The impact of the amendment to the Business Corporations Act on credit financing

Some of the changes introduced by the amendment of Act No. 90/2012 (Business Corporations Act) that entered into force on 1 January 2021 will also impact credit financing. This article summarises and discusses the potential implications of those changes.

The amendment replaces the previously used term "part of an enterprise" with the term "part of assets". Disposing with a part of the asset(s) representing a substantial change in the company's actual line of business will now be subject to the approval of the GM.

This can cause considerable complications and uncertainty in determining the extent to which disposing with a part of assets is only a "change in enterprise structure" and when the company's actual line of business is already changing. Furthermore, the approval of the GM will also be required from the other party to the transaction (i.e. the assignee or the pledgee). Preventive approvals of such transfers can therefore be expected from both parties.

Another important change concerns the pledging of a share in a company. According to the existing rules, the conditions applied to share pledges were the same as those applied to share transfers. After the amendment, companies will be allowed to limit or exclude the pledge of a share differently from its transfer. Also, the amendment now explicitly allows the establishment of a negative pledge of a share by registration in the Commercial Register.

authors: Ondřej Havlíček and Matěj Šarapatka