Jsou společnosti ovládané a řízené sourozenci osobami blízkými?

Why should you care about transactions with an affiliated company?

Imagine a model scenario: Your company enters into a contract with another company owned by your brother (or another family member). Everything works, money flows – for example, you pay your brother's company for provided storage services. However, if your company goes bankrupt in a year or two, a problem arises. The insolvency trustee will see large payments directed towards the "affiliated" company and may flag them as suspicious. They will challenge them with an action to set aside transactions (avoidance action) in court with the aim of declaring them ineffective (void against creditors) and forcing your brother's company to return the money to the debtor's estate. Now the question is – will your brother's company be viewed as a close party to you, or as a regular business partner? This is precisely what determines whether the trustee can challenge transactions from one year ago, or even up to three years ago.

When is a company considered a close party?

Most people associate the term "close party" with family members – spouse, children, siblings, etc. In the Civil Code (Section 22), we indeed find a definition stating that a close party is, for example, a relative in the direct line or a sibling. But how does this work for legal entities, i.e., companies? Can a company also be a close party to another company? The legislator thought of this as well: Section 22(2) of the Civil Code explicitly states that special restrictions for transactions between close parties apply analogously to transactions between a company and a member of its body or anyone who significantly influences that company as a shareholder or on the basis of an agreement or other fact.

Simply put, a company is assessed similarly to a "close party" to its director, statutory body, or, for example, its majority shareholder. Why? Because when the head of a company enters into a transaction with themselves (or rather with "their" company), it is clear that there is a lack of arm's length distance – and the law protects third parties (creditors) by looking at such transactions with greater suspicion. Similarly, if an entity significantly influences a company (such as a dominant shareholder in a holding structure), transactions between such interconnected companies are also assessed more strictly under Czech legislation.

In addition, the Insolvency Act explicitly mentions persons who form a business group (concern) with the debtor. Typically, these will be parent and subsidiary companies. Here too, transactions within such a group are subject to a longer look-back period and stricter scrutiny in insolvency. The logic is again obvious: companies in one group often act in a coordinated manner, have common owners, and thus there is a risk of "shifting" assets between them to the detriment of creditors. The insolvency trustee therefore has greater room for maneuver to challenge such transfers.

However, the key question is: What about other situations that are not directly listed in the law? What if it is neither a member of a body, nor an official shareholder, nor a formal business group – but there are still close personal ties (such as family)? Will the court approach a transaction between two independent companies whose owners are related with the same caution? Or will it assess it as a purely commercial relationship without special conditions? Until recently, there was uncertainty about this, and legal theorists debated the issue. However, we now have fresh guidance directly from the Supreme Court.

A case from practice: Siblings in the management of two companies

To illustrate this, let's look at a real case that the Supreme Court of the Czech Republic resolved in March 2025. Let's imagine a company, let's call it ALFA, a.s., which is 100% owned and managed by Mr. Novák. In 2016, this company entered into a storage agreement with BETA, s.r.o., which, for a change, is owned and managed by Mr. Novák's brother, Jan. Based on the contract, ALFA paid BETA substantial amounts every month for storage services. Both companies were therefore formally independent – neither owned a share in the other, each had its sole owner. The only connecting element was the brothers at their helm.

A few years later, ALFA fell into serious financial difficulties and was declared bankrupt. During an audit of the accounting records, the insolvency trustee of the debtor ALFA found that millions of Czech korunas had flowed to BETA over the last few years – not only for the mentioned storage fees but also other payments. He therefore began to flag these transactions as suspicious. He filed an action to set aside transactions and demanded in court:

• that the 2016 storage agreement be declared ineffective,

• that all payments made by ALFA to the brother's company BETA be declared ineffective legal acts,

• and that BETA be ordered to return tens of millions of Czech korunas in total, which it had received from ALFA, to the debtor's estate.

• that the 2016 storage agreement be declared ineffective,

• that all payments made by ALFA to the brother's company BETA be declared ineffective legal acts,

• and that BETA be ordered to return tens of millions of Czech korunas in total, which it had received from ALFA, to the debtor's estate.

The trustee built his lawsuit precisely on the argument that "family means close". He claimed that both companies were so interconnected through the person of their owners that they should be viewed as close parties or at least as a business group. He mentioned that the brothers (Jan and Petr) de facto acted in concert and their companies cooperated for the benefit of a single entity. His goal was to have the court recognize the business relationship between ALFA and BETA as a relationship of close parties – making it possible to challenge transactions up to three years back from the insolvency petition (instead of the usual one year).

Supreme Court ruling: Sibling companies are not close parties

The case gradually made its way through the appellate instance to the Supreme Court. It had to answer a fundamental legal question: Are two companies "close parties" if each of them is owned by one sibling? The verdict is quite clear – they are not. The Supreme Court ruled that the mere fact that the owners of two companies are brothers is not sufficient for these companies to be considered close parties in their own right.

The court emphasized that statutory definitions must be interpreted strictly. A company can be a close party to another company only in cases foreseen by law – especially if one directly controls the other, or if they act on the basis of an agreement or unified management. In our case, however, no such formal connection existed: brother-director A was neither a shareholder nor a member of the bodies of company B, and vice versa. Both brothers conducted business alongside each other, each for their own company. Yes, they were family, but from the perspective of corporate law, this does not mean that one company "significantly influenced" the other. It was therefore not a case of a controlling and controlled person, nor of persons acting in concert on the basis of an agreement.

The Supreme Court explicitly stated that a sibling relationship between natural persons – company owners – does not in itself lead to their companies being assessed as close parties or acting in concert. This conclusion is not surprising even in light of earlier decisions. The judiciary had already resolved similar situations in the past: for example, it was decided whether the husband of a female director is a "close party" to the company, or whether the son of a female company owner is a close party to that company. In all cases, the courts concluded that a family member of a natural person does not automatically mean a close party for a legal entity. The current 2025 judgment thus fits into this concept and confirms it in the context of siblings.

What does the decision mean in practice?

For the insolvency trustee of the debtor ALFA, this meant that he could not use the extended 3-year look-back period to challenge the transactions. The 2016 agreement and older payments were thus already out of reach of the avoidance action, as they fell outside the one-year period established for regular (non-close) entities. The Supreme Court de facto closed the trustee's path to recovering certain payments from the brother's company, provided they took place more than a year before the commencement of insolvency. On the other hand, payments made in the last year before bankruptcy could still be reviewed – no exception applies there.

From the perspective of company owners and directors, this decision is an important guide. It confirms that not every family connection automatically means "extended danger" in insolvency. If you do business with your relative's company, the law (absent other special circumstances) views you as two independent companies. The insolvency trustee must therefore manage to challenge a suspicious transaction within one year of the commencement of insolvency – otherwise, they are out of luck. Conversely, for truly close or connected parties (typically when a director transfers assets to their own second company or to their spouse's company, etc.), the risk period is three years.

Impacts on directors and company owners

You might say: "Great, so if I transfer assets to my brother's company, I'm safe after a year." Beware – it is not that simple, and our Prague-based legal team at ARROWS often warns clients against a false sense of security. Although the Supreme Court judgment clarified the legal qualification (sibling companies ≠ close parties), the risks in insolvency remain high. What are the main lessons and what should you watch out for?

1. Even transactions with an "unrelated" company can be void if they are disadvantageous to your company. The law allows challenging any transaction without adequate consideration (i.e., if your company performed but did not receive corresponding value) made in the year before bankruptcy. So, if you send 10 million to a "friendly" company a few months before going bankrupt and do not receive real consideration for it, the trustee will challenge it anyway – regardless of who owns the other company. The court will examine the substance of the transaction: was it a fair deal, or just a way to siphon off money? Emotions and family ties play no role; objective adequacy of performance is what matters.

2. If insolvency is looming, be cautious with every major payment. Directors often believe until the last moment that the company can be saved, and in doing so, they may imprudently create a preferential position for selected creditors. For example, you pay off a debt to a relative or an affiliated company at the last minute, while other creditors receive nothing. Such a payment is also a preferential legal act that can be invalidated in insolvency, with the money being clawed back. Moreover, you put yourself at risk – if you knowingly prefer one creditor to the detriment of others, other creditors or the trustee can claim damages from you, and in extreme cases, criminal prosecution may also loom (so-called harming a creditor).

3. A family business does not necessarily equal a concern. Many owners automatically assume that if they do business "as a family" and help each other out, it is a concern or acting in concert. Do not be misled – legally, this may not be the case. A concern is defined quite strictly under Czech legislation (one company must have a controlling influence over the other, or there must be a management contract or de facto unified management). Regular sibling or other family assistance often does not meet these criteria.

Why is this important? If you are not a concern, certain exceptions (such as the mentioned 3-year look-back period) do not apply to you. The Czech legal team at ARROWS routinely analyzes the structure of our clients' companies and points out whether they fall under the definition of a concern or not. It is good to know this in advance – it will help you correctly assess the risks.

4. One owner of two companies = high risk. The opposite extreme to siblings is a situation where one natural person controls two or more companies at the same time. There, on the contrary, the law is completely clear: such companies are treated as close parties. So, if you personally are the sole director and shareholder in company A and at the same time own company B, any asset transfers between A and B can be challenged in insolvency up to 3 years back. In our practice, ARROWS frequently encounters cases where entrepreneurs shift assets between their "sister" companies – either for optimization or, in worse cases, to protect assets from creditors. We point out that such steps are very easily challenged and courts can uncover them.

How to minimize risk? (Practical tips)

The good news is that with appropriate prevention and legal guidance, unnecessary disputes and penalties can be avoided. Here are recommendations from ARROWS lawyers on how to proceed safely in transactions between affiliated companies:

• Ensure market conditions. Enter into every transaction with a close party's company (even if legally formally "foreign") under fair conditions. The price should correspond to the usual market price, and the services must actually be provided. Document how you arrived at the price – for example, with a valuation or a comparison of competitors' offers. This will prove that there is no friendly favoritism involved.

• Get everything properly in writing. Even if you are doing business "in the family", draft a standard contract. Describe the performance, deadlines, penalties for breach – in short, just like with any other business partner. Do not underestimate invoicing – issue and pay invoices on time so it does not look like you were strangely shifting money around without paperwork. If the insolvency trustee then sees a proper contract and documents, it will be harder for them to claim that the transaction was merely sham. Our lawyers at ARROWS routinely help clients set up contracts even between affiliated companies so that they can withstand potential scrutiny.

• Monitor your company's financial health. It may sound obvious, but early diagnosis of impending insolvency is key. If you know a problem is looming, limit transfers of larger amounts to affiliated entities. It is better to consult with a lawyer or an insolvency specialist about what you can still pay out and what might already be challengeable. Sometimes it is better to wait or choose a different approach rather than deal with court battles over returning money later.

• Do not forget tax aspects. Transactions within the circle of related parties interest not only insolvency trustees but also tax authorities. If the price were significantly different from the usual market price, you risk a tax reassessment (e.g., due to disguised profit distribution or non-recognition of expenses). This is yet another reason to keep everything within market limits and transparent.

• Keep personal liability in mind. If you are a member of a statutory body, the law expects you to act with due managerial care – fairly towards all creditors. If insolvency proceedings were to occur and it was proven that your actions (such as transferring assets to a relative) caused damage to creditors, you could bear personal financial liability. In extreme cases, courts decide on the disqualification of directors from office, or creditors can sue them for damages. Therefore, always ask yourself: "Is this step defensible before all creditors? Am I inappropriately favoring someone?" If you are unsure, it is better to discuss it with a lawyer.

Be cautious and seek advice

Transactions between affiliated entities can be a ticking time bomb if insolvency occurs. Knowing the current case law – such as the described Supreme Court judgment – will help you understand the risks and avoid mistakes. Let's summarize the main findings:

• An insolvency trustee can challenge suspicious acts of the debtor. For regular business partners, 1 year retrospectively; for close/affiliated persons, up to 3 years. The difference is fundamental and can involve millions.

• Not every family connection is considered a "close party". Companies of two siblings are not automatically close parties. Similarly, a company is not a close party to the husband of its female director or the son of its female owner – it always depends on formal influence and involvement in the company.

• Nevertheless, no advantage applies absolutely. Even if your transaction does not fall under the close parties regime, it can be invalidated if it took place in the last year before bankruptcy and met the criteria of preference or a transaction without consideration. Act transparently and fairly to withstand potential scrutiny.

• Prevention and professional advice are the best defense. If you have doubts about whether a step you intend to take could one day cause problems, take advantage of a consultation with a lawyer. You will save yourself a lot of worry in the future.

Many statutory bodies and company owners already trust the ARROWS team in the area of insolvency and corporate law. Our experienced lawyers routinely resolve situations where it is necessary to set up safe relationships between affiliated companies or defend a client in an incidental dispute before an insolvency court. If you are troubled by similar questions, do not delay the solution. We are ready to analyze your specific conditions, propose effective measures, and, if necessary, represent you and protect your legitimate interests. Contact us today and see for yourself that reliable legal advice is the best foundation for peaceful business. Your security and peace of mind are worth it.