Commercial Code (Ukázka, strana 99)

Chapter I: Companies Chapter I: Companies 

Section 161b

c) it does not bring about the company’s own bankruptcy according to a special legal regulation by acquiring its own shares, d) it has resources to create a special reserve fund for its own shares, providing the creation of such a fund is required according to Section 161d Subsection 2.

(2) The condition stipulated in Subsection 1 Paragraph a) need not be fulfilled if the acquisition of its own shares is required in order to avert substantial damage directly threatening the company. The board of directors is obliged to familiarise the forthcoming general meeting with the reasons and purpose of the purchases made, with the number and nominal value of acquired shares, their ratio to the company’s registered capital and the price that was paid for them. The company must dispose of shares thus acquired at the latest within 18 months from their acquisition.

(3) The provision of Subsection 1 Paragraph a) does not apply to the acquisition of shares which the company or a person acting in their own name on the company’s behalf acquires for the purpose of sale to employees according to Section 158. The company must dispose of shares thus acquired at the latest within 12 months from their acquisition.

(4) The board of directors is responsible for fulfilling the obligations according to Subsection 1 Paragraphs b) and c).

Section 161b (1) The company may acquire its own shares even without fulfilling the conditions stipulated in Section 161a, if it acquires them: a) for the purpose of implementing a decision of the general meeting on the reduction of the registered capital, b) as the legal successor entering into the rights of the person that was the previous owner thereof, c) in order to fulfil the obligations imposed on it by law or based on a court decision to protect minority shareholders, particularly during mergers or divisions, change of legal form or the introduction of limited transferability of registered shares or the exclusion of shares from trading on the European regulated market, d) in a court auction during the execution of a decision on the recovery of the company’s receivable towards the owner of mature shares, e) as financial collateral or for reasons of executing the right to satisfaction from financial collateral.

(2) The company may acquire its own shares without payment even without fulfilling the conditions under Section 161a. The provisions of Subsection 1 Paragraphs a) through c) shall similarly apply to acquiring its own interim certificates. This shall apply also to interim certificates acquired from a subscriber that delays in payment of the contribution, if the company has decided to apply the procedure according to Section 177 Subsection 3 through 7.

(3) The company is obliged to dispose of shares and interim certificates acquired according to Subsection 2 within 18 months from their acquisition; the company is obliged to dispose of shares and interim certificates acquired according to Subsection 1 Paragraphs b) through e) within three years from the date of their acquisition.

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Chapter I: Companies Chapter I: Companies 

Section 161c

(4) If the company does not dispose of its own shares or interim certificates within the deadline stipulated in Subsection 3 or in Section 161a, it is obliged to reduce its registered capital by the nominal value thereof without undue delay. The company is obliged to reduce registered capital without undue delay also in cases when it reports its own shares in the balance sheet and the sum of the value of registered capital and the amounts set out in Section 178 Subsection 2 Paragraphs a) and b) exceeds the value of equity; the reduction must be by an amount at least equal to this difference. If the company does not fulfil the obligation to reduce the registered capital, the court may wind up the company even without a petition and order its liquidation.

(5) By acquiring interim certificates, the company is not relieved of the obligation to pay the issue price for the shares replaced by the interim certificate, unless the reason for acquisition is that the company has decided to reduce its registered capital.

Section 161c (1) A legal act undertaken contrary to Section 161a and 161b is not invalid, unless the other party was not acting in good faith.

(2) The company is obliged to dispose of shares or interim certificates acquired contrary to the provisions of Section 161a and 161b within one year from the day it acquired them; otherwise it is obliged to reduce the registered capital by the nominal value thereof.

If the company does not fulfil this obligation, the court may wind up the company even without a petition and order its liquidation.

Section 161d (1) If the company acquires its own shares or interim certificates, it cannot exercise the voting and priority rights attached to them. If in such cases the general meeting decides on the division of profit among shareholders according to Section 178, the company shall not be entitled to a dividend and the general meeting shall simultaneously determine whether the profit pertaining to each of its own shares or interim certificates shall be divided proportionally among the other shares or interim certificates, or whether it shall remain on the account of retained profits from previous years.

(2) If the company reports its own shares or interim certificates under assets in the balance sheet, it must create a special reserve fund in the same amount. This special reserve fund shall be cancelled or reduced if its own shares or interim certificates are disposed of in full or in part, or used to reduce the registered capital. This reserve fund cannot be used for any other purpose.

(3) The company may use retained profit or other funds the company may use at its own discretion to create or supplement the reserve fund for the purposes set out in Subsection 2.

(4) The provisions of Subsection 2 and 3 do not affect the obligation to create and supplement the reserve fund according to Section 217 Subsection 2.

(5) If the company acquires its own shares or interim certificates, the report on the balance of the company’s assets submitted to the general meeting according to Section 192 Subsection 2 shall also contain at least the following information:

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Chapter I: Companies Chapter I: Companies 

Section 161e

a) the reasons for the acquisition of shares which occurred in the course of the accounting period, b) the number and nominal value of the shares acquired and disposed of in the course of the accounting period, c) the sum of purchase prices for purchased and sold shares in the accounting period, indicating the lowest and highest price in the event that the shares were acquired for payment, d) the number and nominal value of all company shares included in the company’s assets and their share in the registered capital, both at the beginning and end of the accounting period.

Section 161e (1) The company may accept its own shares or interim certificates as a pledge only under the conditions stipulated in Section 161a Subsection 1 and 4, Section 161b, 161d and in Section 161f.

(2) The limitation according to Subsection 1 does not apply to banks and financial institutions according to another legal regulation regulating the activities of banks6), providing such transactions are entered into within the standard limits of their core activity.

Section 161f Financial Assistance (1) The company may provide financial assistance for the purpose of acquiring shares or interim certificates of the company only if set out by the articles of association and only if at least the following conditions are fulfilled: a) financial assistance is provided under standard conditions in business transactions, b) the board of directors has examined the financial standing of the person to which financial assistance is provided, c) the provision of financial assistance has been approved in advance by the general meeting based on a report from the board of directors according to Paragraph d); acceptance of the decision requires the consent of at least two thirds of the votes of all shareholders, d) the board of directors shall draw up a written report in which: 1. it shall justify the provision of financial assistance, including a statement of the ensuing benefits and risks for the company, 2. it shall state the conditions under which financial assistance shall be provided, including the price for which the shares shall be acquired by the recipient of financial assistance, 3. it shall indicate the conclusions of its examination of the financial standing according to Paragraph b), 4. it shall justify why the provision of financial assistance is in the interest of the company, e) if financial assistance is used to acquire shares in the company providing financial assistance, the price for which these shares are acquired must be fair, 6)

Act No. 21/1992 Coll., on banks, as amended.

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