CZECH LOWER HOUSE PASSES REFORM OF COMPANY

UNCLAS PRAGUE 000198 SIPDIS STATE FOR EUR/NCE, EB/CBA AND EB/IFD/OIA COMMERCE FOR 4232/ITA/MAC/MROGERS E.O. 12958: N/A TAGS: EINV PGOV EZ SUBJECT: CZECH LOWER HOUSE PASSES REFORM OF COMPANY REGISTRATION PROCESS, FULFILLING LONG-HELD AMCHAM AND EMBASSY GOAL FOR IMPROVEMENT OF BUSINESS CLIMATE ¶1. On February 9 the lower house of the Czech parliament, the Chamber of Deputies, passed a bill designed to speed up registration of companies in the so-called "commercial register", a sine qua non for doing business in the Czech Republic. Foreign and domestic businesses alike have long complained about delays and uncertainties in the process of registering companies and subsequent changes in their management structure or capitalization. The process has been under control of judges, and their arbitrary demands for documentation, not limited by law, were a chronic concern of the business community. The vagaries of the process made registration a frequent source of allegations of bribe-seeking by Czech judges and clerks. The new procedures should help to curb and perhaps even eliminate corruption from the process. ¶2. Registering a company or changing an existing registration in the Czech Republic has taken an average of 88 days in the Czech Republic, compared to hours in some jurisdictions such as Delaware in the United States. The close scrutiny of the process by the courts may reflect a traditional suspicion of business that is slowly disappearing. Some would add that judges' reluctance to give up control reflects that the process was a significant source of income to them. The new law sets a five-day period for the courts to act, after which the company is presumed to be validly registered and papers must be issued. The law also sets up clear criteria for registration, simplifies authentication of documents and prescribes forms for submission of applications. Ultimately, the process should be accessible through the Internet. If approved by the Senate as expected, the law will be effective in July. ¶3. The law was a rare example of a successful legislative proposal originated by the opposition party, the ODS, with the acquiescence and support of the government. Most laws in the Czech Republic originate as government proposals. The ODS, in particular its shadow minister of justice, Jiri Pospisil, who sponsored the bill, saw an opportunity to make political capital from the government's long delay in bringing forward this reform. Additionally, reform of the commercial register has been a key point of advocacy by both the American Chamber of Commerce in the Czech Republic and the Embassy over the past few years and governments. The AmCham and experts associated with it worked closely with Pospisil to produce the draft law. Deputy Prime Minister Martin Jahn had also made this reform a priority in his campaign to improve the climate for doing business in the Czech Republic. Radek Spicar, an advisor to Jahn, recognized the AmCham's and Embassy's efforts as extremely important to the bill's passage in a conversation with the Embassy's Economic officer after the bill was passed. CABANISS