The deadline for legal entity members of elected bodies of other corporations is approaching (Section 46 of the Business Corporations Act).
In this article, we would like to call your attention to a new rule introduced by the amendment of the Business Corporations Act; according to that rule, a legal entity member of a body of another business corporation must elect a particular individual (natural person) to represent the business corporation of which the legal entity is a member.
It needs to be immediately clear which individual is authorized to act on behalf of which legal entity.
There are certain limitations imposed on the selection of a representative by a legal entity as the authorized individual must comply with the requirements for holding the office prescribed by the Business Corporations Act for an actual member of an elected body.
It is important to keep in mind that the appointed representative must be registered in the Commercial Register; otherwise, the legal entity cannot be registered in the Commercial Register as a body of a business corporation.
If the legal entity fails to make the authorization and registration in the Commercial Register within 3 months from the day when its membership in the body commenced, the membership will be terminated by the operation of law. It means that if there is currently a legal entity member of an elected body of a business corporation, the legal entity must have its representative appointed and registered in the Commercial Register within 3 months of the effective date of the amendment, i.e. by 1 April 2021.
Last but not least, such a representative has a duty to act with due managerial care, so if a business corporation has as a member of its body a legal entity that has appointed a representative and the corporation suffers any damage, the representative and the legal entity that is a member of the corporation’s elected body will pay compensation for the damage caused by the representative jointly and severally.
If you need any help with appointing and registering your authorized representative, please do not hesitate to contact us.
Mgr. Alexandra Kábrtová
AK Pajerová s.r.o.
18 March 2021