for meeting the obligation to publish the financial materials in
the collection of deeds at the Commercial Register will be 12 months after the last day of the
previous accounting period. Only then will the relevant tax authority impose a fine of up to 3%
of the value of the company’s assets, or the registration court can impose a fine of up to CZK
100,000 and in the worst case can even commence proceedings on dissolution of the company
The decision on the distribution of profits is typically made upon approval of the financial
statements, i.e. within six months of the end of the accounting period. In light of current case law
of the Czech Supreme Court, however, as of January 1, 2014 an annual financial report prepared
for the previous accounting period can serve as a material for the General Meeting decision
on distribution of profits for a company (s.r.o. or a.s.) until the end of the following accounting
Decision-making outside the General Meeting (per rollam) as an option for holding a General
Meeting (s.r.o. or a.s.) even without the shareholders or stakeholders being physically present
Decision-making outside the General Meeting, also called “per rollam”, is always permitted as
long as it is not prohibited by the Memorandum of Association for a limited liability company
(s.r.o.). For joint stock companies and associations (in Czech: družstva), this method of decision-
making is permitted if the Articles of Association for the joint stock company or association
explicitly so permit. For joint stock companies this is typically the case.
This method of decision-making, which can fully replace the General Meeting and shareholders’
assembly, represents an opportunity to manage the corporation at a shareholder/stakeholder/
association member level even without their physical presence at the General Meeting or
shareholders’ assembly. It can take a variety of forms, including postal correspondence and
Other possibilities also exist, however, both for holding the General Assembly and for making
decisions outside the General Assembly. The Act on Corporations allows voting at the General
Meeting or decision-making outside the General Meeting by technological means under certain
circumstances (not for associations), such as holding the General Meeting as a teleconference
or video conference. This form of decision-making is possible under the condition that the
Memorandum of Association or Articles of Association of the company allow it, and these
documents (or the statutory body) must also designate the conditions allowing the company
to verify the identity of those authorized to exercise voting rights and designate the shares/
ownership interest associated with the voting rights. If this is not done the votes and participation
of the shareholders/stakeholders voting in this manner must be disregarded. These conditions
must be stated in the invitation to the General Meeting or proposal for making decision outside
the General Assembly (per rollam).
In the event of making decision outside the General Assembly (per rollam), the person authorized to
convene the General Meeting (typically the statutory body or qualified shareholder/stakeholder)
sends the proposed decision to the address given in the list of shareholders/stakeholders or
by other means designated in the Memorandum of Association. For a limited liability company
(s.r.o.) the proposed decision must always contain a) the deadline for delivering the statement
of the shareholder designated by the Memorandum of Association, otherwise 15 days, b) all
materials needed for enacting the decision, and c) any other information stipulated by the
Memorandum of Association.
If a shareholder does not deliver its consent to the proposed resolution to the person authorized
to convene the General Meeting by the stipulated deadline, then the shareholder is deemed not
to consent. It is also important to stress that the majority required to enact decisions is logically
calculated based on the total number of votes of all shareholders, which makes it possible to
address some nonsensical discrepancies in the required numbers for having a quorum and
enacting decisions of the General Meeting that we encounter from time to time. The company
or person authorized to convene the General Meeting of the company announces the decision
enacted outside the General Assembly (per rollam) to all shareholders without undue delay after
it is made, including the day of making the decision. The same rules apply with minor exceptions
for joint stock companies (a.s.) and associations.
What about owners’ associations (in Czech: SVJ)? Can an owners’ association make decisions
outside the owners’ association assembly?
Owners’ associations can only make decisions outside the owners’ association assembly (per
rollam) if expressly permitted in their Articles of Association. If the Articles of Association for the
owners’ association do not permit this decision-making method, it cannot be used except under
the single exception given below.
It is possible to have the person entitled to convene the owners’ association assembly (the
statutory body - committee or unit owners (in Czech: vlastníci jednotek) with more than one
fourth of all votes) propose in writing that unit owners (owners’ association members) decide
on a given matter in writing outside the assembly. However, this is only possible if a previously
convened owners’ association assembly did not have a quorum.
Thus it is possible to call an owners’ association assembly that will not have a quorum due to the
absence of the members. Then the owners’ association members can decide on the same matters
outside the owners’ association assembly (per rollam), provided that the features stipulated by
law are met. Decision-making outside the owners’ association assembly (per rollam) is subject
to the same rules as described above for corporations.
25th March 2021