Criminal Liability of Companies and Legal Entities in 2026

In 2026, Czech companies face a rigorous legal framework under the Act on Criminal Liability of Legal Entities, which sets uncompromising rules for the market. Although the principles of corporate criminal liability have been in place for several years, judicial practice in the Czech Republic is becoming significantly stricter, and compliance programs have transformed from an administrative formality into a critical factor for a company's survival. Let us clarify the current rules, risks, and how to better prepare for them under Czech law..

Scope of Corporate Criminal Liability in the Czech Republic

Legal regulation in the Czech Republic is based on the principle of a so-called negative list. This means that a legal entity can be prosecuted for practically all criminal offenses listed in the Czech Criminal Code, with the exception of those expressly excluded by the Act on Criminal Liability of Legal Entities.

In practice, this means that companies are fully liable for subsidy fraud, tax evasion, corruption, as well as cyberattacks or fraud committed using modern technologies, provided they occur in the company's interest.

The fundamental rule is that companies cannot claim "this is beyond our control." Practically everything their employees or management do in the interest of the company can become the subject of criminal prosecution against the legal entity under Czech law.

How Corporate Liability is Determined

The law clearly defines when an unlawful act by a natural person can be attributed to a company according to Section 8 of the ZTOPO. A company is not automatically liable for every mistake made by a rank-and-file employee; liability arises if the act is committed by a statutory body, a person in a leading position, or an employee acting on management's instructions.

Here, the law offers a key defense: a legal entity can be exonerated from criminal liability if it exerted all efforts that could reasonably be required to prevent the act. This is where compliance management systems (CMS) are absolutely critical.

microFAQ – How Attributability Works

1. To whom can a criminal offense be attributed?
Primarily to persons in leading positions and statutory bodies according to Section 8, Paragraph 1 of the ZTOPO. For subordinate employees, corporate liability arises if management failed in supervision, control, or prevention.

2. Is it relevant whether the specific perpetrator is caught?
No. The criminal liability of a legal entity is not conditional on identifying a specific natural person according to Section 8, Paragraph 3 of the ZTOPO. It is sufficient to prove that the act occurred during the company's activities and must have been committed by a person whose actions are attributable to the company.

3. Does the company's criminal liability depend on the employee's criminal liability?
No, it is a concurrent and independent liability. A situation often arises where an executive (natural person) is prosecuted alongside the s.r.o. (legal entity).

Methodology for Calculating Monetary Fines

The system of monetary fines for legal entities in the Czech Republic is designed to be significant. The penalty is imposed in daily rates according to Section 21 of the ZTOPO, where the court determines the number of rates based on the gravity of the act and the amount of one rate based on the company's financial circumstances (up to CZK 2 million per day).

In practice, this means that for serious economic crimes where a company has high turnover or assets, fines can range in the tens to hundreds of millions of Czech korunas.

In addition to the monetary fine, there is also an obligation to compensate for damages. Within the framework of diversions in criminal proceedings, such as a plea bargain or conditional suspension of prosecution under the Czech Code of Criminal Procedure, payment of damages is a necessary condition.

When Money Matters Even with a Formal Sentence

It is important to note that even if a natural person (e.g., an executive) escapes with a suspended sentence, the company may still face a high monetary fine. Furthermore, Czech courts can impose a penalty of forfeiture of property or a part thereof, which can be liquidating for the company.

microFAQ – How High Fines are Calculated

1. What are the lower and upper limits of a monetary fine?
The lower limit of one daily rate is CZK 1,000, and the upper limit is CZK 2,000,000 according to Section 21, Paragraph 2 of the ZTOPO. The number of rates is determined by the Criminal Code for specific offenses. The court considers net turnover and the overall financial strength of the company when determining the amount.

2. Can I calculate my amount in advance?
An exact calculation cannot be made without knowledge of the case file, but a lawyer can estimate a likely range based on case law and your turnover.

3. Can the court reduce the fine if the company would be severely impacted?
The court takes financial circumstances into account, but the penalty must be felt. It should not be liquidating unless the law allows for the dissolution of the legal entity, but in practice, fines for creditworthy companies are very high.

Compliance Programs as a Necessity

Here we reach the core of prevention, as a compliance program is a key defense tool in 2026. The law (Section 8, Paragraph 5 of the ZTOPO) gives a legal entity the chance to be exonerated.

A legal entity shall be released from criminal liability if it proves that it exerted all effort that could reasonably be required of it to prevent the unlawful conduct.

Czech courts and the Supreme Public Prosecutor's Office assess the quality of the program very strictly. They examine whether the program is understandable, applied in practice, whether training takes place, and if control mechanisms and internal audits are functioning.

The biggest mistake is so-called "paper compliance"—formal directives kept in a drawer that no one knows about—because the court will not recognize such a program as a reason for exoneration.

Basic Building Blocks of a Compliance Program

For a program to work and be recognized by a court, it should include a Code of Ethics defining the company's values and internal directives for risk areas. Furthermore, regular employee training and functional control mechanisms are essential.

An integral part is Whistleblowing (a reporting system) for safe reporting of unfair conduct and a system of corrective measures. Our Czech legal team at ARROWS law firm has long specialized in auditing compliance programs (CMS), preparing directives, and conducting training. Contact us at office@arws.cz.

microFAQ – Compliance Programs in Practice

1. How long does it take to create a functional compliance program?
For a smaller company, it takes a matter of weeks; for a corporation, months. However, the key is implementation and the "internalization" of rules by the staff.

2. Must the program cover everything?
It should cover the main risks of the given company (Risk Assessment) – for a construction company, public tenders; for a trader, taxes and customs.

3. What sanctions face an employee who violates the program?
Labor law penalties (reprimand letter, termination, immediate dismissal under the Czech Labour Code) and potentially claims for damages. Consistency in enforcement is essential for the program's credibility.

Conditional suspension of criminal prosecution

The legal system in the Czech Republic allows, pursuant to Section 26 of the TOPOin conjunction with the Czech Criminal Procedure Code, the use of so-called diversions, of which the conditional suspension of criminal prosecution is highly practical.

In practice, this means that if the company meets the legal conditions, the proceedings are suspended and the company is not convicted, meaning it maintains a clean criminal record.

Conditions usually include a confession or statement, compensation for damages, surrender of unjust enrichment, and payment of a financial sum to assist victims. The company also commits to proper conduct during a probationary period.

Supervision of the company

A court or public prosecutor may impose reasonable restrictions and obligations. Demonstrating the functionality of compliance measures is often required to prevent the recurrence of criminal activity.

This legal instrument is not an automatic right, and a prosecutor will generally offer it only if the company cooperates and actively remediates damages. Our attorneys in Prague at ARROWS law firm have extensive experience in negotiating these diversions. For a consultation, write to us at office@arws.cz.

Corporate criminal risks and solutions through compliance and legal defense

Risks and Sanctions	How ARROWS helps (office@arws.cz)
Broad liability for criminal offenses: A company is liable for the actions of managers and employees (in case of failure of control) within its activities under Czech law.	Audit and revision of compliance programs: We identify criminal law risks specific to your industry in the Czech Republic.
High financial penalties: Sanctions derived from turnover and the severity of the act can reach liquidating levels.	Legal advice and defense: Our Czech legal team represents companies in criminal proceedings to minimize sanctions.
Formal compliance program: A Czech court will not recognize a "paper-only" program as a reason for exculpation.	Implementation of a functional CMS: We prepare tailored guidelines, train employees, and set up control mechanisms.
Ban on public procurement: A penalty that can exclude a company from the public tender market for up to 20 years.	Strategic defense and prevention: We focus on risks in the area of public procurement and Czech competition law.
Reputational risk and criminal record: A company's conviction means a "black mark" that hinders financing and business operations.	Negotiating diversions: We strive for conditional suspension of prosecution or a plea bargain agreement.

Tax and economic crimes in the Czech Republic

Long-term statistics show that the majority of prosecuted legal entities in the Czech Republic face charges related to tax offenses.

Tax evasion and failure to pay insurance contributions

The criminal offense of tax evasion (Section 240 of the Criminal Code) and failure to pay taxes (Section 241 of the Criminal Code) are among the most common. This concerns situations where a company uses fictitious invoices, unjustifiably claims VAT deductions, or fails to remit withheld insurance premiums.

Subsidy fraud and public procurement

High-risk areas include subsidy fraud (Section 212 of the Criminal Code)and damaging the financial interests of the EU, where providing false information in an application is sufficient for prosecution. Similarly, bid rigging and collusion in public procurement are areas with high activity from Czech law enforcement authorities.

Fraud and embezzlement – internal risks

A company can also be held liable for what happens "internally" if management tolerates employee fraud against clients. Our Prague-based attorneys provide advice on how to set up control mechanisms in accounting and procurement. Contact us at office@arws.cz.

microFAQ – Tax risks in practice

1. Which accounting errors are considered a criminal offense?
The intent to evade tax is criminal. Intent can also be indirect (the company knew the invoices were suspicious and used them anyway). An administrative error is resolved with a tax assessment and penalty, not by a court, unless fraud is involved.

2. How much must be evaded for it to be a crime?
The threshold for a criminal offense is damage of "greater extent," which is currently 100,000 CZK under Section 138 of the Criminal Code.

3. Can I be exculpated if I relied on an accountant?
The statutory body is responsible for proper bookkeeping. Responsibility cannot be avoided simply by referring to an external accountant if there was a lack of supervision or if the selection of the professional was not diligent.

Bans on activity and subsidies

The Czech Act on Criminal Liability of Legal Entities allows for the imposition of significant penalties restricting business operations.

Ban on public procurement

A court may impose a ban on performing public contracts or participating in public tenders for 1 to 20 years under Section 23 of the TOPO. This means an absolute stop for companies oriented toward the public sector, often even in the position of a subcontractor.

Ban on receiving subsidies and grants

Similarly, a ban on receiving subsidies and grants for 1 to 20 years can be imposed under Section 24 of the TOPO. For companies dependent on European or national Czech subsidy programs (e.g., agriculture, research), this is a liquidating measure.

Practical steps for risk minimization

We recommend the following procedure to minimize risks:

Step 1: Risk Assessment

Identify where your company is vulnerable, whether in public procurement, international trade, or agency employment. ARROWS law firm in Prague will perform a basic risk screening.

Step 2: Implementation or revision of a compliance program

Create or update a code of ethics and guidelines that must respond to current Czech legislation. Set up processes so they are functional, not just formal.

Step 3: Training

Regularly train management and employees. Keep records of the training – these are key evidence in a Czech court in case of a problem.

Step 4: Monitoring and Control

Conduct random compliance checks and respond to reports received through the whistleblowing hotline.

Step 5: Legal Preparedness for Crisis Situations

Have a plan ready for potential dawn raids or the initiation of criminal proceedings. Knowing whom to call and how to proceed in the first few hours is critical under Czech law.

Our attorneys in Prague from the ARROWS law firm are ready to be your partner in both prevention and defense. Contact us at office@arws.cz.

microFAQ – Practical Compliance Implementation

1. How long does it take to implement a program?
Basic setup takes weeks; full implementation into the corporate culture takes months.

2. Who is responsible for the program?
The statutory body. They may delegate the agenda to a Compliance Officer, but the management bears ultimate responsibility for the existence of the system under the Czech legal system.

3. Is it expensive?
The costs of prevention are a fraction of the costs of defense and fines in criminal proceedings. A basic audit and setup typically range in the tens of thousands of Czech koruna.

Tax and Commercial Threats

Risks and Sanctions	How ARROWS Assists (office@arws.cz)
Tax Evasion: Fictitious invoices and carousel fraud with the risk of high penalties and tax assessments.	Legal support during tax audits: We represent clients before the Czech tax authorities and in criminal proceedings.
Subsidy Fraud: Incorrect use of subsidies or false information in applications.	Audit of subsidy processes: Checking project compliance with subsidy conditions and providing legal defense.
Collusion in Insolvency and Public Procurement: Unfair agreements with competitors (bid rigging).	Competition and Criminal Law: Advisory in the field of economic competition and criminal defense in Czech courts.
Breach of Duty in Asset Management: Asset stripping, disadvantageous contracts signed by management.	Corporate Governance Setup: Rules for the conduct of statutory bodies and the duty of "due managerial care" under the Czech Business Corporations Act.
Cybercrime: Attacks on data, identity theft.	IT and Criminal Law: Legal solutions for the consequences of cyberattacks and data protection liability.

Conclusion

The criminal liability of legal entities in 2026 is not a future threat but a harsh reality of today. Czech public prosecutors and courts have effective tools at their disposal to penalize companies and do not hesitate to use them. The only effective defense is prevention, as a high-quality, tailor-made, and actively maintained compliance program is your insurance policy and allows a company to exculpate itself.

Our attorneys in Prague at ARROWS law firm specialize in white-collar crime and compliance and will help you set up a shield to protect your company. If your company does not have a compliance program in place or is concerned about risks associated with public procurement, do not hesitate to contact us, as prevention costs a fraction of resolving the consequences.

Email us at office@arws.cz for a non-binding consultation.

FAQ – Frequently Asked Legal Questions on Corporate Criminal Liability

1. Does this mean my company will stop being able to do business and live in constant fear?
Not at all. It simply means you must conduct business with an awareness of risks and have established rules. A compliance program is not a brake on business, but its protection. Contact us at office@arws.cz.

2. Do we need a compliance program even if we are a small s.r.o. (LLC)?
Czech law does not distinguish by company size regarding the possibility of exculpation. Even a small company should have basic rules (code of ethics, accounting controls, employee instructions) to demonstrate preventive efforts in case of a problem. The scope of measures must correspond to the size and risks of the company.

3. What should we do if we suspect an employee is committing criminal activity?
It is necessary to conduct an internal investigation and secure evidence. Management has a duty to intervene (prevent the crime); otherwise, they risk prosecution of both the company and the statutory officers. In certain cases, filing a criminal complaint is mandatory. Consult the procedure with a Czech attorney.

4. How long does it take to become compliant with legislation?
A basic audit and process setup can be completed within weeks. The important thing is to start. Contact us at office@arws.cz.

5. If we have an inspection or a search of premises, do we have to testify without a lawyer?
Never. You have the right to legal assistance. During a search of residential or other premises and land, you have the right to the presence of an attorney. We recommend not providing statements without consulting defense counsel according to the Charter of Fundamental Rights and Freedoms. Call experts immediately.

6. Is a plea bargain or conditional suspension of prosecution a "second chance"?
Yes, these are procedural tools to end a matter quickly and without liquidating consequences, often without a record in the Criminal Register (in the case of conditional suspension). However, they require an active approach, compensation for damages, and often an improvement of the compliance system.

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.

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