Purchasing a Czech company as a non-EU buyer

Purchasing a Czech company as a non-EU buyer involves navigating multiple layers of regulatory scrutiny, legal complexity, and financial risk that European competitors typically don't face. You'll encounter foreign investment screening requirements, transfer pricing obligations, GDPR compliance challenges, and employment law traps. This guide explains the essential legal steps, regulatory hurdles, and practical risks you need to address before your acquisition closes.

Understanding the Czech market for foreign buyers

The Czech Republic has established itself as an attractive investment destination within the European Union, offering strategic location, developed infrastructure, and relatively competitive business conditions. However, the legal framework for acquiring Czech companies differs significantly depending on your origin.

Non-EU buyers face substantially different requirements than their European counterparts, particularly regarding foreign investment screening and regulatory approvals. Our team specializing in Corporate & Holding services in the Czech Republic can help you navigate these complex regulatory differences. Czech law fundamentally distinguishes between acquisitions that fall under foreign direct investment screening and those that don't.

The Czech Foreign Investments Screening Act established mandatory notification requirements for non-EU investors acquiring significant stakes in Czech companies.

This distinction determines your timeline, approval requirements, and the complexity of your transaction. The law doesn't block most foreign investment, but it creates procedural obligations that, if ignored, can result in penalties.

Foreign investors from non-EU countries must understand that Czech authorities actively review acquisitions to protect national security. This isn't a formality comparable to standard corporate registration—it's a substantive security assessment.

The screening process involves consultation with Czech intelligence services, and rejected or heavily conditioned deals do occur.

Foreign investment screening: The first legal hurdle

Non-EU buyers triggering mandatory screening must navigate the Czech Foreign Investments Screening Act. This applies when your acquisition gives you effective control (defined generally as at least 10 percent of voting rights) in a Czech company operating in critical sectors.

The Ministry of Industry and Trade (MOIT) administers this screening process, and the law defines "critical" broadly.

The screening requirement applies if your ultimate beneficial owner is from a non-EU country and you're acquiring a 10 percent or greater stake. Critical infrastructure extends beyond obvious sectors like energy and transportation to include data processing and aviation.

If your target company operates in any these areas, you cannot complete your acquisition until MOIT issues a formal approval decision.

Many non-EU buyers assume their transaction won't trigger scrutiny, but the Czech definition of critical sectors is expansive. Technology companies handling sensitive data, companies with manufacturing operations, and businesses controlling telecommunications infrastructure often fall within scope.

Non-EU buyers frequently underestimate the documentation burden, including the need to prove the origin and legitimacy of all acquisition financing.

Failing to assess whether your target requires screening before signing the purchase agreement creates serious risk. You could sign a binding contract only to discover the transaction is blocked or subject to onerous conditions.

The timeline and procedural requirements

Standard screening takes up to 90 days from the commencement of proceedings for acquisitions deemed low-risk. Extensions are possible for complex cases. If MOIT identifies security concerns, the timeline extends further.

During this period, you cannot close your acquisition—Czech law imposes a "standstill" obligation preventing completion until formal approval is obtained.

MOIT can also conduct retrospective reviews of foreign investments up to five years after completion. This applies even if the transaction was completed without advance notification. For those managing cross-border projects, it is also useful to review our insights on cross-border construction law and building due diligence in the Czech Republic.

This means that if you miss screening requirements entirely, you face the prospect of the Czech government unwinding your acquisition years later.

The voluntary consultation mechanism offers strategic advantages that many buyers don't utilize. If you're uncertain whether your acquisition triggers mandatory screening, you can request a consultation with MOIT.

Obtaining negative clearance through this consultation prevents ex officio screening later, protecting your transaction from future unwinding.

1. Does my company's structure affect screening requirements?
Yes, the screening rules apply based on your ultimate beneficial owner—the natural person with final control. Complex corporate structures with multiple holding companies don't eliminate screening obligations.

2. Can I close my acquisition while screening is pending?
No. Czech law prohibits closing before formal MOIT approval. Attempting to close creates liability for sanctions, potential forced unwinding, and regulatory penalties.

3. What happens if I discover screening requirements after signing the purchase agreement?
You'll need to renegotiate terms to suspend closing until MOIT approval, which weakens your negotiating position. Identifying screening requirements before signing is essential to avoid this situation.

Merger control approval: A separate regulatory track

Beyond foreign investment screening, non-EU buyers must also comply with Czech merger control rules. These operate independently and involve the Office for the Protection of Competition (OPC).

The rules require notification when the combined net turnover of all competitors in the Czech market exceeds CZK 1.5 billion.

This creates dual regulatory tracks that operate simultaneously—you may need both MOIT approval for foreign investment screening and OPC clearance for merger control. Czech merger control applies to acquisitions meeting turnover thresholds without regard to the buyer's nationality.

The OPC applies the SIEC test (significant impediment to effective competition), evaluating whether your acquisition would substantially reduce competition.

Unlike some European jurisdictions, Czech law doesn't exempt EU-internal acquisitions from merger control review. Non-EU buyers must evaluate whether their transaction meets Czech turnover thresholds and file accordingly.

Timing integration of screening and merger control

These two regulatory processes operate independently, creating a complex approval matrix. You may receive OPC approval while still awaiting MOIT screening results, or vice versa.

If MOIT takes 90+ days and the OPC takes 30–60 days, you cannot close until the later date, even if the OPC clears you earlier.

Closing your acquisition requires satisfaction of both processes, and Czech law treats these as parallel, not sequential, obligations. You must account for both timelines when structuring your transaction.

1. Do I need OPC approval for every Czech company acquisition?
No. Approval is required only if the transaction meets specific turnover thresholds and meets the definition of a "concentration" (acquisition of control).

2. What happens if I fail to notify the OPC when required?
The OPC can impose fines up to 10 percent of your group's net turnover for failure to notify ("gun jumping"). The OPC has demonstrated willingness to impose these penalties.

3. Can the OPC block my acquisition?
Yes. The OPC can prohibit acquisitions creating or strengthening dominant positions. They may also condition approval, requiring divestitures or behavioral commitments.

Structuring your acquisition: Entity type and tax considerations

Non-EU buyers must choose between acquiring all shares in the target company (share purchase) or purchasing specific assets (asset purchase). This choice has profound tax, legal, and practical implications that Czech law treats very differently.

Share purchases versus asset purchases

A share purchase transfers complete ownership of the target company, including all assets, contracts, and liabilities. From a legal standpoint, the acquisition is simple, as the target company's legal personality remains unchanged.

When purchasing shares, you inherit all of the target's liabilities, including tax arrears, employment liabilities, and regulatory violations.

Asset purchases provide greater liability protection but involve substantially more complexity. You identify specific assets and liabilities you wish to acquire, and other obligations remain with the seller.

However, asset purchases require renegotiation of material contracts, and customers or suppliers with key contracts may have contractual rights to terminate agreements.

Czech law also recognizes acquisitions of "enterprises" or parts of enterprises as separate structures. Under Czech Civil Code provisions, certain liabilities transfer automatically to you by operation of law.

This transfer of liabilities occurs automatically without seller consent, but only for liabilities connected to the business operations being transferred.

Tax implications of structure choice

The acquisition structure fundamentally affects your tax position. Share purchases provide significant tax advantages—if the shares are held for more than 12 months, dividends and gains are typically exempt.

For non-EU buyers, this exemption may apply depending on tax treaties and whether they are comparable to EU corporate entities.

Asset purchases generate different tax consequences. Sales of individual assets are subject to 19 percent corporate income tax on gains for the seller, though you may benefit from step-up in basis for depreciation.

Czech law implements arm's length transfer pricing requirements requiring that transactions between related parties occur at prices comparable to independent parties' transactions.

Transfer pricing issues arise for non-EU buyers if your acquisition involves related parties. Non-compliance creates exposure to additional tax assessments and penalties.

1. Will I pay transfer tax when acquiring a Czech company?
No. The Czech Republic abolished real estate transfer tax in 2020, and there are no stamp duties on corporate share transactions. However, VAT may apply to asset purchases.

2. What transfer pricing documentation do I need to prepare?
Czech law doesn't mandate advance documentation, but you must be prepared to provide transfer pricing analysis during tax audits, typically within 15–30 days.

3. Can I use a Czech holding company to optimize acquisition tax treatment?
Yes, but this requires careful planning. Establishing a Czech holding company triggers various compliance obligations including beneficial owner registration.

Due diligence requirements: Identifying hidden liabilities

Effective due diligence is not a formality or checkbox exercise. It is the primary risk management tool protecting you against catastrophic undisclosed liabilities.

Czech law does not impose affirmative seller disclosure obligations, meaning the seller has no legal duty to reveal problems you don't specifically ask about.

The scope of due diligence required is far more extensive than many international buyers anticipate. Legal due diligence must examine regulatory compliance, employment law exposure, and beneficial ownership structures.

Contractual dependency and contract assignability

One critical due diligence area involves identifying contractual dependencies that could threaten business viability. If the target company depends excessively on a single customer or supplier, this represents substantial business risk.

If these key contracts cannot be transferred without third-party consent, you may face forced renegotiation on disadvantageous terms.

The practical impact is severe. You may acquire a company with seemingly stable revenues, only to discover that your largest customer can terminate their contract if the company changes ownership.

Many acquisitions produce 20–30 percent reductions in purchase price once contracts are renegotiated or lost.

Due diligence must identify every material contract, review assignment restrictions, and assess change of control clauses. For critical contracts, experienced buyers request written consent before closing.

GDPR compliance and data protection risks

GDPR compliance represents one of the most severe risks in Czech acquisitions. It receives insufficient attention from international buyers unfamiliar with EU data protection standards.

Any GDPR breach can result in fines reaching the higher of EUR 20 million or 4 percent of your acquiring company's total annual global turnover.

The GDPR exposure commonly arises through three mechanisms. First, the target company may be handling personal data non-compliantly. Second, during due diligence itself, access to data creates risks.

During due diligence itself, you'll request access to customer lists and databases, which creates a GDPR controller relationship triggering your compliance obligations.

Managing GDPR risk requires sophisticated data protection due diligence conducted in parallel with standard legal due diligence. You must establish a secure data room with access controls.

Any gap between actual practices and GDPR requirements requires mitigation before closing, either through seller representations or escrow provisions.

Czech authorities enforce GDPR requirements, and fines can be imposed within months. Unlike some other areas of law, GDPR breaches often surface quickly through regulatory investigations.

Transfer pricing and permanent establishment

International acquisition structures require careful analysis of transfer pricing. Transfer pricing obligations arise when your acquisition involves related-party transactions.

Non-arm's length pricing creates exposure to additional tax assessments, penalties, and lengthy dispute resolution procedures.

Permanent establishment (PE) risks are often overlooked in due diligence. If the target company operates foreign branches, these may constitute unregistered PEs triggering tax obligations abroad.

Upon acquisition, you inherit these PE liabilities, potentially creating unexpected tax arrears and cross-border compliance obligations.

Real property and land registry issues

If the target company owns real property, due diligence must verify that ownership is properly registered. The Czech Land Registry (Cadastral Register) maintains records of property ownership and mortgages.

If the target company owns real property with registered execution, you cannot acquire that property until the execution is satisfied.

Registered executions occur when creditors obtain judgments and register them against the property. This prevents transfer until satisfaction.

If the target company's property is mortgaged and the lender withholds consent, you cannot close your acquisition.

Restrictions on alienation and encumbrance commonly arise when properties are mortgaged. Many mortgage agreements require written consent from the lender before the property can be sold.

1. Can I rely on the seller's representations about contract assignability?
Representations help but don't eliminate risk. You should request written third-party consents for all material contracts to convert abstract risk into contractual certainty.

2. How extensive should GDPR due diligence be?
Minimally, you should assess data inventories, processing purposes, and security measures. If the target processes large customer databases, you should engage a data protection specialist.

3. What if I discover unregistered permanent establishments after acquisition?
You'll inherit the PE's tax obligations and face exposure to additional assessments. Due diligence should specifically investigate foreign operations to prevent this outcome.

Employment law: The Section 339a trap

Czech employment law contains a particularly dangerous provision that catches many foreign buyers by surprise. Section 339a of the Czech Labour Code creates specific severance risks.

Section 339a of the Czech Labour Code allows employees to claim severance compensation if they resign within two months following a business transfer.

The claim is valid if resignation is due to "substantial deterioration of working conditions." Upon your acquisition, employees' relationships transfer automatically to you through TUPE provisions.

If you subsequently modify working conditions—for example, by changing compensation structures or reducing benefits—departing employees can claim severance compensation.

The severity of this risk is amplified by the general principle of "Equal Pay for Equal Work." Acquiring companies must ensure fair treatment across their workforce.

Acquiring companies must ensure fair treatment, meaning that if newly transferred employees perform the same work as your existing employees but for lower wages, you may be required to equalize their pay.

This creates a financial trap where you must increase compensation to avoid discrimination. However, unilaterally changing conditions to align systems can trigger the "substantial deterioration" clause.

For labor-intensive operations, this can represent a substantial percentage of the acquisition price.

TUPE transfer obligations and consultation requirements

The Transfer of Undertakings provisions require that affected employees transfer to the new employer. Both seller and buyer must inform and consult with employee representatives at least 30 days before transfer.

Failure to provide this notification creates exposure to administrative penalties up to CZK 200,000, plus potential employee damages claims.

"Affected employees" includes not only employees directly involved in the transferred business but also those whose employment may be impacted by the transfer.

You must provide affected employees detailed information about the transfer, circumstances affecting their employment, and measures you intend to implement.

Post-acquisition integration and liability risk

The practical impact of these employment law provisions is that post-acquisition integration requires careful planning. Frequently, this involves acceptance of higher labor costs than initially modeled.

Successful acquirers build severance cost reserves into acquisition price models and budget for compensation increases to achieve equalization.

For labor-intensive operations, this represents substantial financial burden. A manufacturing company with significant staff may face millions in additional annual labor costs.

If these costs weren't modeled into the acquisition price, the acquisition becomes economically unviable.

This creates a powerful incentive for thorough pre-acquisition labor law due diligence. You should analyze target company compensation structures and model the cost of equalization.

This is not soft-side due diligence—it's critical financial analysis determining transaction viability.

Risks and Sanctions	How ARROWS Helpsoffice@arws.cz
Section 339a severance claims: Employees departing within two months of acquisition can claim severance in court if working conditions deteriorate, creating unpredictable liability for acquired companies.	Employment due diligence and integration planning: ARROWS Law Firm reviews target company employment contracts, identifies compensation differences, and models equalization costs.
TUPE consultation failures: Failure to notify and consult employee representatives creates administrative penalties and employee damages claims, particularly for companies with organized labor representation.	TUPE compliance management: ARROWS Law Firm ensures compliance with notification timelines, prepares comprehensive employee communications, and documents consultation processes.
Unequal treatment claims: Equal pay principles may require equalization of working conditions between transferred and existing employees, exposing acquirers to wage compensation claims.	Compensation structure analysis and equalization planning: ARROWS Law Firm analyzes whether equalization is legally required and provides strategic guidance on achieving compliance cost-effectively.
Misclassification liability: Targets sometimes classify employees as independent contractors to avoid employment law obligations, exposing acquirers to fines reaching CZK 10,000,000 for illegal work.	Labor law classification verification: ARROWS Law Firm reviews target company employee classification practices against "Švarc system" criteria and ensures proper employment relationship documentation.

Regulatory compliance and integrity due diligence

Non-EU buyers must conduct what Czech practice calls "Integrity Due Diligence." This is a comprehensive verification that the target company and its key shareholders have no links to sanctions or organized crime.

Integrity failures can trigger immediate contract termination, international sanctions against your acquiring company, and violations of anti-money laundering regulations.

Integrity due diligence is more complex than running background checks on company executives. It requires mapping beneficial ownership structures and identifying all shareholders.

This process is time-consuming because beneficial ownership chains often involve multiple corporate vehicles across different jurisdictions.

The risk is severe because acquiring a company with integrity problems exposes your entire organization to international sanctions. Czech authorities regularly identify integrity issues in acquisition targets.

An American corporation that acquired a Czech company discovered post-closing that shareholders had connections to a network of quasi-state entities.

Integrity due diligence must also address politically exposed persons (PEPs). The definition of PEPs is broad and includes not only elected officials but also their family members.

Acquiring a company where family members of government officials have indirect ownership interests can create unexpected sanctions compliance obligations.

AML/KYC compliance and sanctions risk

The anti-money laundering (AML) and know-your-customer (KYC) requirements require that you verify the source of acquisition financing. This isn't merely a regulatory compliance matter.

Failure to conduct proper AML/KYC creates personal liability for officers approving the transaction, in addition to corporate liability.

For non-EU buyers using international financing, this means providing documentation showing the source of acquisition funds. This typically involves bank statements or investment committee approvals.

Czech authorities increasingly scrutinize foreign acquisitions involving complex financing structures or funding from high-risk jurisdictions.

The practical impact is that acquisitions can be delayed if financing documentation is inadequate. Banks involved in financing Czech acquisitions conduct their own AML/KYC procedures.

1. What does beneficial ownership verification require?
Complete identification of all shareholders, including indirect shareholders, through all corporate layers until natural persons are identified. For complex structures, this requires searches in multiple jurisdictions.

2. Can integrity issues be covered by seller warranties and indemnities?
Partially, but seller indemnities provide limited protection if the seller becomes insolvent. The most effective protection is comprehensive pre-acquisition verification.

3. What happens if I discover sanctions connections post-acquisition?
Your company could face international sanctions exposure, inability to conduct banking transactions, and criminal liability. Immediate legal consultation is necessary.

Real estate and asset-specific considerations

Czech acquisitions frequently involve real property—production facilities, office buildings, or warehouse operations. Real property transfers create distinct legal requirements and commonly generate unexpected costs.

Land registry registration and transfer mechanics

Transfer of real property ownership in the Czech Republic becomes effective only upon registration in the Cadastral Register (Land Registry). Ownership doesn't transfer until registration occurs.

This is not a procedural formality—ownership doesn't transfer until registration occurs, which creates distinct closing mechanics.

The registration process requires that the purchase agreement be prepared in writing with authenticated signatures. For non-EU buyers, this creates unexpected notarization and legal costs.

By law, the registry cannot grant registration for at least 20 days after filing, and usually issues a decision within 30 days of application.

However, if the Cadastral Office identifies deficiencies in your application, you must remedy them before registration. This creates potential delays extending the timeline by months.

Real property encumbrances and restrictions

Before acquiring real property, you must search the Land Registry to identify mortgages, pledges, and easements. Mortgages are particularly important if the property secures the seller's bank loan.

If the property secures the seller's bank loan, you must verify that the mortgage will be released upon your payment at closing.

Easements create different issues. If the property is subject to easements benefiting neighboring properties, these continue to burden the property after your acquisition.

You must understand the practical impact of these easements on your intended use of the property and ensure your business plans can accommodate them.

Pre-emption rights represent another critical concern. Czech law provides pre-emption rights in specific circumstances, such as when land and structures are separately owned.

If pre-emption rights exist, the owner with those rights must be offered the property before you can complete your acquisition.

Financing and mortgage availability for non-EU buyers

Non-EU buyers seeking to finance Czech real property acquisitions face distinct constraints compared to EU citizens. Lending terms and loan-to-value ratios differ based on your country of origin.

While not strictly legislated by statute, bank internal policies often restrict maximum loan-to-value ratios for non-resident buyers.

These restrictions create budgeting implications. If you expected 80 percent financing and your bank only offers 60 percent, you must increase your equity contribution.

Czech banks prefer income earned within the Czech Republic and require comprehensive documentation of foreign income stability.

1. When does my ownership of Czech real property become effective?
Upon registration in the Cadastral Register, not at closing. This means you must complete the registration process before you legally own the property.

2. What if the seller's bank won't release the mortgage at closing?
You must verify pre-closing that the seller has arranged mortgage release financing. Assuming a mortgage without prearrangement creates serious risk.

3. Can I finance my Czech real property acquisition as a non-EU resident?
Yes, but terms are generally more restrictive. Expect lower loan-to-value ratios compared to residents, plus extensive income documentation requirements.

Acquisition document structure and contractual protections

The purchase agreement represents your primary contractual protection against post-closing discoveries of undisclosed liabilities. Czech purchase agreements require careful drafting to allocate risks effectively.

Representations, warranties, and indemnification

Czech purchase agreements typically include seller representations regarding the target company's legal status, financial condition, and regulatory compliance.

These representations are critical because they form the legal basis for post-closing claims against the seller if representations prove false.

The indemnification provisions in your purchase agreement establish the mechanism for recovering damages if the seller breaches representations. Practical limitations include survival periods and caps on liability.

These provisions create negotiating points between buyers and sellers, with buyers preferring longer survival periods, higher caps, and lower baskets.

For non-EU buyers, representations and warranties (W&I) insurance has become increasingly common. This insurance covers representation breaches even if the seller becomes insolvent.

This insurance is particularly valuable in Czech acquisitions where seller information reliability is uncertain or where you're concerned about post-closing seller viability.

Disclosure schedules and schedules of exceptions

Purchase agreements typically include schedules listing known exceptions to representations. These schedules are critical because they define what the seller has disclosed.

These schedules are critical because they define what the seller has disclosed and what remains as your risk.

Carefully reviewing and negotiating these schedules is essential. Items omitted from schedules become undisclosed liabilities not covered by representation breaches.

A disclosure schedule stating "all matters disclosed in due diligence" effectively eliminates the seller's liability for anything you had access to.

Purchase price adjustments and earn-out mechanisms

Many Czech acquisitions involve purchase price adjustments based on post-closing financial reconciliation. The most common approach is "completion accounts," showing actual net working capital.

If actual working capital is higher than estimated, you pay additional purchase price; if lower, you receive a refund.

These adjustments require careful definition of what constitutes "working capital" and what accounting principles apply. Czech companies may use different accounting practices.

Experienced purchase agreements include detailed definitions of working capital components and specify that calculations apply Czech accounting principles.

Earn-out provisions are less common in Czech acquisitions but appear in transactions where buyer uncertainty exists. Earn-outs create practical challenges and require ongoing cooperation.

Most Czech sellers prefer definitive pricing at closing rather than earn-outs dependent on buyer management performance.

Timing and procedural roadmap

Non-EU buyers should anticipate that Czech acquisitions require 6–12 months from initial signing of a letter of intent to final closing. This depends on target complexity and regulatory screening.

Non-EU buyers should anticipate that Czech acquisitions require 6–12 months from initial signing of a letter of intent to final closing.

The procedural roadmap includes distinct phases with critical timelines. Due diligence and foreign investment screening notifications must be initiated immediately.

Parallel with screening, you should conduct employment law due diligence, GDPR assessment, and environmental due diligence.

Regulatory approvals from the Czech National Bank apply if the target is a credit institution. Merger control filings must be made even while foreign investment screening is pending.

This parallel processing requires sophisticated coordination to ensure deadlines are met and timing contingencies are built into the purchase agreement.

Many purchase agreements include material adverse change (MAC) clauses allowing termination if major circumstances change. However, Czech courts interpret MAC clauses strictly.

Prudent buyers avoid relying on MAC clauses and instead ensure that due diligence and all regulatory approvals are obtained before signing.

1. Can I close my acquisition while foreign investment screening is pending?
No. Czech law prohibits closing before MOIT issues approval. However, you can sign the purchase agreement while screening is pending, with closing contingent on approval.

2. What if my acquisition triggers both foreign investment screening and merger control?
Both processes operate independently and in parallel. You must account for both timelines when scheduling closing—closing can occur only after both approvals are obtained.

3. When should I conduct due diligence relative to signing the purchase agreement?
Prudent practice is to conduct due diligence before signing the purchase agreement. This avoids signing contracts you may need to terminate if due diligence reveals material problems.

Risks and Sanctions	How ARROWS Helpsoffice@arws.cz
Foreign investment screening rejection: Non-compliance with mandatory screening requirements or failure to obtain approval prevents closing and exposes you to penalties up to 1% of total annual net turnover.	FDI screening analysis and representation: ARROWS Law Firm assesses whether your acquisition triggers mandatory screening and prepares comprehensive notifications.
Merger control notification failures: Failure to notify the OPC when thresholds are met creates fines up to 10% of net turnover and exposes you to enforcement action.	Merger control assessment and notification: ARROWS Law Firm evaluates whether your acquisition meets OPC notification thresholds and files required notifications.
Hidden employment liabilities: Section 339a severance claims and TUPE consultation failures create unexpected costs and litigation exposure post-closing.	Employment due diligence and TUPE compliance: ARROWS Law Firm conducts comprehensive employment law reviews, models severance cost exposure, and ensures TUPE consultation compliance.
GDPR fines and data breach exposure: Inheriting non-compliant data handling practices creates exposure to fines reaching 4% of global turnover, plus employee litigation.	GDPR due diligence and data protection assessment: ARROWS Law Firm reviews target company data handling practices, conducts compliance gap analysis, and models potential fine exposure.
Undisclosed real property encumbrances: Mortgages, easements, or restrictions on sale prevent closing or create hidden ownership conflicts post-closing.	Land Registry verification and real property due diligence: ARROWS Law Firm conducts comprehensive Land Registry searches and identifies encumbrances and restrictions.

Executive summary for management

Foreign Investment Screening Complexity: Non-EU buyers cannot close Czech acquisitions in critical sectors until the Czech Ministry of Industry and Trade approves the transaction. Missing screening requirements creates severe penalties and exposes you to forced transaction unwinding.

Non-EU buyers cannot close Czech acquisitions in critical sectors until the Czech Ministry of Industry and Trade approves the transaction.

Employment Law and Compensation Cost Reality: Czech law requires adherence to equal pay principles, which may necessitate equalization of working conditions. If working conditions deteriorate, employees may resign within two months of acquisition and claim severance.

Labor-intensive operations face potential post-acquisition cost increases—factoring these risks into acquisition pricing is essential.

GDPR Exposure and Data Risk: Inheriting data protection compliance failures exposes your organization's global operations to fines reaching 4 percent of worldwide turnover. Pre-acquisition assessment and remediation are substantially more cost-effective than managing fines.

Inheriting data protection compliance failures exposes your organization's global operations to fines reaching 4 percent of worldwide turnover.

Parallel Regulatory Approval Processes: Czech acquisitions subject to both foreign investment screening and merger control require parallel compliance with two independent regulatory regimes. Closing can occur only after both approvals are obtained.

Contractual Due Diligence Reality: Due diligence requires assessment of contractual dependencies, employment law exposure, and beneficial ownership verification. Comprehensive pre-acquisition due diligence is the primary mechanism for preventing post-closing discovery of material liabilities.

Comprehensive pre-acquisition due diligence is the primary mechanism for preventing post-closing discovery of material liabilities.

Conclusion of the article

Acquiring a Czech company as a non-EU buyer requires navigating regulatory complexity that extends far beyond standard corporate acquisition procedures.

Foreign investment screening, merger control compliance, employment law exposure, and GDPR risk are interdependent regulatory and legal obligations.

The most significant risk facing non-EU buyers is underestimating this complexity based on experiences in other jurisdictions. Czech authorities actively review foreign acquisitions for security and competition implications.

Czech authorities actively review foreign acquisitions for security and competition implications, and the regulatory framework imposes genuine approval obligations.

Experienced acquirers in the Czech market universally recognize that legal and regulatory complexity requires early engagement with specialists. ARROWS Law Firm combines in-depth knowledge of the Czech legal environment with extensive experience.

ARROWS Law Firm combines in-depth knowledge of the Czech legal environment with extensive experience in cross-border acquisitions involving international buyers.

ARROWS Law Firm will help you assess whether your acquisition triggers foreign investment screening and manage the approval process. We also represent clients in merger control proceedings and manage integration planning.

We also represent clients in merger control proceedings before the Czech competition authority and manage integration planning.

Are you considering acquiring a Czech company? Don't navigate the regulatory complexity alone. Contact us at office@arws.cz to discuss your acquisition and learn how ARROWS Law Firm can manage the Czech regulatory approval process.

FAQ – Frequently asked legal questions about Czech company acquisitions for non-EU buyers

1. Do I need Czech government approval to acquire a Czech company?
You need approval from the Czech Ministry of Industry and Trade only if your acquisition triggers the Foreign Investments Screening Act. This applies when you're a non-EU buyer acquiring effective control in a company operating in critical sectors. Most acquisitions don't trigger screening, but you should assess whether your target falls within the screening scope.

2. How long does a Czech company acquisition typically take?
Non-screened acquisitions typically close 4–6 months after signing a purchase agreement. If your acquisition triggers foreign investment screening, add up to 90 days for MOIT approval. If merger control applies, add 30–60 days for competition authority review. These timelines run in parallel.

3. What happens if I discover undisclosed liabilities after closing my acquisition?
Your primary protection is the seller's representations and warranties in the purchase agreement. However, if the seller becomes insolvent, indemnification claims may be uncollectible. Comprehensive pre-acquisition due diligence is the primary mechanism for discovering liabilities before you acquire them.

4. Are there any restrictions on my ability to operate the Czech company after acquisition?
Generally, no—you can operate the company as a subsidiary and change management. However, you must comply with Czech labor law regarding Section 339a severance claims if you modify working conditions detrimentally. If the company holds government licenses, those may require approval for operator changes.

5. What role does a Czech lawyer play in my acquisition?
A Czech lawyer is essential for navigating regulatory requirements, conducting due diligence, and preparing purchase agreements compliant with Czech law. While international law firms handle overall transaction structure, Czech legal counsel is necessary to address local regulatory compliance and mitigate jurisdiction-specific risks.

6. What is the difference between acquiring shares versus assets in a Czech company acquisition?
Share purchases transfer complete company ownership including all assets and liabilities. This approach is faster but exposes you to inherited liabilities. Asset purchases let you acquire specific assets while leaving unwanted liabilities with the seller, but they require renegotiating contracts.

Notice

Disclaimer: The information contained in this article is for general informational purposes only and serves as a basic guide to the issue. Although we strive for maximum accuracy in the content, legal regulations and their interpretation evolve over time. To verify the current wording of the regulations and their application to your specific situation, it is therefore necessary to contact ARROWS Law Firm directly (office@arws.cz). We accept no responsibility for any damage or complications arising from the independent use of the information in this article without our prior individual legal consultation and expert assessment. Each case requires a tailor-made solution, so please do not hesitate to contact us.