In the Collection of Laws was on 13 February 2020 published the first major amendment to Act No. 90/2012 Coll., on Commercial Companies and Cooperatives (Business Corporations Act), as amended (hereinafter “BCA”), which will (predominantly) come into effect on 1 January 2021. The amendment, inter alia, substantially changes the adoption of any general meeting’s decisions outside its meetings (per rollam) as limited liability companies will not be able to change its foundational legal act without co-operating with a notary.
This article, being the first one from a series of articles which our law firm will publish about the above-mentioned amendments to the BCA, explains the changes in the adoption of decisions by the general meeting outside its meetings (per rollam).
Current legal regulation
According to the current Section 175 et seq. of the BCA, it is possible to adopt decision of the limited liability company’s general meeting outside its meetings (per rollam), unless it is excluded by memorandum of association. If the BCA requires certification of the general meeting’s decision by a public deed, it is at present sufficient to officially certify the signature of the shareholder(s) on their statement(s) (the so-called “ballot paper”). So, if a company decides to use the decision-making per rollam, the change of the memorandum of association can be changed without any involvement of the notary. This means that in extreme cases it is possible to change all provisions of the memorandum of association without the notary reviewing the compliance of the resolution with the law or the memorandum of association. The current regulation of decision-making per rollam is therefore a frequent target of criticism as it incorrectly transposes the relevant directive into national legislation.[1]
New legal regulation
The proposed formulation of Section 175 (3) of the BCA (and similarly Section 419 (2) of the BCA for joint-stock companies)[2] provides that “the draft per rollam decision must be in the form of a public deed and the signature on the member’s statement must be officially certified”. This provision clearly provides that the requirement for official certification of the member’s signature for his or her statement remains. Moreover, the new regulation will require the draft decision to be sent to members in the form of a notarial deed. Subsequently, another notarial deed should be made about the course of per rollam decision-making.
If the decision of the general meeting requires the form of a notarial deed, the new amendment proposes two-step procedure. In the first step, a notarial deed of the draft per rollam decision will be made, of which copy will be send to the members. The members may comment on the proposed decision and their signature must be officially certified. In the second step, the person who sent the proposal to the members will submit to the notary the necessary documents and other relevant documents, so that the notary can verify adoption of the decision in the next notarial deed.
The procedure described above shall apply similarly to the joint-stock companies. However, there remains a fundamental difference since the articles of association of the joint-stock companies must explicitly allow the per rollam decision-making whereas for a limited liability companies the per rollam decision-making is automatically allowed.
Non-compliance with the form of a notarial deed
In relation to the introduction of new formal requirements for per rollam decision-making, the amendment to the BCA also regulates the consequences in case of non-compliance. The explanatory note to the BCA amendment is based on that: “when it is not entirely clear from the provisions of the Directive, its spirit and purpose requires that decisions which are not „officially certified” (i.e. are not certified by a notarial deed) do not have legal effects.” [3]
This conclusion is reflected in the amendment to Section 45 (3) of the BCA, which newly stipulates that if a decision a business corporation’s body is not certified as a public deed and drafted within 60 days of the date of its adoption, it has no legal effects.
The amendment introduces a 60-day “protection period” within which the required form of a notarial deed can be additionally fulfilled. This is due to the common practice that, although a notary is present at the quorum of a body, (s)he will not produce a notarial deed immediately, but within a several days after.
Nevertheless, the importance of the new Section 45 (3) of the BCA goes far beyond per rollam decision-making, which is also acknowledged in the explanatory note. The mentioned provision does not apply only to decisions of the board of directors of a business corporation, but also to decisions of elected bodies. According to the explanatory notes, this provision also applies to the decision of a sole executive director or a shareholder under the authority of the supreme body, unless such a decision has been drawn up in the form of a notarial deed.
Transitional provisions
These new requirements regarding the form for per rollam decision-making shall apply from the effective date of the amendment, i.e. from 1 January 2021. However, according to the transitional provisions, the current version will apply if the legal action (that is distribution of the draft per rollam decision to the members or shareholders) leading to a decision by a business corporation has been taken before the effective date of the amendment.
Conclusion
In conclusion, this amendment to the per rollam decision-making will finally properly transpose the company law directive and will ensure the legality of the decisions in cases where the law requires form of a notarial deed. On the other hand, we believe that the use of per rollam decision-making will decrease due to the increased administrative and financial burden.
If you have any questions about this article or corporate law in general, we are at your disposal – so please don’t hesitate to contact us.
Mgr. Martin Heinzel, attorney-at-law – heinzel@plegal.cz
Mgr. Jakub Málek, partner – malek@plegal.cz
13. 02. 2020
[1] Cf according to article 10 of the Directive (EU 2017/1332 of the European Parliament and of the council of 14 June 2017 relating to certain aspects of company law: “In all Member States whose laws do not provide for preventive administrative or judicial control, at the time of formation of a company, the instrument of constitution, the company statutes and any amendments to those documents shall be drawn up and certified in due legal form”; (hereinafter “Company law directive“).
[2] Cf also Section 654 of the BCA for cooperative conditions.
[3] The explanatory note to the Act amending the Act No. 90/2012 Coll., on Commercial Companies and Cooperatives (Business Corporations Act), as amended by Act No. 458/2016 Sb., and other related acts, (discussed as a chamber press No. 207), available here: https://www.psp.cz/sqw/text/tiskt.sqw?O=8&CT=207&CT1=0.