What innovations did the amendment to the ZOK bring in the area of types of shares and stocks?

On 1 January 2021, a major amendment to Act No. 90/2012 Coll., on Commercial Corporations (hereinafter referred to as the "CCC"), published in the Collection of Laws under No. 33/2020, will come into force. These changes also include changes to the types of shares and stock.

This article was written in 2020. If you are looking for the latest information on this topic, please contact us at office@arws.cz or by phone on +420 245 007 740. We will be happy to advise you.

Equity participation in companies is realised through shares

According to the CCC, it is then possible to have several types of shares within a capital company, i.e. shares with different rights and obligations attached to them. The ZOK then stipulates that these different types of shares can only be specified in the founding act (articles of association or articles of association). The ZOK thus increases the flexibility of capital companies, whereby different rights and obligations for individual shareholders can be regulated through different types of shares.

New developments in the area of types of shares

After the amendment, the possibility to allow multiple types of shares in the articles of incorporation remains, but the new law provides for the obligation to indicate the name of the type of share in the articles of association and on the share certificates (if issued) in the case of multiple types of shares. Here, the explanatory memorandum emphasises the distinction between the name of the share and the designation of the share. In the case of public limited companies, the name of the type of shares must also be indicated in the articles of association and on the shares.

The amendment now dispenses with the statutory distinction between 'basic shares' and 'special shares'. Similarly, the distinction between 'ordinary shares' and 'shares with special rights' has been abandoned.

The amendment also explicitly provides for two new types of shares with special rights and obligations, namely:

I. Non-voting shares and shares without voting rights

A) Shares

It is now expressly provided that, if the articles of association so provide, shares may be issued in a company which do not carry voting rights.

However, there are limits to this provision, namely that a shareholder holding a non-voting share is also entitled to vote at a general meeting of the company if a decision is taken to amend the articles of association or to amend the articles of association and such a decision would affect the rights and obligations of that shareholder. A further limit is then the logical rule that there must be at least one share in the company with which voting rights are attached.

B) Shares

Similarly, the regulation of public limited companies now expressly provides for the possibility of issuing shares that do not have voting rights attached to them, or (unlike shares in an SRO) issuing shares that have different weightings of votes attached to them.

There are also limits for public limited companies, namely that the aggregate nominal value of shares with which no voting rights are attached may not exceed 90% of the share capital. Furthermore, here too, a shareholder holding shares with which no voting rights are attached is entitled to vote at the general meeting if the ZOK requires voting at the general meeting according to the type of shares.

II. Shares and shares with broadcasting rights

A) Shares

Furthermore, the ZOK expressly provides that, if the articles of association so permit, so-called "shares with broadcasting rights" may be issued in a limited liability company, i.e. shares with which the right to appoint one or more managing directors is attached and to remove the managing directors so appointed.

However, even here the ZOK sets limits, namely that the total number of executive directors appointed by the shareholders holding the shares with posting rights may not exceed the number of executive directors appointed by the general meeting.

At the same time, the amendment provides that if the managing directors form a collective body and the shareholders owning the broadcasting rights do not appoint a managing director within one month from the date on which they were able to exercise their broadcasting rights, the managing directors whose number has not fallen below half may appoint a replacement managing director until the shareholders exercise their broadcasting rights.

Similarly to the managing directors, members of the supervisory board may be appointed and removed in this way if a supervisory board is established in a limited liability company.

B) Shares

Also in a public limited company, the articles of association may provide that the right of one or more directors is attached to the shares, the number of directors so appointed not being greater than the number appointed by the general meeting or, if the articles so provide, the number appointed by the supervisory board.

Similarly, the right to appoint one or more members of the Supervisory Board or the Management Board may be attached to the shares, the number of members so appointed not being greater than the number appointed by the General Meeting.

Even in the case of a public limited company, the members of all the aforementioned bodies, whose number has not fallen below half, may co-opt missing members in the event that the shareholders holding shares with broadcasting rights do not appoint a member within one month of the date on which they were able to exercise their broadcasting rights.

Appointment and removal of members on the basis of shares with broadcasting rights shall always require a written form with a certified signature. The General Meeting may only remove members so appointed if the broadcasting right attached to the share or shares lapses or if there is a compelling reason for doing so in the performance of the appointed member's duties, in particular if he or she has seriously or repeatedly breached his or her duties.

Summary

The amendment to the CCC brings certain changes and clarifications in the area of various types of shares and units, some of which are linked to the obligation to regulate founding acts, ordinary certificates or shares. If you need further advice on the regulation of rights and obligations related to shares or stocks, please do not hesitate to contact us.

Read also:

• Summary of the most important changes in the major amendment to the German Companies Act
• The new concept of the monistic joint stock company system
• Changes in the distribution of profits of companies after the amendment
• General meeting instructions, business management, strategic and conceptual management
• Per rollam decision-making at general meetings after the amendment to the ZOK 2021
• How are the terms of office of members of (not only) statutory bodies changing?
• Codetermination of supervisory board members by employees
• New obligations for entrepreneurs - mandatory reporting and collection of documents
• New risks for managing directors under the amendment to the ZOK
• Liens (and other rights in rem) on shares in a business corporation after the amendment to the ZOK