General Meeting instructions, business management, strategic and conceptual management

The major amendment to the ZOK (Act No. 33/2020 Coll.) brought innovations, among other things, in the area of the granting of instructions by the General Meeting concerning business management, strategic and conceptual management.

Author of the article: ARROWS (JUDr. Vladimír Janošek, office@arws.cz, +420 245 007 740)

A distinction must be made between strategic and conceptual instructions of the general meeting (which are permitted) and instructions relating to business management, which are (with exceptions) not permitted.

A properly chosen instruction enhances the protection of the interests of the company's owners by setting clear boundaries for the statutory body within which to operate on key corporate governance issues.

What is meant by business management?

Business management is the organisation and management of the day-to-day business activities of a company, in particular decisions on the operation of the company's business (plant) and related internal company matters.

The case law of the Supreme Court indicates that the business management of a company includes , for example, decision-making:

1) the company's operational matters, e.g. supply, sales or advertising,

2) whether and what assets the company will acquire or, on the contrary, transfer to a third party,

3) whether (and how) the company will collect debts from its debtors,

4) whether the company will pay its liability,

5) the relocation of the company's premises to new premises, as the current premises are inadequate,

6) on the management of employees, the recruitment of employees, the creation of job assignments for employees, the training and development of employees and their evaluation, including decisions on the amount and form of remuneration for employees or the sale of a flat to an employee at a specific purchase price,

7) how the company's operations will be financed,

8) whether the company, as an investor, will enter into a cooperation agreement for the implementation of the project and whether it will grant a loan (credit) to the contractor for this purpose.

Prohibition on giving instructions to the statutory body concerning the conduct of business

The prohibition on giving instructions to the statutory body regarding business management (except as provided for in Sections 51(2) and 81(1) of the CCC) applies even after the amendment. If the general meeting gives instructions to the statutory body in the area of business management despite this prohibition, such instructions have no legal effect.

Strategic and conceptual management

Strategic (conceptual) management represents extraordinary decisions that go beyond the normal organisation and management of the company or its plant (i.e. the area of business management), e.g. the disposal of a branch, a change in the scope of business, etc.

Ability to give strategic and conceptual instructions to the statutory body

The ZOK, as it stood at the time, did not expressly provide for the power of the general meeting to give strategic and conceptual instructions, and it was therefore necessary for the articles of association to confer this power on the general meeting. However, in corporate practice, most companies did not have such a clause in their articles of association and therefore, without such a provision, the general meeting could not give strategic (conceptual) instructions to the statutory body.

As of 1 January 2021, the aforementioned clause was no longer necessary; the power of the general meeting to issue strategic and conceptual instructions now derives directly from the law (see in particular Sections 195(2) and 435(3) of the CCC). The statutory body will be bound by the instructions issued by the general meeting, provided that they comply with the law and the articles of association.

Legal assistance in connection with the preparation of strategic and conceptual guidelines

It is not always easy to recognise when an instruction (business guidance) is not permitted by law and when it is a strategic (conceptual) policy and instruction permitted by law. If you are unsure, do not hesitate to contact us and we will prepare tailor-made guidelines for your company.

Read also:

• Summary of the most important changes in the major amendment to the CCC
• New concept of the monistic joint stock company system
• Changes in the distribution of company profits after the amendment
• What innovations did the ZOK amendment bring in terms of types of shares and shareholdings?
• Per rollam decision-making at general meetings after the amendment to the ZOK 2021
• How are the conditions of performance of duties of members of (not only) statutory bodies changing?
• Codetermination of supervisory board members by employees
• New obligations of entrepreneurs - mandatory statements and collection of documents
• New risks for managing directors under the amendment to the ZOK
• Liens (and other rights in rem) on shares in a business corporation after the amendment to the ZOK