Establishment of a branch of a foreign entity

16.1.2016 News

Business through a branch is one of the ways in which foreign entities can do business in the Czech Republic without establishing a new company. The establishment of a branch, its management and dissolution is less administratively demanding than the establishment, management and dissolution of a classical company (e.g. limited liability companies, joint stock companies, etc.).

The main advantages of a branch compared to a classical company are the following in particular:

The key person in the branch is the branch manager, who manages the branch and usually also holds the position of responsible representative, and therefore also answers to the foreign entity for the proper operation of the business and adherence to the Trade Licensing regulations. In selecting the branch manager, therefore, the foreign entity should proceed with due diligence, as it is the person who will be responsible for its business activities in the Czech Republic. A branch can have only one manager, who must be a natural person. The branch manager must be registered in the Commercial Register.

The advantage is that the branch manager is already directly entitled under the law (without having to be granted power of attorney for the specific legal act) to act for the foreign entity in all matters relating to the branch in the Czech Republic, including representation of the foreign entity in judicial, administrative, tax and other proceedings.

In this context, it should be emphasized that the branch is not a legal entity (since it does not have legal personality); it is merely an organizational unit of a foreign entity located in a state other than that of the place of residence of the foreign entity. This means that in dealing with business partners, authorities, courts or other entities in the Czech Republic the branch manager must denote all contracts and other business documents as the foreign entity an not as the branch itself, as only the foreign entity is eligible to acquire rights for itself by its own legal actions and commit to obligations (perform legal acts). In other words, it is only and solely the foreign entity that can own property, employ staff, enter into contracts, participate in relevant proceedings, etc.

Example of correctly denoted representative: Business intelligence, s. r. o., identification no.: 123456, registered office: Bratislava, Kríková 4, Postal Code 821 07, registered in the Commercial Register maintained by the Regional Court Bratislava I, Section Sro, Insert 00007/B [note: identification of the foreign entity] via Business intelligence, s. r. o., odštěpný závod (branch), identification no.: 741852, registered office: Prague, Dlouhá 730/35, Postal Code 110 00, registered in the Commercial Register maintained by the Municipal Court in Prague, Section Ax, Insert 987 [note: identification of the branch], represented by the branch manager Jan Novák.

If a foreign entity provides an item to the branch, such as property, employees, etc., it does so purely informally, and it is precisely for this reason that the branch is not legally separated from the foreign entity (such transactions take place within one entity, therefore it is not necessary to conclude a purchase contract).

Except for the branch manager, the branch has no bodies, but the foreign entity may allocate core employees to the branch or hire new employees for this purpose.

The foreign entity operates in the Czech Republic through the branch under the same conditions and to the same extent as a domestic entity, i.e. among other things, this means that the branch is required to maintain separate accounts according to the regulations of the Czech Republic, to pay taxes in the Czech Republic, etc.

All foreign entities who are domiciled in a foreign country may establish a branch in the Czech Republic. In order for a foreign entity to start doing business through the branch in the Czech Republic, it is necessary to:

Documents to be submitted to the registration court for registration of the branch in the Commercial Register are:

Our services include:

The deadline for registration of the branch in the Commercial Register after submission of the application and delivery of the necessary documents is only 10 business days.

What we will need from you in order to prepare the respective documents:

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