PRAGUE | BRNO | OSTRAVA | BRATISLAVA
Legal News
June 2016
Strategic thinking l Individual approach l Excellent legal team l Long-term partnership
The most successful law firm in the Czech Republic and Slovakia based on the number of nominations and awards in all years of the competition
Ranked by clients as the Best Law Firm in the Czech Republic (2010, 2013, 2015)
Czech Law Firm of the Year (2011–2012, 2014–2016)
M&A Law Firm of the Year in the Czech Republic and Slovakia (2016)
No. 1 legal advisor according to the number of M&A deals in the Czech Republic
(2009–2015) (2009–2013)
Legal News 6/2016
Summary Jaroslav Havel: I expect more transactions by larger investment groups on the Czech M&A market
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Differences in Negotiating Transactions by Domestic and by Foreign Investors
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The Pitfalls of Correct Specification of Business for Transfer
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Family Holding for Every Family
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Act on Contract Register
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Changes to the Regulation on Electronic Signatures (eIDAS)
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On Effectiveness of New Public Procurement Act
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Eventful Times for Labour Law
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No More Freedom for Real Estate Agents?
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Israel
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Amendment to the Universities Act
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Automatic Exchange of Information in the Field of Taxes
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Introduction Dear Clients and Business Partners, Let me introduce another issue of Havel, Holásek & Partners’s Legal News. The leitmotif of this issue is M&A, an area in which our law firm has been successfully specialising since its establishment in 2001. Right in the introductory part of this issue, you will learn what the situation is in the area of mergers and acquisitions in both the Czech and international contexts, what we can expect in the near future from the perspective of business and investment activities, and how our firm can help you in this respect. In addition, we will also acquaint you with the current legislative situation, specifying new laws which are being prepared, and those already enacted. For example, we will look at the factual purpose of the Act on Real Estate Intermediation which, according to the Ministry for Local Development, should strengthen the protection of consumers’ rights whilst enhancing consumers’ trust in real estate services. We will also analyse the new Act on Register of Contracts, which has been named in a public poll of professionals and most businessmen as the “act of the year”, as well as the prepared amendment to labour law or changes in regulation of electronic signatures. We will also briefly deal with the issue of capital transfer by sale of a business or its part, and, using an interesting historical parallel, we will also briefly describe the useful concept of a family holding. As we are celebrating our 15th anniversary this year, we will also mention some significant moments from the history of our firm, which would have never happened without your support and mutual cooperation. I wish you inspiring reading and a pleasant, sunny summer. Jaroslav Havel Managing Partner
Legal News 6/2016
Jaroslav Havel: I expect more transactions by larger investment groups on the Czech M&A market market, where one of the most active participants was the group Rockaway, owned by Jakub Havrlant. It is also worth noting the fate of GE Money Bank which, instead of being directly sold to an external investor, was listed on the stock exchange under the new name MONETA Money Bank. Significant transactions in the real estate market included the sale of the shopping centre Palladium for EUR 565 million and, in the context of the planned development of the Masarykovo nádraží area in Prague by the investment group PENTA, the sale of the office building Florentinum will also be the subject of interest. What were the developments for the first half of this year in the Czech and international context, and what can we expect in the upcoming period? The increasing trend in mergers and acquisitions is also continuing this year for the same reasons. We expect that the investment market will be more volatile in the future, but still proceeding in an upward trend of an increasing number of transactions. At the European level, the market will most reflect the events relating to Brexit, and also the progress of the refugee crisis. At the international level, constant attention is being paid to China and its investment strategy. Which sectors or business industries are most significant in terms of the number of transactions? In which sectors are numbers increasing, and in which sectors are numbers decreasing, and which sectors are worth investing in?
How was the year 2015 from the mergers and acquisitions perspective? The development in 2015 and in first months of this year follows on from positive figures from the previous two years, when, after a sharp drop in the number of transactions due to the financial crisis, the market significantly rallied, entailing once again an increased number of transactions worth almost 200 billion Czech crowns. Currently, we can see an increased investor “appetite”, thanks primarily to sufficient free capital in the market and low interest rates. The Czech M&A market may be considered to be one of the best profitable in the entire CEE region.
There has been a long term degree of interest in the real estate sector, which is number one in terms of the number of transactions completed in the Czech market. Other attractive sectors include the health and pharmaceuticals sectors, information technologies, e-commerce, mechanical engineering, as well as the food and retail sectors. In the future there will also be an increase in investments through fund structures specialising in areas from start-ups to real estate, or other forms of fund structures associating more investors combining both strategic and financial investors. Fewer transactions are completed in the energy sector, where domestic investors already prefer to focus on foreign investments.
Which transactions can be considered to be the most significant? Last year, the largest transaction within the CEE region was completed in the Czech Republic, when the Swedish company Trelleborg acquired Česká gumárenská společnost for more than EUR 1 billion. There were also major acquisitions in the mechanical engineering sector, when the Chinese group CEFC, which is very active in the Czech Republic, acquired the businesses ŽĎAS and TS Machinery from the mechanical engineering group Železiarne Podbrezová for almost CZK 2 billion. Regarding activities of foreign investors in the Czech Republic in 2015, we can regard as significant the acquisition of the Czech food company Hamé for EUR 175 million by the Norwegian group Orkla, already holding another major Czech food company Vitana a.s. in its portfolio. There were also interesting acquisitions in the e-commerce
Are the transactions in the Czech M&A market somehow distinct when compared to the developed Western world? Are there any local specifics? I would not say locally specific, but in the Czech Republic, we constantly see a slow growth in direct foreign investments and their allocation. In order to improve the investment environment, it is necessary to continue focusing on removing obstacles limiting higher efficiency in investments, which is primarily excessive bureaucracy.
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Legal News 6/2016 What is the interest of Czech entrepreneurs and businessmen in acquiring companies abroad?
Czech Republic are expanding its existing investments and planning the new ones, which is a good sign for the entire economy. Several technology companies may also become significant investors in the future, where, in my opinion, there is always a space for procuring interesting foreign know-how and capital. Another, separate chapter are the activities of Chinese investors in the region, who, after a recent visit by China’s president, are investing in individual sectors, aiming to create a certain “bridgehead” for their further activities in the West.
Compared to the past, when Czech investors were primarily interested in acquisitions of Czech companies, there is currently an increased number of foreign acquisitions occurring. This also relates to the fact that the number of acquisition opportunities, particularly in the segment of larger companies, is very limited in the Czech Republic. These are activities mainly in the energy sector where we have noted several interesting investments outside the Czech Republic, when, for example, in early 2015 EPH acquired several coal and gas power plants in Italy from the group E.ON. We can also expect other acquisition activities on the part of Czech investors in Slovenia within the context of planned privatisations of state-owned companies, where as early as at the end of last year, the non-alcoholic beverage producer Kofola acquired the mineral water producer Radenska, and the Czech company Sporten has long been attempting to take over the major ski manufacturer ELAN. We can say that during recent years, Czech investors have been focusing in particular on neighbouring Germany, Slovenia and Poland, but also on Bulgaria, France and Austria. On the contrary, the acquisition activities of Czech investors in relation to Russia have been significantly reduced; the same is true with Ukraine, where some Czech investment and industrial groups had planned a quite extensive expansion before the crisis.
Do you think that if the Czech Republic introduces the Euro, foreign companies will be more interested in doing business in the Czech Republic, which will also be reflected in a further wave of mergers and acquisitions? The macroeconomic indicators and the overall business climate seem to be favourable in terms of the economic growth and relative stability of the Czech Republic, so I would forecast optimistic prospects. I do not think that in general, the introduction of the Euro would contribute to significantly increased interest in relation to foreign investors, because the Czech crown is a stable currency and does not pose a great risk to foreign investors. Although the Czech National Bank has recently surprised many companies with its Czech crown devaluation strategy, the market is currently offering various forms of security instruments which will significantly reduce the inherent risk. The interest of foreign investors will not definitely slow down in the future, however, we think that the growing demand of domestic investors having the local knowledge requisite for acquisitions and, in general, mergers of undertakings into larger groups by sector specialisation will contribute to foreign investors preferring more and more joint investments with Czech investors, despite being in the position of minority shareholders. For example, this is the case for recent Chinese investments.
In which sectors in the Czech Republic does foreign capital most often enter, and which segments of the Czech market may be subject to the interest of foreign investors in the future? The Czech Republic usually attracts interested parties from the automotive sector and its suppliers. Investors in the
Chart – Statistics of Havel, Holásek & Partners: Overview of Transactions by Sectors
The 2010–2015 statistics is based on the transactions in which HHP provided legal advice, and the value of which was more than EUR 2 million (92 transactions in total).
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Largest M&A team
400 450 60 13 From 2006 to 2015, more than
transactions
relating to M&A and divestitures and corporate restructuring primarily in Central and Eastern Europe.
Transactions completed v from 2006 to 2015 worth over
CZK billion
Largest M&A team in the Czech Republic and Slovakia, with more than
M&A partners
lawyers
Our M&A services commonly include: detailed transaction structuring advice; lead counsel advice for regional acquisitions; legal audit (due diligence); industry-related expertise in structuring transactions; drafting and negotiating transaction documents; merger control and compliance; post-acquisition advisory services. We typically advise on approximately forty to seventy mergers, acquisitions, divestitures or similar transactions per year.
Jan Koval Partner | Prague
Václav Audes Partner | Prague, Bratislava
Ludvík Juřička Partner | Brno
Martin Jurečko Partner | Bratislava
jan.koval@havelholasek.cz
vaclav.audes@havelholasek.cz
ludvik.juricka@havelholasek.cz
martin.jurecko@havelholasek.sk
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Major M&A transactions
Legal advice to a major German phytopharmaceuticals producer and distributor Havel, Holásek & Partners has provided comprehensive legal advice to MB Beteiligungs GmbH, a member of the German holding Martin Bauer Group, one of the world’s largest processors of medicinal herbs. The legal advice involved the sale of a 100 % shareholding in Megafyt Pharma s.r.o., a major Czech tea and medicinal products producer and distributor. The company’s new owner is a major Czech producer of drugs, medical devices, cosmetics and food supplements, Dr. Müller Pharma s.r.o.
Legal advice to Erste Group Bank on a joint venture with Global Payments Havel, Holásek & Partners successfully represented a major Austrian banking company Erste Group Bank, which also is the parent company of Česká spořitelna, in negotiations with the European Commission. On 19 April 2016, the Commission approved a transaction resulting in the formation of a joint venture between Erste Group Bank and Global Payments, a leading worldwide provider of payment technology services. The joint venture will provide merchant acquiring in the Czech Republic, Romania and Slovakia. Last year, Havel, Holásek & Partners advised Raiffeisenbank on a similar matter. The agreements resulted in the formation of a joint venture with EVO Payments which, by means of a new Czech subsidiary REVO, took over all activities relating to payment card acceptance. This transaction also required approval from the European Commission.
Legal advice to Czech Industry Group on an alliance with a Chinese investor for the construction of a new brake disc manufacturing plant Havel, Holásek & Partners provided comprehensive legal services to Czech Industry Group on the conclusion of a contract with Shijiazhuang Zhongxing Machinery, the largest Chinese holding company manufacturing brake discs and agricultural machinery. The contract is for the construction of a new plant in Sokolov, in which the Chinese company will invest over a billion Czech crowns and supply its own technologies. The new factory will create 100 to 200 new jobs in the Sokolov region.
Comprehensive legal advice to the Chartered Town of Plzeň on the acquisition of Vodárna Plzeň (one of the largest operators of water and sewerage infrastructure in the Czech Republic) AHavel, Holásek & Partners represented the Town of Plzeň in the acquisition of 98.3% of shares in Vodárna Plzeň from Veolia Česká republika. As a result of this transaction, worth approx. CZK 700 million, Plzeň has become the sole shareholder of the company. Vodárna Plzeň is the operator of water and sewer systems in Plzeň and the surrounding area, and is one of the 10 largest water companies in the Czech Republic.
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Legal News 6/2016
Differences in Negotiating Transactions by Domestic and by Foreign Investors apply international standards and provide legal services to both domestic and foreign clients. They have an apparent, constantly growing business approach to proposed solutions to the issues identified within the transaction. They focus on a detailed description of risks and methods for resolving them (either in the form of exclusion or limitation), thus enabling their clients to reach managerial decisions responsibly.
In the Czech Republic and Slovakia, there has been a very interesting development regarding the approach to investing. In the 1990’s and in the early 2000’s, the economy was being privatized; major domestic market leaders were completing their “first largest” transactions, and foreign investors were coming. Historical differences in the approach of domestic and foreign investors to transactions have gradually become blurred. Now, the common denominator is good preparation and the use of transaction processes.
The different knowledge of environment also entails a different approach to the parameters of a transaction. Whereas domestic investors place more emphasis on the method of paying the purchase price, foreign investors tend to place more emphasis on the seller’s liability for the condition of the target company. Disagreement regarding this parameter may also frustrate the transaction. The successfulness and structure of the transaction are also affected by the activities of public authorities. Foreign investors, who are coming to a new environment, sensitively perceive the speed and quality of the public authorities’ decision making. Over the last years, there has been a positive shift, for example, in the activity of the Office for Protection of Competition or registry courts.
Domestic investors place less emphasis on the elaboration of transaction documentation and are willing to accept more risk, particularly for the detailed knowledge of the market and the target company. Less often, they use advisors who are replaced with internal teams. If a transaction is financed by a bank, the involvement of an advisor is typically a rule. As for foreign investors, the involvement of advisors is much more common, and, considering the limited knowledge of the Czech and Slovak business environment, also necessary. Their willingness, especially of those from the EU, U.S.A. and Japan, to bear the managerial risk from the transaction, is lower than that of domestic investors. There is almost zero willingness to bear the risk is in cases where the target company is oriented, from the customer aspect, at the public sector. The reason is non-standard practices in negotiating contracts which are strictly sanctioned by the national legislation of the investor (mainly in the U.S.A.).
On the other hand, in transactions, foreign investors in particular still prefer that their potential disputes are resolved by foreign arbitration courts and not by general courts or national arbitration courts. One positive trend for the conclusion: across the investor spectrum, we can see the increasing significance of gentleman’s agreements, when in reality, in many cases, the shaking of hands is more binding than the many pages of contractual documentation.
Initially, the legal know-how was brought by the offices of international law firms led by foreign experts. Currently, in the M&A sector, there are often active Czech attorneys who
Author: Václav Audes | Partner
Experienced attorney Silvie Király joins largest M&A team in CEE Havel, Holásek & Partners bolsters its team with the addition of another experienced lawyer, Silvie Király (36). Silvie, who has spent ten years in the legal profession, is a valuable acquisition for the firm’s specialized M&A team – the largest M&A team in the CEE region, consisting of over 60 lawyers and 13 partners. Silvie studied at the Faculty of Law of the West-Bohemian University in Pilsen. During her studies, she participated in international legal contests including moot courts in the Hague, the Netherlands, and in Washington D.C. She has also completed a course at the School of Law at Manchester Metropolitan University in the United Kingdom, and subsequently undertook a half-year work secondment with Amy Tsang & Co. Solicitors in Manchester (UK). In addition to her native Czech, she speaks fluent English.
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Most successful Czech-Slovak law firm, Havel, Holásek & Partners celebrates its
15th anniversary Havel, Holásek & Partners was founded in 2001 by five young lawyers from leading international and Czech law firms. In 15 years, the firm has achieved the absolute top position among law firms in the Czech Republic and Slovakia. It had continued to grow even during the global financial crisis, and since 2009, it is the largest Czech-Slovak law firm and the most dynamically growing law firm in the region of Central and Eastern Europe. “I am pleased that we have managed to build in a relatively short time a strong and prosperous law firm that is modern, sharp, innovative, and teeming with top-notch lawyers. Together they have undertaken the most challenging projects and have made every effort to maximise client satisfaction. I firmly believe that we will continue to fulfil our vision even in future years, i.e. to be the leading Czech-Slovak law firm that provides services of the highest international standards in the legal profession,” explains Jaroslav Havel, Managing Partner and one of the five founding members of the firm.
15 SUCCESSFUL YEARS
Five young lawyers, namely Jaroslav Havel, Jan Holásek, Robert Nešpůrek, Marek Vojáček and Ondřej Petr, establish their own law firm, Havel, Holásek, in Prague.
The newly-established firm is profiled as a national law firm, providing top-tier services to both Czech and international clients. To enhance this, the firm concludes an exclusive cooperation agreement with Deloitte.
The firm manages to obtain clients in key markets in Germany, the United Kingdom and North America, and its international reputation continues growing. Thanks to this, the firm starts to come to the attention of prestigious global rating agencies.
The year 2004 foreshadows substantial growth of the firm in the three years to come. The firm increases the number of its lawyers and clients, strengthening its position in the legal market.
The firm ends its exclusive four-year partnership with Deloitte and takes its own course without ties to any single strategic partner. The firm’s revenues and profit double within a year.
The size increase of the firm also boosts the reach of legal services. The firm establishes its office in Ostrava and addresses cases involving an international element with leading law firms in Europe, North America and Asia.
Further growth of the firm is encouraged by a favourable economic climate and a worldwide wave of mergers and acquisitions. Thanks to the number of these transactions completed, the firm is now among the top law firms in Central Europe.
As for the number of completed transactions, the firm becomes number one in the Czech Republic. It also expands to the Slovak legal market and establishes its office in Bratislava, which currently is among the largest law firms in Slovakia.
Despite the culmination of the financial crisis, the firm recruits other lawyers and, after a re-start, gets ahead of its competitors – becoming the largest Czech-Slovak law firm, and establishing its office in Brno.
The firm solidifies its position in the market by the highest number of completed transactions in the entire CEE region, despite the fact that within the region, it is active only in two jurisdictions, namely the Czech Republic and Slovakia.
The firm hires new partners and, by integrating the Slovak office, changes the firm’s brand to Havel, Holásek & Partners. By celebrating its 10th anniversary, it commences another successful career. The number of the firm’s clients exceeds 1,000, including more than a third of the companies in the Czech Top 100, and 70 from among the 500 largest global companies according to Fortune 500. The firm also establishes its own Foundation to support its pro bono activities.
Thanks to strategic thinking, successful management of the firm, and an annual two-digit growth of the turnover, the firm is the most dynamically growing law firm in Europe. Havel, Holásek & Partners moves to the prestigious office building Florentinum and integrates legal teams from renowned law firms, including the Prague office of Norton Rose Fulbright. The firm also opens its own education Academy.
The firm solidifies its position as the economically strongest law firm in the Czech Republic and, according to national and global awards, is the best, most popular by clients and most required by students, law firm in the Czech Republic.
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Legal News 6/2016
The Pitfalls of Correct Specification of Business for Transfer
be considered a business. Another situation may occur if the lease of premises is intentionally excluded by the parties from the sale of a business constituting private medical practice. In this case, it would be necessary to consider whether it is an established practice or a practice whose relocation would have no or very little impact on client fluctuation, and so on.
Compared to company restructuring or a divesture of assets, an asset transfer by means of the sale of a business or its part may offer several advantages (in the majority of cases, the sale of a business does not require an expert opinion, the purchaser does not assume the public debts of the seller, the transfer of a business is not subject to VAT). From a legal perspective, it is usually a rather complex transaction that requires many issues to be carefully addressed in contractual documentation. The correct and precise specification of the business or its part is of extreme importance to both the seller and the purchaser.
The “erosion” of the business or its parts caused by incorrect exclusion of individual items may result in significant legal and tax issues as well as practical complications. According to the available interpretations, one consequence will be that the individual asset items will pass onto the purchaser but within the legal regime of sale or assignment. Items that may only be transferred subject to the prior consent of the other party or a creditor (which would not be required in the case of a transfer of the business or its parts, according to the available interpretations and established practice) will not be acquired by the purchaser. In addition, such a transfer would be subject to value added tax. This, of course, can be a substantial financial burden on the parties, and can move the transaction to a completely different commercial level than originally intended by the parties.
Therefore, the contractual documentation should ensure that the parties transfer to each other all they wish to transfer and effectively exclude components they do not wish to transfer, although they could be part of the business and would otherwise pass onto the purchaser along with the business automatically by law. This might seem a simple task. However, it can hardly be dealt with by including a mere list of transferred and excluded items in the transfer agreement. Although today, the law expressly permits that the parties exclude from the transfer some asset components comprising the business, they should bear in mind the risks they would be exposed to if the remaining asset items ceased to be considered a business.
An inaccurate or incomplete specification of asset items can also result in items passing onto the purchaser that were considered by the parties excluded in the contractual documentation and vice versa.
The assessment as to whether or not a specific asset item is separable from the business need not be easy. In each individual case, the nature of the business to be transferred should be taken into account. For example, if the lease of office premises is excluded from the sale of a business that comprises running an e-shop, the remaining set of assets will most probably not lose its integrity and will continue to
Consequently, it is highly advisable that the parties pay special attention to the specification of the business during negotiations for the sale and in the transaction documents to avoid unnecessary inconvenience.
Authors: Pavel Němeček | Partner Zuzana Hájková | Associate
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Legal News 6/2016
Family Holding for Every Family property and the non-homogeneous and weakened group of companies could not withstand the pressure of negative external influences, and dissolved.
At first sight, it might seem that a family holding is a privilege reserved only for certain forms of family business of a certain minimum size and, to many, it may also seem to be an unnecessary luxury. However, as a matter of fact, a family holding is a rather unique and flexible tool, offering numerous advantages to both its founders and other family members. Moreover, without exaggeration, the principles on which it is built have been established for centuries. Undoubtedly, it is not just a trendy product, but rather a comprehensive and versatile solution not dissimilar to some historical concepts (such as a trust) which have been thoroughly tested over time. A father decided to hand down a prospering business to his offspring. Having thoroughly considered everything, he decided to divide shares so that his sons would not be able to work without each other in making decisions, with the oldest or most capable son having a decisive majority in the event of a dispute. Because the ownership of companies would be scattered and threatened with further disintegration as a consequence of an uncontrollable inheritance, marriage splits or even financial trouble of the children, the handing-down was preceded by an ownership concentration allowing also for the effective management of the whole group, with the exclusion of non-blood relatives – a family holding. At the same time, the father warned his sons that family wealth accumulated over generations can only be maintained through mutual familial cooperation, the ability to listen to each other, and by remaining united. As long as the sons acted in line with their father’s advice, the companies would continue prospering, and the value of the family property would remain unreduced. However, as soon as disputes arose, the brothers started to divide the
Does this sound close to home to you? The story dates back to the last decade of the 9th century. The mentioned group of companies was the Great Moravian Empire, the father was Svatopluk I himself, and the legend of a bundle of three rods is notorious. A lesson can be taken from this story, which has significant implications for present times, in particular with regard to the first post-revolution generation of businessmen and their families. Your business and family property do not necessarily have to be as large as those held by this prominent Slavonic duchy to deserve appropriate care and protection. We take our household, third-party motor or life insurance as something almost for granted. However, it is necessary to ask ourselves a question: Do I also sufficiently protect our family’s wealth? It seems that a family holding is the mythical force which can hold the rods together.
Authors: David Neveselý | Partner Tomáš Valouch | Associate
Legal advice to Albatros Media on the acquisition of the publishing portfolio of Denmark’s Egmont Havel, Holásek & Partners provided comprehensive legal advice to Albatros Media, the largest Czech publisher, on the acquisition of its rival, the Czech subsidiary of Danish consortium Egmont. For Albatros Media, who are a Havel, Holásek & Partners’ client of many years’ standing, this was a very important step in its acquisition strategy, and a reinforcement of its robust market position in the Czech Republic and Slovakia. As a result of the transaction, Albatros Media will benefit from access to international licences, such as access to Disney and Star Wars titles.
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Legal News 6/2016
Act on Contract Register number (thousands) of obligated entities and contracts concluded by them and, obviously, parties to these contracts. All contracts worth over CZK 50,000 concluded by the state, local governments, institutions receiving contributions from the state budget, state funds, scientific research institutions, public universities, municipal unions, regional cohesion councils, institutes and public service organisations established by the state or local governments, state and national enterprises, health insurance companies, Czech Television, Czech Radio and other legal entities “in which the state or a local government holds a majority shareholding whether directly or through a third-party legal entity”. Contracts will be published in the contract register maintained by the Ministry of Interior accessible on the Internet in a machine-readable format, including metadata set out by the law.
Revolution in contract law? Freedom of contract limited by public interest in transparent use of public finance. Act no. 340/2015 Coll., on Contract Register (“Contract Register Act”) was first presented in the Chamber of Deputies in 2012 as a parliamentary initiative for broadening public control. Historically, the law is one of the longest deliberated laws ever and has earned a number of popular nicknames, such as “the most beautiful law” or “Pandora’s box of transparency”. The idea behind its adoption was to reinforce and deepen available means for securing transparency in financing the public sector, in particular control over transparency in the use of public assets and finance. Lawmakers have long looked for a suitable form of such control meeting the adequacy and necessity requirements. In the end, the legal regulation was embodied in a thin publication, containing several paragraphs with the law being based on the principle of self-regulation of obligated entities without supervision by any authorities, and automatic sanctions under private law. However, the act alone and its amendment which was submitted shortly after its adoption and has been still discussed up to the present day (parliamentary publication no. 699) were very substantially affected by motions to amend the law submitted by the deputies and provoking a number of questions. Owing particularly to these motions it is evident that the new act will raise a number of interpretation and application issues which will need to be resolved.
Another important difference as compared to the current legislation contained in the Information Access Act is the essence of sanction consequences. The Information Access Act imposes obligations on a basically sanction-free basis. In contrast, the Contract Register Act provides for two consecutive sanctions, however, both having their effective date postponed by one year, i.e. until 1 July 2017. The first sanction is ineffectiveness: a contract to which the duty of publishing in the contract register applies enters into effect no earlier than on the date of its publication. The Contract Register Act provides that contracts must be sent to the contract administrator without undue delay within 30 days from their conclusion. This is an administrative period, and a failure to adhere to it does not trigger any sanctions.
The law ideologically follows up on Act no. 106/1999 Coll., on Free Access to Information (“Information Access Act”). Regarding the substantive reasons for the protection of information, the Contract Register Act is based on the Information Access Act and, therefore, the application of the Contract Register Act should also be based on interpretation of the Information Access Act and other legal regulations regulating free access to information from a case-law and doctrinal perspective (Section 3 (1) of the Contract Register Act). However, as a substantial change, some information which can be provided to an applicant today will be published before their publication in a contract register.
Sanction consequences will occur only in cases envisaged in Section 6 (1), under which a contract which was to be, but is not published, is not effective. The ineffectiveness of the contract is then followed by another sanction – the contract becomes null and void. If a contract which enters into effect no earlier than on the date of its publication is not published through the contract register even within 3 months of the date when it was concluded, it is regarded as being null and void from inception.
Regarding the scope of information to be published, no significant change occurs, but the new act still narrows the scope of published information, as compared with the existing law. This is the result of numerous motions to amend the law and, primarily, exemptions from the publication duty provided for in Section 3 (2) of the Contract Register Act. However, other exemptions completely copy those set out under the Information Access Act (personal data, trade secrets, classified information, intellectual property rights etc.).
Despite of the fact that sanction consequences arise automatically, the act opens certain space for remedying the defect – an option of non-cancellation. This is a legislative attempt for the application of the Contract Register Act to respect the constitutional tenets of autonomous will and freedom of contract, and to limit these tenets on the basis of the principle of good will protection. Therefore, a contract will not be cancelled if only its part is not published on the grounds of legitimate protection of certain information, if it is authoritatively concluded in a subsequent dispute that there were no legal grounds for the protection of such information and the parties subsequently publish the missing parts of the contract within 30 days. The
The law sets out an enumerative list of obligated entities in Section 2 (2). The publication duty will affect a large
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Legal News 6/2016 parties will remedy the lack of publication in this manner, and the contract will remain valid.
interpretation problems to which solutions of the existing challenges will be added on a continuous basis.
Preparation of organisational and technical changes to be made by the obligated entities, and good will in overcoming disputed provisions through interpretation, will be necessary for the application of the act. The interpretation should respect the basic meaning and purpose of the act and attempt to contribute to the transparent publication of contracts by entities with public element. A simple principle applies to the obligated entities in many cases. If they agree on the publication of a contract with a counterparty, and the counterparty grants its consent thereto, the obligated entities will eliminate the need for searching, identifying and excluding from publication protected potential information and the risks associated with its potential non-publication.
It is important that restrictive interpretations, in particular those concerning possible corrections, do not have a “chilling effect” on contracts with obligated entities. One of the most important tests in this respect is the interpretation of the scope of effects of Section 7 (2), which provides the mentioned option to the affected entities in cases where the contracts were concluded at least partly (i.e. in the right format and including the required metadata), or where some metadata of these contracts were incorrectly excluded due to protection of trade secret. The Contract Register Act will probably be amended soon, but it is still not clear to what extent and how. Three committees of the Chamber of Deputies are discussing questions concerning entrepreneurs – individuals, state and national enterprises, and many other exemptions required by particular affected groups of entities. These questions again provoke the same disputes as those which emerged at the time when the act was adopted two years ago. For example, the Economic Committee promotes broader protection for certain types of obligated entities which would imply not only the omission of all state-imposed conditions, but also all entrepreneurs – individuals. By contrast, the Public Administration Committee supported only the exemption of the national enterprise Budvar. Nonetheless, the amendment is not likely to be passed before the intended effective date of the law.
Interestingly, many obligated entities publish all their contracts at the public administration portal in the voluntary contract register application already, without seeing any issues, whereas many other obligated entities which are practically identical in legal terms, and which are all obligated entities under the Information Access Act, regard such publication as an insurmountable problem. In any case, a balance must be struck between interests of the public and the affected entities in interpreting and applying the law. This is also one of the reasons why the Ministry of Interior is furnishing a methodology for the application of the Information Access Act, which will be a living document reflecting the current application and
Authors: František Korbel | Partner Alexandra Molitorisová | Junior Associate
Havel, Holásek & Partners retains the title of the most successful law firm in the Law Firm of the Year awards in the Czech Republic and Slovakia Havel, Holásek & Partners, the largest Czech and Slovak law firm, has yet again succeeded in the Law Firm of the Year 2016 awards in Slovakia in ten out of twelve categories. Havel, Holásek & Partners is a highly recommended law firm in competition, development projects and real estate, mergers and acquisitions, telecoms and IT law, public procurement and tax law. It was also named as a recommended firm for corporate law, restructuring and insolvency, banking and finance, and IP law. The Law Firm of the Year is a professional competition assessing the quality of legal services offered in the Czech Republic and Slovakia. The awards were launched in 2008 in the Czech Republic and in 2013 in Slovakia. Havel, Holásek & Partners is the most successful and all-encompassing legal practice in both the Czech Republic and Slovakia, both in terms of the total number of nominations and the awards received in both countries in all years of the awards.
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Legal News 6/2016
Changes to the Regulation on Electronic Signatures (eIDAS) other member states. The Regulation also stipulates terms and conditions for the preservation of qualified electronic signatures, imposing on the service provider the obligation to use appropriate technologies capable of extending the trustworthiness of the qualified electronic signature beyond the technological validity period.
In furtherance of the Europe 2020 European strategy, a new EU regulation was adopted last year, abbreviated as eIDAS. Effective from 1 July 2016, the new regulation will introduce, apart from Europe-wide principles of electronic identification and authentication, some substantial changes to the principles governing electronic signatures and will no doubt have an impact on the Czech judiciary.
In addition, the Regulation could offer some progress with regard to dynamic biometric signature, which is widely popular among clients.
It has been over 15 years since the first piece of legislation was adopted at the European level to predetermine the current form of the member states’ national laws governing electronic signatures – Directive 1999/93/EC of 13 December 1999 on a Community framework for electronic signatures (the „Directive”). However, the Directive unfortunately was not capable of providing a comprehensive cross-border and cross-sectoral framework for secure, trustworthy and easy-to- electronic transactions.
Besides changes in the area of electronic signatures, the Regulation stipulates conditions under which member states will recognise methods of electronic identification or provide a legal framework fort electronic seals (similar to the current electronic signs under the Act), electronic time stamps, electronic documents, electronic delivery service, and certification service for website authentication.
With the increasing use of electronic signature in the member states, the EU acknowledges the importance of standardisation and unification of the applicable laws. This is why Regulation No 910/2014 of 23 July 2014 on electronic identification and trust services for electronic transactions in the internal market and repealing Directive 1999/93/EC (the “Regulation”), also referred to as “eIDAS”, has been adopted and published. Effective from 1 July 2016, the Regulation will introduce in the Czech Republic, besides changes to electronic identification and authentication, modifications of electronic signatures and other electronic identifiers.
On 9 November 2015, the portal of the ODok Application featured an initial draft of the Czech implementing regulation proposed by the Ministry of the Interior; on 31 March 2016 the material, already discussed by the government, was submitted in the form of two separate bills, namely the act on trust services for electronic transactions (Parliament print no. 763; “ATS”) and the so called implementing act, which projects the ATS into other related regulations (Parliament print no. 764). The two acts, once promulgated, will amend or abrogated more than eighty existing regulations. Apart from abrogating the Act, which will no longer be necessary due to the existence of the directly applicable European legislation, and apart from amending other laws applicable to electronic data and communications, changes should also be made to procedural rules, the act on archives and filing service, and tax laws. The ATS itself, being very concise, introduces rules for signing with electronic signatures and for using electronic seals and electronic stamps, and introduces penalties for violations of the obligations ensuing from the Regulation and the ATS. Last but not least, the ATS allows using some of the existing electronic identifiers for two years from its effective date, which should be the date of its promulgation, but in any case not later than 1 July 2016.
The Regulation, in contrast to the Directive and the Czech Act No 227/2000 Coll. on electronic signature (the “Act”), changes the definition of electronic signature so that electronic signature, instead of data which serve as a method of authentication of the signature or identity of the signatory, newly means data which serve as a proof that a person has expressed his or her intent and confirms the validity of a document (“…data (…) which is used by the signatory to sign …”). In addition to the term advanced electronic signature, the Regulation introduces a qualified electronic signature, being an advanced electronic signature based on a qualified certificate and created with a qualified electronic signature creation device. The main purpose of the Regulation is to ensure that, in all member states, the qualified electronic signature has the same legal effect as hand-written signature, and to acknowledge a qualified electronic signature based on a qualified certificate issued in one member as a qualified electronic signature in all
The Czech judiciary is about to face another interesting challenge in connection with the Regulation and the ATS, which it will hopefully cope with appropriately.
Authors: František Korbel | Partner Dalibor Kovář | Associate
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Legal News 6/2016
On Effectiveness of New Public Procurement Act We would like to remind contracting entities that certain provisions of the new act following from the transposition of three new public procurement directives adopted at the EU level can already be applied, e.g. those covering team quality evaluation or preliminary market consultations (contracting entities are authorised to openly hold these consultations with the objective of defining contract-award conditions as precisely as possible with suppliers who will also subsequently tender for a contract which was previously discussed with them).
In the last issue of the Legal News, we informed you that a new public procurement act is being prepared, and that a draft of this act, which represents the largest legislative change in public procurement in the Czech Republic in the last 10 years, was forwarded from the Chamber of Deputies of the Czech Parliament to the Czech Senate for consideration. The effective date of the act and its final version were not known at the time of publication of last year’s edition of the Legal News. We can now inform you more precisely that the long-awaited act (Public Procurement Act) was published on 29 April 2016 in the Collection of Laws under no. 134/2016 Coll. With regard to the six-month period between it coming into force and effect, as a result, the act will enter into effect on 1 October 2016 (with the exception of a few provisions, the effective dates of which were postponed for practical reasons). The new act is to enter into effect in October this year in order to give both contracting entities and suppliers sufficient time to thoroughly familiarise themselves with new legislation. However, contract-award procedures commenced before the effective date of the Public Procurement Act (i.e. by no later than 30 September 2016) will be completed in compliance with current legislation - Act no. 137/2006 Coll., on Public Procurement, as amended.
The new law introduces a number of new duties and concepts; It should emphasise some of the changes which are important for suppliers, and then we must point out a change regarding joint stock companies.
Along with the Public Procurement Act, accompanying Act no. 135/2016 Coll., which amends certain laws in connection with the adoption of the Public Procurement Act, was adopted. In addition to the accompanying act, approximately 8 other implementing laws are expected to be adopted and, in particular, a larger number of methodologies which should help users with the practical implementation of the new law should be published. The content of the law is based on rather a generic concept, and the methodologies are primarily intended to equip contracting entities with sufficient capabilities to navigate through the whole contract-award procedure, so as to minimise errors due to misunderstanding or misinterpretation, and the consequent incorrect application of new legal norms, primarily in the first years following its effective date. The Ministry for Regional Development as the main author of the law guarantees the rule that if a contracting entity proceeds in compliance with the methodology approved by the Ministry, then it also proceeds in compliance with the law.
If a company participating in contract-award procedures as a supplier is a joint stock company and has issued certificated shares at the same time, it will be obliged to convert the shares into a book-entry form, i.e. to replace the current certificated shares upon their entry in the register of book-entry shares administered by the Central Securities Depository. Please note that, as a part of this conversion into a book-entry form, certain acts must be performed regarding the shareholder(s), notary, Commercial Register and, in particular, the Central Securities Depository and, therefore, it seems to be appropriate to commence the conversion process immediately, as during the award procedure, contracting entities will verify whether the successful bidder has (or had on the date of submitting the bid) information on the book-entry form of its shares registered in the Commercial Register. If such information is not entered in the Commercial Register, contracting entities will be obliged to disqualify the bidder from the award procedure.
Authors: Adéla Havlová | Partner Jan Lašmanský | Senior Associate
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Legal News 6/2016
Eventful Times for Labour Law a number of problems, and employers will have certainty as regards how to conduct themselves in these cases.
Rather atypically, a lot has been going on recently in labour law. Not only did a technical amendment of the Labour Code come into effect in autumn last year, with the Czech Parliament currently discussing the further amendment of this act, but also a conceptual amendment has been prepared which should came into effect in April next year. Top managers The first and most awaited change should be the introduction of a special category of employees called “top managers”. On the basis of an agreement with the employer a) a manager directly subordinate to a statutory body or to an employer – individual, or b) a manager directly reporting to such a manager, could become a top manager provided that the employer agreed on salary with the employee specified under point a) or b) and that average monthly earnings of such an employee amount to at least CZK 100,000. Subsequently, exemptions will apply to top managers regarding mainly the scheduling of working hours (they may determine the weekly working hours by themselves), remuneration (exclusion of salary, compensations or compensatory time off for overtime work, work on holidays, night work and work on weekends) and obstacles to work (exclusion of compensation for salary for other important personal obstacles to work).
Other innovations Other innovations include, for example, changes in the planning and scheduling of working hours (moving forward, a written schedule of working hours should be made available to an employee no later than two days before the scheduled period commences), simpler delivery of written documents to employees by the employer (personal delivery of written documents, even outside the employer’s workplace, will no longer be required, and delivery procedures will be harmonised with the postal service’s rules) or explicit inclusion of the prohibition to decide labour disputes arising between an employee and an employer by entities other than courts.
Home office Another interesting novelty is the determination of rules for work outside the employer’s workplace. The employer’s obligation to pay costs associated with communication and other costs incurred by the employee in carrying out such work is explicitly provided. Moreover, such costs must not be included in the wage, salary or remuneration under an agreement. This specification is primarily aimed at the current situation where employers often fail to realise that they should provide employees working from home with certain compensation for costs they incur in this connection. As the current Labour Code provides that employers may not transfer costs associated with the execution of work to employees, this provision will eliminate
Last but not least, we should mention also changes regarding the calculation of holidays, trade unions, collective dismissals, and the transfer of employees. The above changes are just some of the proposed changes. For the time being, all changes are still being discussed during the comment procedure and with social partners. We will inform you as soon as the conceptual amendment takes shape more clearly.
Authors: Petra Sochorová | Counsel Pavla Kaufmannová | Junior Associate
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Legal News 6/2016
No More Freedom for Real Estate Agents? Proof of professional qualifications will be submitted to the Ministry of Regional Development, which will issue a certificate to the agent provided that the prescribed conditions are met. It will be possible to acquire professional qualifications primarily upon obtaining a certificate of successful acquisition of professional qualifications as a real estate agent, under the Act on Verification and Recognition of Results Further Education (Act no. 179/2006 Coll.). Furthermore, the option of proving professional qualifications on the basis of a master’s degree in real estate agency, law, property valuation or a university degree plus one year of experience as a real estate agent or the completion of a high school with a high school diploma plus three years of experience as a real estate agent.
At the beginning of this year, the government approved its legislative proposal of the Act on Real Estate Intermediaries. Thus, the times when a trade licence for real estate agency was easy to get will likely be soon over. Proof of legal age and a clean criminal record have been sufficient up to now for obtaining a trade licence for real estate agency activities under Act no. 455/1991 Coll., on Trade Licensing (“Trade Licensing Act”), i.e. fulfilment of general conditions for carrying out a trade, but it has not been necessary to prove any professional qualifications for carrying out the trade. The new law is expected to come into effect in the second half of 2017.
The Ministry of Regional Development prefers this solution to the option where the professional qualifications are set out by the Trade Licensing Act. In accordance with the conditions of the Trade Licensing Act, it is sufficient for an entrepreneur if an individual meets the requirements for carrying out the respective trade, rather than all employees or independent contractors. However, the Ministry would like to achieve a situation where every real estate agent is obliged to prove their professional qualifications. The certificate will be added to Annex no. 2 of the Trade Licensing Act as proof of professional qualifications. Persons who have proven their professional qualifications and hold a certificate will be recorded in a publicly accessible List of Qualified Persons. With the use of this list, consumers will be able to verify whether a particular real estate agent is indeed professionally qualified for carrying out the respective activities.
According to its proponent – the Ministry of Regional Development – the new legal regulation should in particular define the basic legal framework for real estate agency work, boosting protection of consumer rights and deepening consumer trust in real estate services. According to the Ministry, the main reasons for adopting the missing regulation of real estate agency include low professional qualifications of some real estate agents, insufficient supervision over the execution of real estate agency activities, missing legal regulation of intermediation, and the essential elements of agreements on real estate agency.
Mandatory professional liability insurance for real estate agency, and the protection of clients’ funds deposited at a real estate agent in the case of execution or insolvency, should provide further protection to consumers.
Alternative no. 3 which was approved by the government1 assumes that the Trade Licensing Act will be amended to make the conditions for obtaining a trade license for real estate agency more stringent, and also that a special law on real estate agency will be adopted, which will set out rules for the actual execution of activities of real estate agents.
In addition, it is necessary to moderate the more stringent requirements for an agreement on real estate agency. This agreement will be defined as a special type of brokerage contract which is regulated by the provisions of Section 2445 et seq. of Act no. 89/2012 Coll., the Civil Code. According to the government’s legislative proposal, the Real Estate Agency Act should define other mandatory particulars of the agreement on real estate agency, such as a written form of the agreement. The regulation of the agreement on the escrow of funds at a real estate agent will be also more
The amended Trade Licensing Act will put real estate agency in the category of regulated trade. Thus, moving forward, trade licence applicants would not only be obliged to prove the fulfilment of the above general conditions for carrying out a trade, but also professional qualifications for carrying out the activities of a real estate agent. 1
Originally five alternatives of the legal regulation of real estate agency were presented to the Ministry of Regional Development. Initially, the Ministry of Regional Development and the government were in favour of alternative no. 5, which proposed to regulate real estate agency as a licensed trade regulated under a special law.
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Legal News 6/2016 of unprofessional practices. The List of Qualified Persons will enable more efficient supervision over the execution of the relevant activities.
stringent, as moving forward, escrow at real estate agents will be subject to similar requirements escrow at attorneys or notaries. Thus clients’ funds will have to be deposited in an account separate from the account in which operational finance of the real estate agent are kept.
Negative factors will include an increased regulatory burden for entrepreneurs in connection with the notification of trades and the submission of the required documents, as well as for the state administration bodies in connection with the issuance of certificates, and the creation and maintenance of the List of Professionally Qualified Persons. Entrepreneurs will also carry a heavier financial burden due not only to their insurance, but also the costs associated with professional qualifications tests or preparatory courses for these tests.
“The new legal regulation should in particular define the basic legal framework for real estate agency work, boosting protection of consumer rights and deepening consumer trust in real estate services.” According to the Ministry of Regional Development, the new legislation, if adopted in the form approved by the government, will bring such benefits as improved quality of provided real estate agency services and a higher level of professionalism in real estate agency, a substantially higher level of consumer protection based on rules governing the execution of activities in this field such as requirements for qualifications and mandatory insurance, a duty to inform etc. This will likely reduce the number of judicial disputes, as there will be a lower risk of failures due to the application
Despite of these burdens placed on entrepreneurs, we tend to believe that the intent of the new legislation should be embraced, provided that it brings the desired effect, i.e. a higher degree of legal certainty on the market for real estate agents and a higher general standard of real estate agency services.
Author: Daniela Kozáková | Counsel
Havel, Holásek & Partners: Law Firm of the Year in Slovakia for Real Estate The largest Czech-Slovak law firm, Havel, Holásek & Partners, was awarded by Corporate INTL as Complex Real Estate Law Firm of the Year in Slovakia for 2016. “Our office has a significant share of the Czech and Slovak legal market relating to real estate. We have one the strongest teams, and in addition to the expertise of our lawyers, also extensive knowledge of commercial standards on the real estate market in the Czech Republic and Slovakia. I am pleased Corporate INTL has recognised our quality and acknowledged the Slovak office, which for its services and approach to clients, undoubtedly deserves the award,” commented Managing Partner, Jaroslav Havel, on the additional success of Havel, Holásek & Partners. Havel, Holásek & Partners has one of the largest legal teams specialising in real estate and construction law in the Czech Republic and Slovakia. Its team of 25 lawyers, under the leadership of managing partner, Jaroslav Havel, partners Lukáš Syrový in the Czech Republic and Martin Jurečko in Slovakia, with the support of another six partners, provides legal services for real estate projects in the private and public sectors in all aspects of trading with real estate and investment projects in accordance with Czech and Slovak law and according to FIDIC international standards or the rules of the European Investment Bank.
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Legal News 6/2016
Israel system is congested and extremely slow (111th place according to the World Bank’s ranking). This is quite surprising, as otherwise, Israel’s law widely favours contractual freedom and tends to eschew the more typical Middle East bureaucracy. Generally speaking, Israel’s legal system is a blend of Anglo-American and continental tradition. Most of the law of contract is embodied in statute, however long and detailed contracts still prevail. Both Israel and the Czech Republic are parties to the Vienna Convention on Contracts for the International Sale of Goods.
Israel is an export-friendly country, though it does not have many friends. Indeed, trading with Israel often poses an obstacle to trading with the Islamic world. Given the relative size, population and purchasing power of the two territories, many businesses elect to do business with the Muslim business world. To those who manage to overcome this complication, through the use of intermediaries or the like, the Israeli market offers a multitude of benefits. Israel has very strong ties with the European Union. Mutual recognition of standards, as well as the lifting of customs duties and barriers to trade with the EU, is very advanced. Israel has entered into an association agreement with the EU, as well as a number of other liberalisation conventions, including in relation to sensitive commodities such as medical substances and foodstuffs. Access to public contracts has been facilitated by a Government Procurement Agreement. Israel has directly entered into investment promotion and protection agreements with the Czech Republic, as well as an agreement for avoidance of double taxation. Israel is also a member of ICSID, and thus investment-related arbitration is possible. Recognition and enforcement of European judgments and arbitral awards is quite common in Israel.
“… legal conditions for Czech exporters are extraordinarily favourable in Israel …” From a legal point of view, exports to Israel differ only a little from exports to EU countries. Exceptions are sometimes rather amusing (for example, kosher certificates for food products), sometimes less so (for example, the mandatory declaration in the bill of lading that the ship did not call at Arab ports). Furthermore, the rules concerning trade representation and establishment of branches are very liberal, as the importer registration requirements are far less stringent than the Middle East standard. In general, legal conditions for Czech exporters are extraordinarily favourable in Israel.
Resolution of disputes with Israeli entities via arbitration is generally advisable, because the local judicial
Author: Martin Ráž | Senior Associate
Havel, Holásek & Partners – the Best Law Firm in the Czech Republic for the fifth time The largest Czech-Slovak law firm, Havel, Holásek & Partners, has once again achieved international success. The prestigious UK rating agency, Who’s Who Legal, awarded the firm the best law firm in the Czech Republic in its Country and State Awards 2016. This was the fifth time during the past six years that the office has received this award, and it confirms, this year as well, the firm’s leading position on the Czech legal market. “The agency Who’s Who Legal is a respected institution whose ratings are highly recognised in the legal sphere. We are very pleased that we have defended our first place from last year and continue our successful series of awards. This is a wonderful gift for our 15th anniversary, which we are celebrating this year, and a sincere expression of our gratitude to our clients and business partners who have motivated us to progress forward and to keep our services at the highest level,” comments managing partner, Jaroslav Havel, on Havel, Holásek & Partners’ continued success.
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Legal News 6/2016
Amendment to the Universities Act degree in theology “Th.D.” with the doctorate degree “PhD”, and the obligation of the Ministry of Education to maintain a register of artistic performances, a register of associate professors, professors and extraordinary professors, a register of applications for recognition of studies abroad, and a public register of universities and study programmes.
The amendment to the Universities Act (Act no. 137/2016 Coll.) replaces the currently existing Accreditation Commission with the National Accreditation Authority for Higher Education (“Accreditation Authority”). Compared to the Accreditation Commission, the powers of the Accreditation Authority have been defined in more detail and extended, mainly in accreditations. The Accreditation Authority’s executive body will be a council comprising 15 members that are to make first-instance decisions regarding applications for accreditation. The Accreditation Authority will be headed by the chairman appointed upon a motion of the Minister of Education for a six-year’s term. The study programme accreditation system has been extended to include “institutional accreditation”. This can be granted to a university for a period of up to ten years. This form of accreditation is to allow universities to create and implement specified types of study programmes autonomously and without the need for accreditation through the Accreditation Authority.
The amended Act will take force on 1 September 2016, save for provisions governing the appointment of members of the Accreditation Authority, who may be appointed already from 1 July 2016. Deadlines for the fulfilment of certain obligations, such as the submission of a university’s amended internal regulations to the Ministry of Education, or the launch of the registers, are stipulated in transitional provisions in Section II of the amendment. The transitional provisions also prescribe that the accreditation of study programmes accredited by 31 August 2016 will be extended automatically for three years (unless the programme has been accredited for a longer term). However, this does not mean that the extended accreditation cannot be limited or removed by the Accreditation Authority before the expiry of the term.
Another innovation introduced by the amendment is the procedure to declare a state examination or dissertation defence invalid. The decision on the invalidity may be made by the university rector in a procedure that can be initiated within three years of the (putative) taking of the exam or defence of the dissertation. The rector’s decision may be appealed within a two month time-limit via an administrative action. The action has a suspensive effect. The participant in the ensuing procedure may only be the person whose case is being heard. Minor changes include a possibility to establish the post of extraordinary professor, replacement of the academic
Author: František Korbel | Partner
Legal advice on the sale of the largest provider of private language and management education in the Czech Republic Havel, Holásek & Partners provided legal services to owners of the EDUA Group, the largest provider of private language and management education in the Czech Republic. The 100 % share in the group representing Tutor, Caledonian School and top vision brands was purchased by Solotron. The participants have elected to keep the value of the transaction confidential.
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Slovak Republic
Automatic Exchange of Information in the Field of Taxes On 1 January 2016, implementing Act no. 359/2015 Coll. on Automatic Exchange of Information on Financial Accounts for the Purposes of Administration of Taxes and on Amendment and Supplement to Certain Acts (the “Act”) came into effect. The Act constitutes a legal platform for the automatic exchange of information on financial accounts between a competent Slovak public authority in the field of taxes, fees and customs duties, and a competent authority of an EU Member State or of a member state that is a party to the Convention on Mutual Administrative Assistance in Tax Matters as amended by the Protocol (the “Convention”).
in connection with the FATCA agreement, it can be stated that these are similar affected financial accounts. These, subject to further conditions, include depository accounts (including current, commercial, savings, and time deposit accounts), management accounts (i.e. accounts on which one or more financial assets in favour of another person are deposited), with respect to investment entities equity participations or debt shareholdings in financial institutions (i.e. shareholdings in registered capitals or profits of companies), insurance policies with surrender values, or annuity contracts.
By the Act, the Slovak Republic has fulfilled, among other things, its obligation to implement in its national legislation the provisions of Council Directive 2014/107/EU of 9 December 2014 amending Directive 2011/16/EU as regards mandatory automatic exchange of information in the field of taxation.
Scope of information exchanged In addition to identification of affected financial accounts, financial institutions must harmonise internal procedures and client-related documentation in order to appropriately reflect the scope of information that must be reported. Under the Act, such information also includes, among other information, selected information on an account holder, account number, and account balance at of a specific date.
The Act also constitutes a long-awaited legislative basis for the performance of the Agreement between the Slovak Republic and the United States of America to Improve International Tax Compliance and to Implement Foreign Account Tax Compliance Act (FATCA), which has been in effect since July 2014.
It can also be stated that as of the effective date of the Act, there will probably not be many entities (financial institutions) that would have to dramatically change their internal procedures and documentation, in order to harmonise them with said obligations. This is especially so because such obligations had to be fulfilled by a vast majority of reporting financial institutions, under threat of being penalised with a 30 % withholding tax, already in accordance with a time schedule required by FATCA and its de facto extra-territorial effect.
Obliged entities under the Act The Act specifies the entities that shall be obliged, at regular, intervals, to obtain and report information on financial accounts of their clients as ‘reporting financial institutions’. These include custodian institutions and financial asset administrations (e.g. banks, Central Securities Depositary (CDCP)), depository institutions (e.g. banks, building societies), investment entities (e.g. securities brokers, financial agents, collective investment undertakings), and specified insurance companies (e.g. insurance companies, reinsurance companies).
Aim of automatic exchange of information Automatic exchange of information is without doubt aimed at reducing tax evasion and having a preventive effect for tax entities. The real effect of the Act will, however, to a large extent, depend on the efficiency of performance of selected obligations by financial institutions, in particular, with regard to comprehensive obligations imposed on them by the Act and related legislation.
Affected financial accounts Despite the fact that the Act separately defines an affected account in the case of automatic exchange of information on EU residents, or residents of the contractual countries to the Convention, and separately defines an affected account
Authors: Matej Firický | Partner Martin Mičák | Junior Associate
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We support the education of managers Also this year, in connection with our anniversary – 15 years since the founding of the law firm, we carries on supporting the publishing of the best practically oriented international management books. “We have selected the best of the management literature at various publishing houses that we have drawn on and been inspired by over the years for the management of our own law firm. We believe that, in this way, we can contribute to the professional development of Czech managers and promote further cultivation of the local business environment”, says Jaroslav Havel. Of the sponsored books has been already published John Kotter’s Leading Change, The Leadership Code by Dave Ulrich, Norm Smallwood a Kate Sweetman or Good to Great by Jim Collins. This year in spring, there has been published first time the Czech edition of the bestseller Built to Last by Jim Collins and Jerry I. Porras, and Private Equity by Orit Gadiesh and Hugh MacArthur, the leaders of Bain’s global private equity practice.
Legal studies at the highest level Seminars | Tailored approach | Expert opinions | Consultations
The Havel, Holásek & Partners Academy is preparing for the fall semester these workshops among others: Specifics of the conclusion of IT contracts from the perspective of both the supplier and the client Major changes in the protection of personal data Operational responsibility in detail Conceptual amendment to the Labour Code New Public Procurement Act Competition News in the European Union and the Czech Republic Development trends regarding the Civil Code; the new civilian jurisprudence of the Supreme Court Seminars are held in the modern offices of the Florentinum building in Prague on Fridays from 9 to 12:30. Our lecturers are leading experts, academics and co-authors of the new Civil Code and major commentaries on the Civil Code – Milan Hulmák, František Korbel, Filip Melzer and Petr Tégl.
For more information, please visit: www.havelholasek.cz/akademie
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