Necessity to change subject of business activity stating only production, trade and services not listed in Annexes 1 to 3 of the Trade Licensing Act

In 2021, the Supreme Court of the Czech Republic has issued a decision under file  No. 27 Cdo 3549/2020which deals with the necessary clarity of registration of the subject of business or activity in the commercial register.

The common practice before the issuance of this decision was that business corporations entered the subject of business (activities) in the commercial register as "production, trade and services not listed in Annexes 1 to 3 of the Trade licensing Act" and had this subject also listed in the articles of association (statutes). However, the Supreme Court decided that this practice is in conflict with the applicable legislation due to its lack of clarity.

According to the decision of the Supreme Court, the provision of the AoA (statutes), according to which the subject of business of a business corporation is "production, trade and services not listed in Appendices 1 to 3 of the Trade Licensing Act" does not meet the requirement of certainty, as it is not clear from it what is the subject of business of a company, and the corresponding result cannot be obtained even by interpretation. In the court opinion, in the event that the subject of business is stated in the articles of association (statutes) and possibly entered in the commercial register as "production, trade and services not listed in Annexes 1 to 3 of the Trade Act", this entry contradicts § 25 paragraph 1 letter b) of the Act on Public Registers and a remedy must be sought. Since this is an entry in the public register that contradicts the mandatory provision of the law, the correction will be arranged according to the procedure according to Section 9, paragraph 1 of the Act on Public Registers. If it is not possible to achieve rectification otherwise, the register court will invite the registered person to arrange rectification and if the legal entity does not arrange rectification within the specified period, the court may, even without a proposal, if such a procedure is in the interest of the protection of third parties, decide on its cancellation with liquidation.