transaction with legal entities registered in other EU or European Economic Area countries. If a company has the legal form of a European Company (Societas Europaea), business transformations can also involve foreign companies. Probably the most frequent form of transformation is merger by acquisition: one of the companies carries on its activities and the other ceases to exist, and its assets and liabilities are transferred to the successor company. Another option is merger by the formation of a new company: all of the original companies cease to exist, and their assets are transferred to a new successor company. From a financial point of view, an important issue is the tax losses carried forward in respect of wound up companies. Under the legislation valid prior to 1 May 2004, these losses could not be transferred to the successor company. However, following the Czech Republic’s accession to the EU, tax losses can now be carried forward. The earliest taxation period for which losses can be carried forward is the period when the Accession Treaty between the Czech Republic and the EU came into force (i.e. on 1 May 2004). Losses assessed in previous taxable periods cannot be carried forward. Mergers are carried out on the basis of merger projects, which must be approved in advance by general meetings. Share exchange ratios and other possible arrangements after the merger are key factors in merger projects. The merger becomes legally effective on the date it is recorded in the Commercial Register. However, from a tax and accounting point of view, the companies are considered a single entity as of the merger date, which precedes all necessary steps and decisions in relation to the merger. In some cases, subject to the agreement of all shareholders or partners, the merger procedure can be significantly simplified. A new option has been created for mergers of joint-stock companies, allowing the voluntary buyout of the other shares if the successor company owns more than 90 percent of the merging company’s registered capital. Should the legal status of shareholders of any participating company be worsened as a result of the merger, the successor company has an obligation to buy out these shareholders under certain circumstances. Companies with a different legal status can also merge, and the merger may involve more than two entities. A number of special regulations apply to cross-border mergers. An important condition is that the merger procedure must be regulated in the same way as in the legal systems of the countries in which the participating companies are registered. The preparatory phase of the cross-border merger is carried out in accordance with Investment in the Czech Republic
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