From 1 January 2012, an amendment to Act No. 513/1991 Coll., the Commercial Code, as amended (hereinafter referred to as the “Commercial Code”), published under No. 351/2011 Coll. (hereinafter referred to as the “Amendment”), entered into force. The Amendment introduces several interesting innovations into the Commercial Code, and within the framework of this circular we will address the newly inserted provision of Section 66d, which represents a significant innovation in the area of concurrent functions of the organs of commercial companies. The provision of Section 66d of the Commercial Code authorises the statutory body of a company to entrust business management (i.e. “business management comprises primarily decision-making on the operational matters of the company in general, i.e. from the organisational, technical, production, economic, commercial, personnel and other aspects”) wholly or partly to another person, whereby this activity may also be performed in an employment relationship and this authorised employee may simultaneously be a statutory body of the company or a member thereof. The Amendment thus expressly permits members of statutory bodies to perform activities falling within the business management of the company also in an employment relationship.

This new regulation of Section 66d of the Commercial Code removes the hitherto problematic view of the concurrence of functions of a managing director (jednatel) of a company (as a statutory body) and a director of a company (as an employee of the company), based particularly on a number of decisions of the Supreme Court, according to which the same person could not perform the activity of, for example, a general director and simultaneously be a statutory body of the company. In the reasoning of decision 21 Cdo 11/98, the Supreme Court stated, for example: “The fact that a natural person is a member of a limited liability company or that they have been appointed as a statutory body of the company (managing director) does not in itself preclude them from entering into an employment relationship or other employment law relationship with that company, provided that its content is not the performance of the activity of a statutory body. … However, it is essential that the content of such an employment law relationship cannot be identical with the content of the activity of a managing director, but may only relate to activities different from the work of a managing director.” This view held by the Supreme Court is no longer relevant for the period from 1 January 2012 as a result of the Amendment; however, employment contracts concluded before the Amendment in conflict with this case-law may continue to be regarded as invalid. For completeness, we note that we have already addressed this issue in more detail in Circular No. 3/2011.

The Commercial Code in the provision of Section 66d paragraph 2 regulates the liability of persons who have been entrusted with business management, such that in the case of persons who are a statutory body of a company and are simultaneously entrusted with the business management of that company in an employment relationship, liability towards the company for damage caused shall be assessed according to the Commercial Code, as in the case of a breach of the duty to perform the function with the care of a prudent manager (péče řádného hospodáře), i.e. without limitation. However, it is necessary to draw attention to the fact that in the case where business management is entrusted to a person who is not a member of the statutory body of the company and is in an employment relationship with that company, such person shall then be liable for damage according to Act No. 262/2006 Coll., the Labour Code, as amended (i.e. with limitation).

If activities falling within business management are performed by a member of the statutory body of a company in an employment relationship, then pursuant to the provision of Section 66d paragraph 3 of the Commercial Code, the wage or remuneration is negotiated or determined by that body of the company which decides on the remuneration of the statutory body or its members. In conclusion, we state that the authorisation of business management cannot include activities falling within the exclusive competence of the statutory body, such as participation in meetings of the statutory body, decision-making on the authorisation of business management, decision-making on the basic direction of the business management of the company and other activities within the business management of the company which fall within the exclusive competence of the statutory body.

This text was translated from Czech to English using an AI translator.