Overview of the SICAV Fund's Annual Obligations

For international investors running a SICAV in the Czech Republic, understanding annual compliance duties is key. This guide outlines the reporting, filing, and governance obligations you must meet. With our Prague-based law firm’s extensive experience assisting foreign clients, we provide clear guidance to help you stay compliant.

Need advice on this topic? Contact the ARROWS law firm by email office@arws.cz or phone +420 245 007 740. Your question will be answered by "JUDr. Jakub Dohnal, Ph.D., LL.M.", an expert on the subject.

The Foundation: Why Annual Compliance for Your Czech SICAV is Crucial

Establishing an investment fund in the Czech Republic, particularly in the form of a SICAV (société d'investissement à capital variable), offers significant strategic advantages. The structure provides access to a preferential 5% corporate income tax rate for basic investment funds, a reputable base within the European Union, and the ability to passport investment activities across the single market. These benefits make the Czech Republic an attractive and transparent alternative to traditional offshore jurisdictions.

However, securing these advantages is only the first step. Preserving them requires diligent and continuous adherence to a set of annual compliance obligations. These duties are not merely administrative hurdles; they are the legal foundation that ensures your fund's good standing, protects its preferential tax status, and maintains investor confidence. 

The primary legal framework governing these vehicles is Act No. 240/2013 Coll., on Management Companies and Investment Funds (AMCIF), which aligns Czech law with core EU directives.

It is critical for foreign managers to recognize that this legal landscape is not static. Since the SICAV structure was introduced in 2013, the AMCIF has undergone numerous amendments to harmonize with evolving EU regulations and resolve inherent conflicts between public regulatory law and private Czech corporate law.

This constant evolution means that a compliance strategy based on last year's rules may be insufficient for this year's requirements. Annual compliance is therefore an active process of risk management against a dynamic legal backdrop, making up-to-the-minute legal counsel a fundamental necessity.

Your Annual Corporate Checklist: The Duties of a Czech Joint-Stock Company

A Czech SICAV is a unique hybrid: it is a regulated investment fund, but its legal form is that of a joint-stock company (akciová společnost). This dual nature creates two parallel sets of annual obligations. While fund managers often focus on the fund-specific regulations enforced by the Czech National Bank, they must not overlook the fundamental corporate governance duties mandated by the Czech Business Corporations Act. Failure to comply with these corporate rules can lead to penalties and operational disruption, irrespective of how well the fund-specific duties are met.

What Are Your Financial Reporting and Filing Duties?

Every Czech SICAV must adhere to a strict annual financial reporting and disclosure cycle. The statutory body—typically the board of directors—is responsible for preparing and submitting a comprehensive package of documents for review and approval.

The core components of this annual filing include:

• Annual Financial Statements: These must be prepared in accordance with Czech accounting standards as of the last day of the company's financial year. The statements must provide a true and fair view of the fund's assets, liabilities, and financial position.
• Annual Report: For companies subject to a statutory audit, the financial statements form part of a broader annual report. This report must also contain a detailed review of the company's business activities during the past year, the current state of its assets, and a forecast of its expected future development.
• Report on Relations: If the SICAV is part of a larger corporate group, its statutory body must prepare a specific "report on relations" within three months of the financial year-end. This document details the structure of the relationships within the group, summarizes reciprocal contracts, and assesses the advantages and disadvantages arising from the company's position within the group.

The deadline for these preparations is critical: the financial statements must be prepared and submitted for approval to the General Meeting within six months of the end of the financial year. Once approved, the company has 30 days to file the complete package—including the resolution approving the statements—with the Collection of Deeds of the Commercial Register. A crucial long-stop date exists: documents must be filed within 12 months of the balance sheet date, even if the General Meeting has not formally approved them.

Must You Hold an Annual General Meeting (AGM)?

Yes. As a joint-stock company, a SICAV is legally required to convene an Annual General Meeting (AGM) of its shareholders at least once per accounting period. The primary purpose of the AGM is to discuss and approve the annual financial statements and decide on the allocation of profit or settlement of losses. In practice, this meeting must be held within six months of the end of the financial year to meet the financial statement approval deadline.

Proper convocation of the AGM involves several formal steps. Shareholders must receive a written invitation at least 30 days before the meeting date. The invitation must be published on the company's website and include the date, time, location, and a detailed agenda with draft resolutions. 

For the AGM to be quorate and its resolutions valid, shareholders holding at least 30% of the company's share capital must be present, either in person or by proxy. ARROWS regularly assists clients with the entire AGM process, from drafting invitations and resolutions to preparing the official minutes, ensuring full compliance with the Business Corporations Act.

FAQ – Legal tips about corporate filings

• What happens if our AGM fails to approve the financial statements?
  Even if shareholders do not approve the financial statements, the company is still legally obligated to file them with the Commercial Register. The law sets a final deadline of 12 months from the balance sheet date for this filing, regardless of approval, to ensure public transparency. Failure to meet this deadline can result in penalties. For assistance with complex shareholder matters, contact us at office@arws.cz.

• Do we need a notary for our AGM?
  A notarial deed is not required for a routine AGM that only approves financial statements. However, the presence of a notary is mandatory for certain significant decisions, such as amending the company's articles of association, increasing or decreasing share capital, or approving a corporate transformation like a merger. To clarify the requirements for your specific agenda, get tailored legal solutions by writing to office@arws.cz.
• Can our foreign directors attend the AGM remotely?
  Yes, Czech law permits remote participation in General Meetings, provided this is allowed by the company's articles of association. The company must establish clear and secure procedures for verifying the identity of remote participants and ensuring the integrity of the voting process. Our lawyers are ready to help you implement compliant remote meeting policies – email us at office@arws.cz.

Reporting to the Regulator: Your Obligations to the Czech National Bank (ČNB)

Beyond its corporate duties, a SICAV is a regulated financial entity subject to the direct oversight of the Czech National Bank (ČNB). The ČNB acts as both the licensing authority and the ongoing supervisor for all investment funds operating in the country. 

A core component of this supervision involves regular and detailed reporting, which allows the ČNB to monitor the fund's activities, assess risks to the financial system, and ensure investor protection. These reporting obligations commence immediately after the fund is licensed and registered in the Commercial Register.

What Information Does the ČNB Require Annually?

The specific content and frequency of reporting to the ČNB are governed by several key pieces of legislation, most notably Decree No. 267/2020 Coll., on reporting by a manager and an administrator of an investment fund, and Decree No. 424/2017 Coll., on the reporting duties of some entities operating on the capital market. These regulations mandate the submission of detailed data related to the fund's portfolio, assets under management, risk exposures, and compliance with investment limits.

All submissions must be made electronically through the ČNB's dedicated information system, known as SDAT. Foreign managers should be aware that navigating the SDAT system can be challenging, as its technical specifications, methodological guides, and user interface are often available only in the Czech language. 

This underscores the importance of having local legal counsel to manage these submissions correctly. This entire process falls under the ČNB's mandate of prudential supervision, where it ensures the stability of the financial market. The act of preparing and submitting this data is known as compliance reporting.

Risks and penalties	How ARROWS helps
Incorrect or late data submission to the SDAT system, leading to ČNB inquiries and potential sanctions.	Legal consultations to prevent inspections: We ensure your data is correct and submitted on time. Need help with ČNB reporting? Email us at office@arws.cz.
Failure to understand Czech-language reporting methodologies, resulting in non-compliant submissions.	Drafting documentation to prevent fines: Our team navigates the Czech SDAT system and its requirements for you. Get tailored legal solutions by writing to office@arws.cz.
Inadequate internal processes for data collection, causing reporting gaps and regulatory scrutiny.	Preparation of internal company policies: We help you design robust internal systems for seamless compliance. For immediate assistance, write to us at office@arws.cz.

Meeting Tax Deadlines: The Annual Corporate Income Tax Return

One of the most compelling reasons for choosing a Czech SICAV is its tax efficiency. A "basic investment fund" is subject to a highly favorable 5% corporate income tax (CIT) rate on its profits, a significant reduction compared to the standard corporate tax rate. 

However, benefiting from this rate is contingent upon timely and accurate annual tax filings. The deadline for filing the CIT return and paying the corresponding tax liability is the same, but the specific date can vary, which is a common source of confusion for foreign entities.

How Do You Determine Your Tax Filing Deadline?

The deadline for filing the annual CIT return for a SICAV depends on its specific circumstances, particularly how the return is prepared and filed. There are three potential deadlines, all calculated from the end of the fund's tax period (which for most is the calendar year ending December 31):

1. Standard Deadline (3 Months): The default deadline is three months after the end of the tax period. For a fund with a calendar tax year, this would be April 1 of the following year. This deadline applies to paper submissions.

2. Electronic Filing Deadline (4 Months): If the tax return is filed electronically, which is mandatory for most legal entities, the deadline is automatically extended to four months after the end of the tax period. For a calendar-year fund, this would be May 1.

3. Extended Deadline (6 Months): The deadline is extended to six months after the end of the tax period under two conditions: if the company is legally required to have its financial statements audited by a statutory auditor, or if the tax return is prepared and filed by a registered tax advisor based on a power of attorney. This pushes the deadline to July 1 for a calendar-year fund.

Given the complexities of fund accounting and taxation, most SICAVs will fall under the six-month deadline. It is crucial to confirm your fund's specific situation and ensure that both the tax return filing and the tax payment are completed by the applicable date to avoid penalties.

Risks and penalties	How ARROWS helps
Missing the tax filing deadline, resulting in late filing penalties calculated daily (0.05% of assessed tax per day).	Legal consultations: We coordinate with your tax advisors to ensure all deadlines are met. Our lawyers are ready to assist you – email us at office@arws.cz.
Incorrectly calculating the tax liability, leading to tax audits, back payments, and interest on late payments.	Legal opinions: We provide legal analysis on complex tax matters to support your tax filings. Do not hesitate to contact our firm – office@arws.cz.
Failure to qualify for the 5% CIT rate due to non-compliance with investment criteria, triggering the standard corporate tax rate.	Contract drafting or review: We review your fund's structure and activities to ensure ongoing eligibility for the preferential tax rate. Need legal help? Contact us at office@arws.cz.

The Czech Advantage: How Prague Compares to Other EU Fund Hubs

For sophisticated international investors, the choice of fund domicile is a strategic decision often involving a comparison between several leading European jurisdictions. While Luxembourg and Ireland are the largest and most established hubs for investment funds in the EU, the Czech Republic offers a compelling and competitive alternative that combines the best features of different models. Understanding these differences highlights the unique value proposition of operating a SICAV from Prague.

Prague vs. Luxembourg and Dublin: A Practical Comparison

The Czech SICAV framework was designed with a clear awareness of other European fund structures, resulting in a hybrid model that offers both robust governance and modern flexibility.

A key operational advantage is the ability for a Czech SICAV to prepare separate financial statements for each of its sub-funds. This feature, which mirrors the structure of the popular Irish Collective Asset-management Vehicle (ICAV), is highly valued by managers of umbrella funds. It simplifies administration, reduces costs, and ensures that investors in one sub-fund only receive financial information relevant to their specific investment, rather than a complex report for the entire umbrella structure.

From a tax perspective, the Czech Republic is highly competitive. Like Ireland, it does not impose an annual subscription tax on the fund's net assets. This contrasts with Luxembourg, which levies a taxe d'abonnement, creating a direct cost advantage for funds domiciled in Prague.

In terms of corporate governance, the Czech SICAV follows a more traditional path. It requires an Annual General Meeting, similar to a standard joint-stock company, ensuring a formal and structured forum for shareholder decisions. 

This differs from the Irish ICAV, where the board of directors can elect to dispense with the AGM entirely by giving written notice to shareholders. For investors who value traditional corporate oversight, the Czech model provides a greater degree of formal shareholder engagement.

As an international law firm operating from Prague, European Union, ARROWS is uniquely positioned to advise clients on these cross-border considerations. Our expertise is supported by the ARROWS International network, which has been built over 10 years and now operates in 90 countries worldwide, enabling us to handle complex multi-jurisdictional matters seamlessly.

FAQ – Legal tips for cross-border fund management

• Can our Czech SICAV be managed from another EU country?
  Yes. Under EU directives such as AIFMD and UCITS, a licensed fund manager in one EU member state can "passport" its services to manage a fund in another member state. This allows for significant operational flexibility, enabling you to use a manager based in, for example, Luxembourg or Dublin to manage your Czech-domiciled SICAV. For assistance with cross-border management agreements, write to us at office@arws.cz.
• How does the Czech Republic's double taxation treaty network help foreign investors?
  The Czech Republic has a large and well-established network of double taxation treaties with over 90 countries around the world. These treaties are crucial for international investors as they prevent income from being taxed twice—once in the Czech Republic and again in the investor's home country. They can also reduce or eliminate withholding taxes on dividends and interest payments, enhancing the overall return on investment. Get a tailored legal analysis by contacting us at office@arws.cz.

How to Avoid Costly Mistakes and Ensure Flawless Compliance

Navigating the annual obligations of a Czech SICAV requires precision and foresight. The consequences of non-compliance are not merely administrative; they can have significant financial and reputational repercussions that undermine the very purpose of the investment vehicle. Understanding these risks is the first step toward implementing a robust compliance strategy that protects your fund, your investors, and your management team.

What Are the Financial and Reputational Costs of Non-Compliance?

The Czech National Bank is an active and vigilant supervisor with broad powers to enforce compliance. For administrative offenses related to investment fund regulations, such as failing to meet reporting duties or violating prohibitions, the ČNB can impose substantial fines of up to CZK 10,000,000 (approximately EUR 400,000). Beyond financial penalties, the ČNB can launch formal investigations, demand corrective measures, and, in severe cases, revoke a fund's license.

The indirect costs of a compliance failure can be even more damaging. A regulatory investigation can consume vast amounts of management time and resources, diverting focus from the fund's core investment strategy. Furthermore, any public sanction or regulatory action can severely damage the fund's reputation, eroding the trust of current and potential investors and making it more difficult to raise capital in the future.

Risks and penalties	How ARROWS helps
Conflict of interest between founder and investor shareholders, leading to disputes and potential litigation.	Preparation of internal company policies: We draft clear governance rules and shareholder agreements to mitigate internal conflicts. Get tailored legal solutions by writing to office@arws.cz.
Failure to maintain adequate AML/CFT procedures, risking severe sanctions from the ČNB and reputational damage.	Professional training for management: We provide certified training to ensure your team understands and implements AML/CFT obligations correctly. For immediate assistance, write to us at office@arws.cz.
Legislative changes rendering existing fund statutes non-compliant, creating unforeseen legal exposure.	Representation before public authorities: We monitor legal changes and proactively advise on necessary updates to your documentation. Our lawyers are ready to assist you – email us at office@arws.cz.

What’s Your Next Step for a Secure and Compliant SICAV?

Ensuring flawless annual compliance is an ongoing commitment that requires specialized local expertise. The complexities of Czech corporate law, the specific requirements of the ČNB, and the dynamic nature of the legal framework demand a proactive and diligent approach. Attempting to manage these obligations without expert guidance exposes your fund to unnecessary financial and reputational risks.

Our team at ARROWS, a law firm based in Prague, European Union, provides a full suite of compliance services designed specifically for foreign-managed investment funds. Our services include drafting all legally required documentation, providing representation before the ČNB and other authorities, offering professional training for management on topics like AML, and delivering ongoing legal consultations to keep you ahead of regulatory changes. We handle the complexities of compliance so you can focus on your investment strategy.

To ensure your SICAV operates smoothly and securely, contact our expert team today for a confidential consultation. Email us at office@arws.cz.

FAQ – Most common legal questions about Czech SICAV Annual Obligations

• What are the three most critical annual deadlines for a Czech SICAV?
  The three key deadlines to track are: 1) The approval of the annual financial statements by the AGM, which must occur within six months of the financial year-end; 2) The filing of the corporate income tax return, which is typically six months after the year-end for audited funds; and 3) Regular periodic reporting to the Czech National Bank (ČNB) through the SDAT system, with deadlines specified by the regulator. For help creating a compliance calendar for your fund, do not hesitate to contact our firm – office@arws.cz.

• How is a Czech SICAV taxed?
  A Czech SICAV that qualifies as a "basic investment fund" benefits from a reduced corporate income tax rate of just 5% on its profits. The taxation of distributions to shareholders depends on the investor's tax residency and any applicable double taxation treaties. To understand the specific tax implications for your investors, get tailored legal solutions by writing to office@arws.cz.

• What is the role of the Czech National Bank (ČNB)?
  The ČNB has a dual role. First, it is the licensing body responsible for reviewing applications and granting authorization for investment funds to operate. Second, it is the primary financial market supervisor, responsible for the ongoing prudential supervision of all licensed entities to ensure financial stability and investor protection. Our lawyers are ready to assist you with all communications with the ČNB – email us at office@arws.cz.

• Can we file all our reports in English?
  While communication with a law firm like ARROWS can be conducted entirely in English, official submissions to Czech authorities often must be in the Czech language. This applies to filings with the Commercial Register and, critically, to the reporting methodologies and interface of the ČNB's SDAT electronic reporting system. For immediate assistance with Czech-language filings, write to us at office@arws.cz.

• What are the main differences between founder shares and investment shares?
  This distinction is fundamental to the SICAV structure. Founder shares (zakladatelské akcie) are held by the fund's founders, carry voting rights, and allow control over the company's governance (e.g., electing the board). Investment shares (investiční akcie) are issued to investors, do not typically have voting rights, and represent a direct claim on the assets within the fund or a specific sub-fund. They are redeemable at a price based on the net asset value. Need help structuring your fund's share classes? Contact us at office@arws.cz.
  
  
• Why should I choose a Czech law firm instead of my home counsel?
  While your home counsel is an expert in your own jurisdiction, navigating the Czech market requires specialized local knowledge. A Czech law firm understands the nuances of the Business Corporations Act, the specific practices and expectations of the ČNB, and can operate fluently in the Czech language for official filings and communications. This local expertise is crucial for avoiding common pitfalls and ensuring efficient, seamless compliance. To benefit from our deep local knowledge, get in touch with our Prague-based team at office@arws.cz.

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