We would like to inform you about the development of the interpretation of rule o representation of legal entities in negotiations with employees (i.e. when concluding employment contracts, termination agreements, giving notices, etc.), which is regulated in the new Civil Code (hereinafter referred to as the "Civil Code"). This news applies mainly to joint-stock companies, but also to those companies with limited liability whose executives form a collective body. It therefore does not apply to limited liability companies, where the statutory body is individual executives.
The basic rule is governed by § 164 paragraph 3 of the Civil Code:
"If a legal entity with a collective statutory body has employees, it shall entrust one member of the statutory body with legal action against employees; otherwise, this authority is exercised by the chairman of the statutory body."
According to the decision of the Supreme Court of the Czech Republic published under the number R 20/2016, only one member of the statutory body must be authorized to deal with the employees of a legal entity, and if he is not directly authorized, the chairman of the statutory body performs this activity. A member of the statutory body thus authorized to act towards employees must then be registered in the commercial register. The entry of an authorized person in the commercial register is also necessary if the chairman of the statutory body performs this activity by virtue of his position (i.e. without a special authorization). The reason for the existence of this rule is to increase the legal certainty of employees and future employees. If an authorized member of the statutory body was not entered in the commercial register (different from the chairman), the employee would be in good faith that the only person authorized to act towards him is the chairman. Even more problematic is the situation when, according to the company agreement (foundation document), the collective statutory body is formed by executives without having an elected chairman of this collective statutory body. There may then be unnecessary disputes about the effects of specific legal actions, which would be done by an authorized but not registered member of the statutory body.
It is essential that, in the case of legal actions against employees, the general rule of representation of legal entities regulated by the articles of association (association agreement or memorandum of association) and registered in the commercial register does not apply. So it also applies instead of the frequent rule of four eyes. Of course, it will not be a problem if the authorized member of the statutory body signs the legal act according to the principle of four eyes with some other member. The effects of such legal action shall not be affected by the countersignature by such other member.
However, the modification of the representation of a legal entity by one authorized member of the statutory body does not prevent other persons from acting on behalf of the company (e.g. personnel directors authorized according to the signature regulations) in relation to the employees.
If legal action against employees is made by a person not authorized to do so (e.g. two members of the board of directors acting in accordance with the general rule of four eyes, none of whom, however, is the authorized member of the board of directors), there is a risk that such action will be found null and void.
If you are interested in more detailed information, or our services related to the authorization of a member of the statutory body and its registration in the commercial register, do not hesitate to contact us.
The team of the Vych & Partners, s.r.o. law office
