When and how to report changes in the management of a regulated company to the CNB.

Are you planning a change in the management of your Czech subsidiary? For foreign companies operating in regulated sectors like finance, insurance, or investments, simply updating the Commercial Register is not enough. This article explains your obligations to the Czech National Bank (CNB), what documents you’ll need for foreign directors, and how to avoid severe penalties, including fines up to EUR 40,000 or even license revocation. As a leading Czech law firm in Prague, EU, we are here to guide you.

Do you need advice on this topic? Contact the ARROWS law firm by email office@arws.cz or phone +420 245 007 740. Your question will be answered by "Mgr. Jáchym Petřík", an expert on the subject.

Why the CNB Scrutinises Your Company’s Management

The Czech National Bank is the guardian of the Czech financial market’s stability. Its oversight of who manages banks, investment firms, and other financial institutions is crucial for protecting clients and the economy. The goal is to ensure that leaders of these companies are not only professionally qualified but also trustworthy.

The core of this supervision is the internationally recognised “Fit and Proper” principle. This standard requires every senior manager to be professionally competent, experienced, and of good repute. This is not a mere formality; it is a fundamental condition for obtaining and retaining a license in the Czech Republic. The quality of your management directly impacts how your company manages risk and operates ethically in the market.

Who Is a “Leading Person”? It’s More Than Just the Title

The definition of a “leading person” (vedoucí osoba) can differ from what you are used to in your home jurisdiction. Czech law looks beyond formal titles. For example, the Capital Market Undertakings Act includes not only board members but also any person who de facto directs the company's activities.

Crucially, the CNB assesses the real influence and decision-making power of an individual, not just their official position. This could include a key manager who is not formally on the board but has significant operational control. Misidentifying who qualifies is a common and costly mistake for foreign companies.

At ARROWS, a law firm based in Prague, European Union, we have extensive experience analysing corporate structures for over 150 joint-stock companies and 250 LLCs. We can help you accurately identify which individuals in your organisation are subject to these reporting duties. For immediate assistance, write to us at office@arws.cz.

FAQ – Legal tips about the “Fit and Proper” Assessment

1. What if our new director is a foreign national?

The process is more complex for non-Czech nationals. You must provide criminal record extracts not only from the Czech Republic but also from their country of citizenship and any other country where they have resided for more than six months in the last three years.

Through our ARROWS International network, our lawyers handle cross-border cases daily and can secure all necessary documents and official translations for you. Get tailored legal solutions by writing to office@arws.cz.

2. Does every board member need a university degree?

While a relevant degree is expected, the CNB places significant emphasis on practical experience and a deep understanding of the risks associated with your company's business.2 A combination of management experience and professional expertise in the specific financial sector is key.

Risks and Penalties	How ARROWS Helps
Appointing a director who fails the “Fit and Proper” test	Candidate Due Diligence – We pre-screen your candidates against CNB criteria to identify potential risks before you make a formal appointment. Need to vet a candidate? Email us at office@arws.cz.
Failing to identify all “leading persons” under Czech law	Internal Structure Analysis – We help you correctly define the scope of individuals subject to reporting, preventing unintentional legal breaches. Need legal help? Contact us at office@arws.cz.
Submitting incomplete or inaccurate documentation	Full Documentation Preparation – We ensure all application materials are complete, accurate, and aligned with the CNB’s expectations to prevent rejection. Our lawyers are ready to assist you – email us at office@arws.cz.

 

When to Report: Pre-Approval vs. Post-Notification

Timing is everything. Confusing changes that require prior approval (ex-ante) with those that only need to be reported afterwards (ex-post) is a critical error that can lead to severe consequences.

Changes Requiring PRIOR CNB APPROVAL (Ex-Ante)

In this scenario, the change cannot be legally executed—meaning the person cannot be appointed—until the CNB grants formal approval. This applies, for example, to the appointment of board members at banks or senior managers at regulated market organisers.

Proceeding without this approval renders the appointment invalid and exposes your company to significant fines.

Changes Requiring POST-NOTIFICATION (Ex-Post)

Here, your company first makes the change (e.g., appoints a new director) and then informs the CNB "without undue delay". In practice, this means within a few business days. This regime typically applies to entities like independent insurance or credit intermediaries.

Our lawyers will provide a clear legal opinion on which regime applies to your specific situation and prepare all necessary documents for a smooth process. Do not hesitate to contact our firm – office@arws.cz.

How to Avoid Common Pitfalls in the Reporting Process

The reporting process is now largely digital, using systems like REGIS or SDAT. Formal errors—such as using an outdated form, a missing certified signature, or incomplete documentation—are the most common reasons for delays that can stall your appointment process for months.

You must submit a complete and flawless documentation package proving both the trustworthiness (důvěryhodnost) and professional competence (odborná způsobilost) of the proposed individual. This includes a detailed CV, criminal record extracts, sworn statements, and proof of education and professional experience.

FAQ – Legal tips about the reporting process

1. How long does the CNB approval process take?

While statutory deadlines exist, the CNB can pause the clock by requesting additional information. Each request extends the timeline.

With our help, you can prepare a complete application from the start, minimising the risk of delays. For immediate assistance, write to us at office@arws.cz.

2. What exactly does the deadline “without undue delay” mean?

The law does not specify a number of days, but best practice is to act quickly, ideally within 3-5 business days of the change occurring.

The Consequences: Fines, Forced Removals, and License Revocation

Underestimating these reporting duties can have disastrous financial and operational consequences. The CNB has a wide range of enforcement powers.

• Financial Penalties: For less severe breaches, fines can reach up to EUR 40,000 (CZK 1,000,000). For more serious violations, penalties can run into the millions of euros.
• Forced Removal from Management: The CNB has the authority to order the dismissal of a board member who no longer meets the “Fit and Proper” criteria. This is a direct intervention in your company’s governance.
• License Revocation: In the most severe cases, where the management as a whole fails to guarantee sound governance, the CNB can revoke your company’s license, effectively ending your business operations in the Czech Republic.

Risks and Penalties	How ARROWS Helps
Making an ex-ante change without prior CNB approval	Legal Consultation & Application Management – We ensure the entire process is legally compliant, preventing invalid appointments and subsequent penalties. Our lawyers are ready to assist you – email us at office@arws.cz.
Missing an ex-post reporting deadline, resulting in a fine	Internal Compliance Policies – We draft internal policies and checklists to ensure all deadlines and regulatory duties are met. Need to set up internal processes? Contact us at office@arws.cz.
Facing a formal investigation by the CNB	Representation Before Public Authorities – If an investigation is already underway, we will represent your interests professionally to minimise negative outcomes. Need representation before the CNB? Write to office@arws.cz.
Threat of license revocation	Comprehensive Regulatory Support – We provide long-term legal support to protect your license and business continuity. For more information, please contact our firm – office@arws.cz.

 

Rely on Experience That Protects Your Business

Reporting management changes to the CNB is a complex process where any mistake can be costly. At ARROWS, we specialise in this area and help our international clients navigate these requirements smoothly and efficiently. Operating from Prague, European Union, we serve clients in 90 countries worldwide.

We offer a full range of services, from preparing all necessary documentation and drafting internal company policies to representing you in regulatory proceedings. We also provide professional training for management to ensure they are always prepared for regulatory scrutiny. Our deep experience and understanding of the CNB’s expectations can significantly speed up the process and minimise your risks.

If you are planning management changes or want to establish robust compliance procedures, we are here to help. Get tailored legal solutions by writing to office@arws.cz.

FAQ – Most common legal questions about reporting management changes to the CNB

1. Do I need to report a change of a proxy holder (prokurista)?

It depends on their actual powers. If the proxy holder effectively manages a significant part of the company's business, they may be considered a "leading person" and the change would be reportable. We can help you assess your specific situation. If you are dealing with a similar issue, contact us at office@arws.cz.

2. What happens if the CNB does not approve our proposed director?

If the appointment required prior approval (ex-ante), the appointment is legally void, and the individual cannot perform their duties. It is essential to wait for the CNB's final decision before proceeding. For more information, please contact our firm – office@arws.cz.

3. How long does it take to get approval from the CNB?

The official deadlines are often extended because the CNB can suspend the process to request additional information. A meticulously prepared and complete application, which we can ensure, significantly speeds up the timeline. For immediate assistance, write to us at office@arws.cz.

4. Do the “Fit and Proper” rules also apply to members of the supervisory board?

Yes, the requirements for trustworthiness and professional competence generally apply to members of supervisory or control bodies as well, given their key role in corporate governance. Need legal help? Contact us at office@arws.cz.

5. Our new director is an EU citizen living in Prague. Is a Czech criminal record sufficient?

No. You must provide a criminal record extract from their country of citizenship and any other country where they have resided for more than six months in the last three years. Obtaining these documents can be time-consuming. Our lawyers are ready to assist you – email us at office@arws.cz.

6. Can our Czech company have only one director, as is common in our home country?

Not always. Sector-specific laws may impose stricter requirements. For example, the Capital Market Undertakings Act requires securities traders to have at least two directors or board members. Do not hesitate to contact our firm – office@arws.cz.

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