Structuring Investment Clubs and Private Equity Groups in the Czech Republic

What we are currently addressing: From an informal club to a professional fund

The collection of funds from investors for the purpose of joint investment falls under the scope of Act No. 240/2013 Coll. (ZISIF) and requires authorization or registration in the list maintained by the Czech National Bank (ČNB).

Many entrepreneurs do not realize that the moment they start collecting funds and investing them under unified management according to a set strategy, they may meet the definition of collective investment. If you carry out this activity without authorization, you face penalties.

The Czech legal team at ARROWS law firm often addresses situations where clients underestimated the boundary between a "club" and an "unlicensed fund", while subsequent legalization and negotiations with the regulator are significantly more demanding.

Main legal categories of investment groups in the Czech Republic

To understand the obligations, we must clarify how Czech law, as of 2026, distinguishes between individual types of investment structures. This distinction has a direct impact on tax burden, reporting to the ČNB, and legal liability.

Asset management under Section 15 of ZISIF

In practice, this is the most common legal form for smaller investment groups and clubs. These are managers who manage assets comparable to investment management but do not exceed the relevant asset threshold. These entities must register in the list maintained by the ČNB, fulfill reporting obligations, and must not exceed the relevant threshold; however, they are not subject to ČNB supervision and must inform investors of this in advance.

The circle of investors is limited: as a rule, an investor must invest at least EUR 125,000 and pass a suitability assessment; a maximum of 20 investors may fail to meet this threshold (Section 15 of ZISIF). Entities registered in the list before July 1, 2024, have a transitional period until July 1, 2026, to meet the EUR 125,000 minimum, information obligations, and submission of the auditor's report (Art. II of Act No. 163/2024 Coll.). In their business name, they must use the designation "venture capital entity" and must not use the word "fund" in it.

Funds of Qualified Investors (FQI)

An FQI is a robust and prestigious model for groups of wealthier investors. It is intended exclusively for qualified investors – i.e., persons who meet the statutory conditions. A qualified investor is typically a person who invests at least EUR 125,000, or at least CZK 1,000,000 if the manager or administrator confirms in writing that the investment corresponds to their financial background, objectives, knowledge, and experience (Section 272 of ZISIF); regardless of the amount, professional clients, for example, are considered qualified investors.

An FQI structure, if it meets the definition of a so-called basic investment fund under the Income Tax Act, can benefit from a reduced corporate income tax rate of 5%. The fund must have a manager and, as a rule, a depositary.

Venture Capital Funds and Private Equity

These funds specialize in investing in startups or established companies. They often operate as funds of qualified investors or as structures under Section 15 of ZISIF. They have specific features in the areas of valuation and risk management.

Regulatory framework and obligations towards the Czech National Bank

Once an investment group falls under ZISIF regulation, the scope of obligations depends on the type of entity. Investment funds and their managers are subject to ČNB supervision; entities under Section 15 of ZISIF are only registered in the ČNB list and are not subject to ČNB supervision. The ČNB and legislation require, in particular, the following points.

• Authorization or registration: The manager must have authorization. For an FQI, the manager needs a ČNB authorization (investment company or self-managed fund) and the fund is registered in the list maintained by the ČNB; for "mini-funds", this involves registration in the list under Section 15 of ZISIF.

• Fund depositary: As a rule, an FQI must have a depositary, typically a bank, which monitors cash flow and asset management; the law allows an exception for funds under Section 96(a) and (b), i.e., qualified venture capital and social entrepreneurship funds (Section 83 of ZISIF). The depositary bears responsibility for ensuring that the fund's assets are recorded and managed in accordance with the law.

• Asset valuation: Investment funds value assets and liabilities from investment activities at fair value (Section 196 of ZISIF). For real estate and non-publicly traded shares, an appropriate, transparent, and verifiable valuation method must be used.

• AML obligations: Administrators of investment funds as well as entities managing assets under Section 15 of ZISIF are obliged entities under Act No. 253/2008 Coll. and must perform client identification and due diligence.

Administration and licensing

Establishing a fund is not just about drafting articles of association. It is a process involving the setup of internal regulations, risk management, compliance, and reporting. The ČNB does not approve the articles of association or the statute of an FQI; the law requires approval of the statute for standard funds. An FQI is registered in the list maintained by the ČNB. The Prague-based ARROWS law firm's legal team handles the complete process from structural design, through communication with the depositary and auditor, to the finalization of the submission to the ČNB.

Tax aspects and obligations towards the tax authority

Tax optimization is a frequent reason for establishing investment structures, but the rules are strict. It is necessary to distinguish between different tax regimes.

Tax regimes

• Standard business corporations (s.r.o., a.s.): Subject to the standard corporate income tax rate, which is 21% in 2026.

• Basic investment funds (FQI): If the fund meets the definition of a basic investment fund, a 5% rate applies. Note: Not all FQIs achieve this rate automatically.

• Taxation of investors: Profit shares (dividends) paid to investors (individuals) are subject to a 15% withholding tax.

Time test and exemption

For individuals, income from the sale of securities is exempt from income tax if the period between acquisition and sale exceeds 3 years. For shares in an s.r.o. (limited liability company), this time test is 5 years.

Tax risks

Tax authorities focus on the so-called abuse of law. If a fund is established purely for tax purposes without economic justification just to obtain the 5% rate, the tax administrator may deny the benefit and assess the tax in full, including penalties. The legal team at ARROWS cooperates with tax advisors to ensure that the fund's structure is defensible and in line with current case law.

Contracts and internal structure of the fund

Quality contractual documentation prevents future disputes. Setting up documents correctly protects the interests of both founders and investors.

Articles of association and fund statute

The statute is the fundamental document defining the investment strategy, risk profile, fee policy, and investor rights. It must comply with ZISIF. Any ambiguity in the statute can turn against the manager.

Shareholders' Agreements (SHA)

In the case of private equity groups, a Shareholders' Agreement (SHA) is key. It regulates relations between shareholders beyond the scope of the articles of association, such as exit rules, non-compete clauses, or deadlock resolution.

Compliance and monitoring – life with regulation

Obligations do not end with registration; they begin. Compliance is an ongoing process that requires constant attention. Both investment funds and entities under Section 15 of ZISIF fulfill regular reporting obligations to the ČNB; in practice, reports are submitted via the SDAT system.

For funds of qualified investors, limits on investment strategy, leverage, and liquidity are monitored according to the statute, and the manager must prioritize the interests of investors over their own. For entities under Section 15 of ZISIF, it is crucial to monitor in particular the relevant threshold (EUR 100 million, or EUR 500 million if statutory conditions are met, Section 16 of ZISIF) and the conditions for investors. The Czech legal team at ARROWS law firm provides external compliance services, where we oversee reporting deadlines and the compliance of internal processes with legislation.

Public offer vs. private distribution

A critical point is the way the fund acquires investors. We distinguish between public and private offers. A public offer of securities generally requires the publication of a prospectus approved by the ČNB, unless one of the exemptions under Regulation (EU) 2017/1129 on the prospectus applies; preparing a prospectus is costly and complex.

Most FQIs and private groups therefore operate under a private offer regime or an offer intended exclusively for qualified investors. If you were to promote the fund publicly without meeting the statutory conditions, you would be committing an administrative offense.

Solving problems in practice – when to contact a lawyer

The best defense is prevention, but in practice, we also resolve crisis situations. A rapid response can mitigate the impact on the fund's operations. If you receive a notice of the initiation of an inspection or a request for explanation from the ČNB, it is essential to involve an attorney immediately.

We often resolve disagreements regarding strategy or profit distribution, where we apply mechanisms from shareholders' agreements. The liquidation of a fund is then a formal process involving the settlement of assets, communication with the ČNB, and deletion from the register. Lawyers from the Prague-based ARROWS law firm have experience representing clients before the ČNB and courts in capital market matters.

Conclusion

The legal framework for investment clubs and groups in 2026 is strict, and mistakes are not forgiven. The decision between an informal club, registration under Section 15 of ZISIF, and a full FQI should be backed by a thorough legal analysis.

The Czech legal team at ARROWS law firm combines knowledge of financial law, corporate law, and tax issues.

We help clients set up structures so that they are secure, tax-efficient, and compliant with regulations. If you are planning to establish an investment group or need a review of your existing structure, contact us at consultation@arws.cz.