Trust, svěřenský fond nebo holding

At a Strategic Crossroads: When Is It Time to Structure Your Assets and Business?

There are several key moments that clearly signal it is high time to consider a more sophisticated structure. These include in particular:

• The need for risk diversification: If your valuable assets, such as real estate, intellectual property, or financial reserves, are part of an operating company, they are fully exposed to its business risks. A single failed project or lawsuit can jeopardise everything you have built over the years.

• Succession planning: You want to ensure a smooth transfer of the company to the next generation without the risk of disputes among heirs or the fragmentation of assets, which could paralyse the company's operations.

• Preparing for an investor's entry or the sale of the company: Every transaction requires a clean, transparent, and legally separate structure. A well-organised company has a significantly higher value for potential buyers or investors, and the entire due diligence process is considerably simpler.

• Effective profit management: Your company generates profits that exceed your personal consumption, and you are looking for a tax-efficient way to reinvest them in new projects without having to pay them out and re-contribute them at a high cost.

The model where you hold all activities and assets under a single company becomes unsustainable at a certain stage of growth. In such a setup, the failure of one part of the business can fatally threaten the healthy core of your company as well as your personal assets. It is at this moment that two essential tools come into play: the trust fund and the holding structure.

The Trust Fund: An Impenetrable Fortress for Your Assets

The trust fund, regulated in Czech law since 2014 in the Civil Code (Section 1448 et seq.), represents a unique and powerful tool for asset protection. Its fundamental essence is not the creation of a new company, but the segregation of a portion of your assets, which legally cease to be yours through this step. This creates "separate and independent ownership" that de jure belongs to no one—neither you, nor the trustee, nor the persons who are to benefit from it.

Who Plays What Role?

The functioning of a trust fund is based on three key figures:

• The Founder: The architect of the entire structure. The founder segregates the assets and, most importantly, defines all the rules for its operation in a key document—the statute.

• The Trustee: The most important and responsible role. The trustee manages the segregated assets with what is known as full administration, meaning they are obliged not only to maintain but also to grow the assets. They must act with due managerial care and strictly according to the rules of the statute. In public registers, such as the Land Register, the trustee is registered as the owner, but with the note "trustee".

• The Beneficiary: The person (or group of persons) for whose benefit the fund is established. They have the right to receive distributions from the fund—either one-off or regular—under the conditions set by the founder in the statute.

The Statute – The Immutable Foundation of the Fund

The cornerstone of every trust fund is its statute, which must be in the form of a public deed (a notarial deed). This document is critically important because, once the fund is established, it is essentially unchangeable. Neither the founder nor the trustee can arbitrarily change the rules of the game; a change can only be permitted by a court under very strict conditions, and always with the aim of preserving the original purpose of the fund. This is precisely why it is essential to devote maximum attention to the preparation of the statute and to anticipate decades ahead.

When Does a Trust Fund Make the Most Sense?

• Maximum asset protection: Separating assets from business risks, potential enforcement proceedings, insolvency, or family disputes (e.g., in a divorce).

• Detailed succession planning: A trust fund is a sophisticated and flexible alternative to a will. It allows for setting precise conditions under which assets will be transferred to the next generation (e.g., upon reaching a certain age, completing education, or demonstrating the ability to manage the assets).

• Ensuring discretion: Although the fund must be registered in the Register of Trust Funds and the Register of Beneficial Owners, information about the beneficiaries and the founder is not in the public part of the register. This provides a higher degree of privacy than direct ownership of assets.

Since the trust fund is still a relatively new institution in Czech law with limited case law, its establishment presents not only an opportunity but also a risk. The value of expert legal services lies not in merely filling out a template, but in the ability to "program" the future of your family and assets into a robust legal document that will stand the test of time. At ARROWS, our specialists will help you prepare a statute that precisely matches your long-term goals.

The Holding Structure: An Engine for Growth and Flexible Management of Your Business

Unlike a trust fund, a holding is not a specific legal form but an organisational arrangement of a business. In practice, this means you establish a new, so-called parent company, which owns the business shares in your existing operating (subsidiary) companies. This model is ideal for active management, growth, and flexible administration of a corporate group.

Holding vs. Concern: A Crucial Legal Distinction

Although these terms are often used interchangeably, there is a vast legal difference between them. A holding is merely a description of an economic arrangement. In contrast, a concern is a legal term defined in Section 79 of the Business Corporations Act (ZOK) as a group subject to unified management. If you voluntarily declare yourself a concern (e.g., by a statement on your website), you gain the right to issue strategic instructions to subsidiary companies, even if they are currently disadvantageous for them, without exposing yourself to the risk of liability for any harm caused.

When Is a Holding Structure the Ideal Solution?

• Separation and protection of assets: The primary motivation is to segregate valuable assets (real estate, trademarks, financial reserves) into the safety of the parent company, while operational risks remain isolated in the subsidiary companies.

• Tax efficiency for reinvestment: A key advantage is the exemption from income tax on profit shares (dividends) paid by a subsidiary to its parent company. This applies if conditions are met, typically holding at least a 10% share for 12 months. This allows capital to be accumulated at the holding level and efficiently allocated to other projects without further tax burden.

• Strategic management and flexibility: A holding allows for the centralisation of key functions such as finance, HR, or IT, thereby achieving operational savings. At the same time, it is very easy to sell just one subsidiary company (one business segment) or, conversely, to acquire a new company without disrupting the rest of the group.

Recent decisions by the Supreme Administrative Court have confirmed that a holding is a legitimate business management tool. However, the key to its defensibility before the tax authorities is not the mere existence of the structure, but the ability to prove its real economic reason, which goes beyond mere tax savings.

Direct Comparison: Which Path Is Right for You?

The choice between a trust fund and a holding structure depends exclusively on your strategic goals. There is no one-size-fits-all solution. The following comparison will help you navigate the key differences. A trust fund and a holding structure pursue different objectives and differ primarily in the way assets are managed, their flexibility, and their use in intergenerational transfers.

A trust fund is mainly used for asset protection and succession planning. Assets are segregated into a separate structure and managed by a trustee for the benefit of designated beneficiaries. Its advantage is primarily the ability to set long-term rules for the management and future transfer of assets. However, compared to a holding, it tends to be less flexible, as changes to the established structure can be legally and administratively more demanding.

A holding structure, on the other hand, is more suitable for active business management, group growth, and efficient asset administration. It operates through ownership relationships between individual companies and allows for a more flexible response to business changes. Companies can be added to, sold from, or reorganised within the structure, making the holding more adaptable to current business needs.

Differences also appear in the areas of taxation and administration costs. With a trust fund, one must primarily account for the costs of the trustee, administration, and ongoing compliance with legal obligations. With a holding, the administrative and tax complexity depends mainly on the number of companies and the intricacy of the entire group. In both cases, therefore, the specific setup must be based on the owner's tax situation and the purpose of the entire structure.

From the perspective of asset protection against creditors, a trust fund can provide a stronger separation of segregated assets from the founder's personal property. However, this protection is not absolute and cannot be used for the deliberate siphoning of assets to the detriment of creditors. In a holding, the individual companies are also legally separate, but the shares in them remain the property of their owners and can, under certain circumstances, be subject to enforcement of judgments.

A significant difference also arises in inheritance and the transfer of assets to the next generation. A trust fund allows for pre-set rules according to which the assets will be managed and provided to beneficiaries, without the fund's assets themselves typically passing through inheritance proceedings. With a holding structure, on the other hand, the issue of succession must be addressed in advance through appropriate ownership arrangements, corporate documents, and potentially other succession mechanisms.

An incorrect choice of structure can have fatal consequences. It is not just inefficient, but it can actively harm your business and assets.

Beyond Borders: Asset Management in an International Context

In today's globalised world, the choice of structure is not just a local matter. It must be "globally compatible" to function effectively when managing foreign assets or expanding into new markets.

A holding structure is a more universally understandable and robust tool in this regard. The principle of parent and subsidiary companies is standard worldwide, which facilitates establishing branches, dealing with banks, and tax optimisation on an international scale.

Conversely, a Czech trust fund, which has no legal personality, may encounter practical problems with recognition abroad. Foreign authorities, banks, or business partners may not understand the concept of assets "without an owner," which can complicate the management of foreign real estate, bank accounts, or company shares.

Thanks to our ARROWS International network, built over ten years, and our daily experience with issues involving an international element, we can ensure that your chosen structure is functional and legally recognised abroad. Whether you need to establish a subsidiary in Germany or manage real estate in Spain through a fund, our partners will ensure a smooth process.

A Strategic Decision Requires an Expert Partner

As is evident, the decision between a trust fund and a holding structure is complex and requires a deep knowledge of corporate, civil, and tax law. It is not about choosing from a catalogue but about creating a tailor-made solution that will serve your goals for decades. A poor setup at the beginning can lead to millions in additional tax assessments, the invalidity of legal acts, and lengthy court disputes.

Our experience from providing long-term services to our clients is key. Our portfolio includes more than 150 joint-stock companies and 250 limited liability companies, which demonstrates our deep expertise in corporate matters. At ARROWS, we provide all necessary services under one roof—from the initial strategic analysis, through the drafting of internal directives and statutes, preparation of complete contractual documentation, representation before courts and administrative authorities, to tax advisory and defence during audits.

We pride ourselves on speed, high quality, and added value. We know how to connect our clients if we see interesting investment or business opportunities, and we are also happy to listen to your business ideas.

Are you at a strategic crossroads, considering the best way to protect and grow your assets? Our lawyers are ready to help you—write to us, and together we will find a tailor-made solution for your future.