US embassy cable - 05PRAGUE198

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