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How to set up a joint stock company: a detailed guide
A public limited company (plc) is a more advanced form of capital company, particularly suitable for larger projects and more investors. Establishing an Incorporated Company is more demanding in terms of preparation and administration than an LLC, but it brings much wider possibilities. Read how to set up a public limited company step by step - through the specific requirements for incorporation, indicative costs and deadlines, to the obligations that await you once the company has been registered.
What you will learn in the article:
- What is a public limited company and who is it suitable for
- What you need to set up a public limited company
- The step-by-step procedure for setting up a public limited company
- Approximate costs and time involved in setting up a plc.
- Responsibilities after the incorporation of a limited company
- A quicker solution: buying a ready-made public limited company
- Do you need help with document preparation or complete incorporation?
What is a public limited company and who is it suitable for
A public limited company is a type of capital company whose share capital is divided into a certain number of shares of nominal value. Their holders, the shareholders, are entitled to certain rights:
- Voting rights at general meetings in proportion to the number of shares held.
- The right to a share of the profit or dividend decided by the general meeting.
- Pre-emptive right to subscribe for new shares if the company offers them.
Shareholders also have the advantage of being liable for the company's obligations only up to the amount of their outstanding contribution (the value of the shares subscribed).
A public limited company is typically suited to larger business ventures or projects that require a high level of capital. While with an LLC you can start with as little as CZK 1 capital, with a JSC you will need at least CZK 2 million (or EUR 80,000).
Therefore, setting up an a.s. makes sense if you are planning a larger business, want to reach more investors, or are considering a public share issue or a stock exchange listing in the future.
Bodies of a joint stock company
A public limited company has more complex organs than an LLC. The general meeting of shareholders, as the supreme body, decides on major issues (e.g. approval of financial statements, profit distribution, changes to the articles of association or dissolution of the company).
The statutory body is used for day-to-day management and external representation, and the supervisory body is used to control its activities. The law allows for two systems of organising bodies in joint stock companies - dualistic and monistic:
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1
Dualistic system: In addition to the general meeting, the board of directors acts as the statutory body (manages the company) and the supervisory board as the controlling body. Traditionally, both the Board of Directors and the Supervisory Board have several members (usually 3) elected by the General Meeting, but a different number (but at least 1) may be specified in the Articles of Association. One person may not hold both a position on the Board of Directors and the Supervisory Board.
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2
Monistic system: Apart from the general meeting, there is only one body - the board of directors. The board of directors combines the functions of both the statutory body and the supervisory body (i.e. it performs together what the board of directors and the supervisory board do in the dualist model). It may have one or more members (normally 3).
Tip: For a detailed comparison of the two systems, see our article on monistic and dualistic systems in a joint stock company. You will learn what the advantages and disadvantages of both models are and what functions are specifically held by each body.
Number of founders and shareholders
A.s. can be established by a single founder (natural or legal person) or by several founders together:
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1
If the joint stock company is a single-member company, no general meeting is formed and its powers are exercised directly by the sole shareholder. The decision of the sole shareholder must always be in writing and, in the case of essential elements, even in the form of a notarial deed.
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2
In practice, joint stock companies usually have several shareholders and members of the bodies from the outset . However, at least two persons should be involved in the management and control of the JSC, especially if you choose a dualistic structure - one person cannot be on the board of directors and the supervisory board at the same time.
Types and forms of shares, their transferability
In order to properly set up the capital structure of your Inc. and motivate key investors, it is important to understand the following areas:
1/ What kind of shares will you issue?
- Ordinary shares are the standard form of shares that provide their holders with full voting rights at the general meeting as well as a share of the profits in the form of a dividend. Each ordinary share usually represents one vote, unless you specify otherwise in your articles of association.
- Preference shares have priority in the payment of dividends or in the distribution of liquidation balances. This means that holders of preferred stock will receive a dividend before holders of common stock. However, ownership of preferred stock carries limited or no voting rights depending on the wording of the articles of incorporation.
2/ Will your shares be registered or registered in registered form?
- Registered shares allow for anonymous ownership - the person who holds the share becomes the owner. The transfer is very simple, just the actual handing over of the paper certificate or registration in the Central Depository without further approval of the authorities of the Inc.
- Registered shares are registered in the name of a specific person - the owner of the share. The transfer of this share requires a change in the company's shareholder register and often the approval of the board of directors (if the articles of association specify transfer restrictions).
3/ What form of shares will you choose?
- Certificated shares are issued in the form of a physical security, which takes the form of a share certificate. Historically, they are the most widely used, but since 2013, certificated shares can only be registered shares in the name of the holder, with mandatory book-entry registration in the Central Securities Depository.
- Book-entry shares do not exist physically, their holding is recorded electronically in a depository (Central Depository or Bank Depot). Book-entry shares are both registered and registered in the name of the holder, with transfers being recorded directly in the depository. This system is safer and more liquid as it eliminates the risk of loss or counterfeiting of securities.
What you need to set up a public limited company
Incorporating a plc is more formally demanding than incorporating an LLC. The law requires a number of formalities, in particular:
| Requirement for an Inc. | What does it look like specifically |
|---|---|
| Business name (name) | A unique name containing the designation "joint stock company" or the abbreviation "a.s."; it must not mislead or copy other companies. Read tips on how to come up with a name. |
| Headquarters | An address in the Czech Republic, must have a documented legal reason for use (owner's consent or proof of ownership). Learn more in the article Headquarters for a company. |
| Articles of Incorporation | Govern the internal relations - structure of the bodies, voting rights, share transfers, corporate governance. Download a free sample of the articles of association to complete. |
| Share capital | Minimum CZK 2,000,000 (or EUR 80,000). Divided into shares with a chosen nominal value. You need to have paid up at least 30% before registration. |
| Subject of business | Name(s) of trade(s) or concession(s), exact wording of the object of business in accordance with the Trade Licensing Act. |
| Trade licence | Notification of trade at the Trade Licensing Office - CZK 1,000 per application, but you can notify more than one type of trade. Do not forget to provide proof of professional competence if you are applying for a trade other than a free trade. If you are unsure, we can advise you on how to choose the right type of trade. |
| Members of the authorities | Names and consents of persons elected to the board of directors/management board and supervisory board (for a dual system). Their written consent to hold office and a certified extract from their criminal records. |
Once you have the above requirements in place, you can proceed to the actual process of setting up the public limited company. This takes place in several steps, which we will now go through in detail.
The procedure for setting up a public limited company
step by step
Incorporation of a joint stock company always starts with a notary public and ends with registration in the commercial register. The whole procedure can be summarized in a few main steps:
1/ Drawing up the incorporation document at the notary's office
1/ Notarial registration
You start by visiting a notary and drawing up the notarial deed of incorporation of the joint stock company. The notary will go through all the necessary details with you (name, registered office, business object, amount of capital, articles of association, etc.) and prepare the articles of incorporation or contract according to your specifications.
Note: If you are setting up an Incorporated Company by a sole founder, the document is called a Memorandum of Incorporation. In case of multiple founders, a memorandum of association is drawn up - these documents are similar in content. However, both alternatives require the preparation of articles of association of the public limited company.
2/ Articles of association of a.s.
The notarial deed contains the articles of association of the joint stock company (free sample downloadable here), which you as founders approve at the time of incorporation. You also appoint a deposit manager, i.e. a person (often one of the founding persons or the bank directly) who will be in charge of collecting the cash deposits.
3/ Certified deed
All founders (or their representatives) sign the notarial deed. The notary will then issue a certified deed (or deeds) of incorporation - these documents will later be submitted to the registry court.
2/ Repayment of the share capital to a bank account
Before the company is incorporated (i.e. before registration), you must deposit the share capital in a special bank account. The deposit administrator (designated in the notarial deed) will open an account for the repayment of the capital and the individual founders will place their deposits in it according to the founders' agreement.
- Cash deposits: it is sufficient to pay part of the amount - the law requires at least 30% of the value of each share to be paid before registration. The remainder of the cash contributions can be paid up subsequently within a period specified in the articles of association, typically within 1 year.
- Non-cash deposits: if agreed, they must be transferred in full and a valuation report submitted to the notary before registration.
The bank will issue a written confirmation of the deposits, or the deposit manager will issue a declaration that the capital has been repaid - this will then be attached to the application for registration in the Commercial Register. The details of the repayment of the deposits (account number, amount) are often stated by the notary in the notarial deed.
3/ Securing trade licenses
Before registering a company in the Commercial Register, it is necessary to resolve the subject of business. Therefore, after the establishment of your Incorporated Company, the next step is usually a trip to the Trade Licensing Office, where you will declare all the necessary trades registered in your Incorporated Company:
- If you plan to run a craft or a tied trade, you will also need to provide proof of professional competence.
- For licensed trades, you will also need to obtain a licence from the state (if the nature of the business requires it).
- For free trades you do not need a professional qualification, you just need to declare them.
The output is an extract from the Trade Register, which is attached to the application for registration of the company in the Commercial Register. You can often resolve this step through a notary as well.
4/ Submitting the application for registration in the commercial register
Once you have the notarial deed of incorporation of the Incorporated Company, the certificate of payment of the necessary part of the capital and the trade certificates, you can file a petition for registration of the Incorporated Company in the Commercial Register.
There are two options for registering an Incorporated Company:
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1
The notary will make the entry directly
Notarial registration with direct registration in the Commercial Register is faster and slightly cheaper - the notary will electronically register your new Inc. and the court will usually register the company within the next working day.
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2
You file the petition with the registry court yourself
The traditional filing with the court (in person or by data mail) has a legal deadline for a decision of 5 working days. The application must be accompanied by all necessary documents.
5/ Formation of the company
A public limited company is formed on the date of registration in the Commercial Register. At this point, your company becomes a fully-fledged legal entity - you can start doing business officially in its name, enter into contracts, issue invoices, etc.
After registration, do not forget to transfer the bank account set up for deposits to the company's current account and, if necessary, pay the rest of the outstanding share capital within the time limit specified in the articles of association.
Note: The incorporation of a joint stock company with a public subscription of shares (public offering) differs from the procedure described above in that the founders first publish a prospectus or invitation to subscribe for shares and third parties may undertake to subscribe for shares.
After the subscription is completed, a constitutive general meeting of the subscribers is convened (within 60 days of the subscription closing) to decide on the formation of the company.
However, this method is administratively complicated (it requires, for example, the approval of the CNB prospectus in the case of a public offering of shares) and is hardly used in practice by start-up entrepreneurs. Most joint stock companies are established without a public offering, i.e. 100% of the shares are subscribed by the original founders.
Indicative costs
and time required to set up a.s.
When setting up a joint stock company, expect higher initial expenses than for an LLC. Although the largest item is the share capital (min. CZK 2 million / EUR 80 thousand), it is not an expense - it becomes the company's property, which is then managed by the company. However, you must have at least 30% of it paid up (in an account or in assets) at the time of incorporation.
How much does it cost to set up a public limited company?
| Item | Price | Time |
|---|---|---|
| Notary fees | approx. 5-10 thousand CZK + VAT | 1-2 days |
| Court fee for registration in the Commercial Register | 8 000 CZK (notary), 12 000 CZK (court) | 2-5 working days |
| Trade license | 1 000 CZK for registration | 1-3 working days |
| Expert opinion (non-monetary deposits) | 5-20 thous. CZK 5-20 (depending on complexity) | 1-2 weeks |
| Reserve expenses | 2-5 thous. CZK (statements, verification) | - |
| Share capital | min. 2 000 000 CZK | - |
Time requirement
The actual drawing up of the notarial deed is a matter of hours (one meeting at the notary if you have prepared the documents). Other steps, such as obtaining trade certificates, depositing the capital and registering it in the register, take days or even weeks.
If you have everything arranged and use fast electronic registration, a joint stock company can be established in 5-10 days. Realistically, however, most founders reserve around 3-4 weeks before the company is fully registered.
It will also take you a lot of time to prepare the articles of association (if you are detailing them yourself), obtain the necessary attachments (property owner's consent, business licenses) and possibly wait for a court decision.
Of course, you can also take advantage of a quicker solution, which is to buy a ready-made joint stock company.
Obligations after incorporation of a.s.
The administrative work does not end with the registration of the company in the Commercial Register. A public limited company has a number of obligations after its formation that you should not forget:
Accounting and taxes
- Double-entry bookkeeping from the date of incorporation.
- Corporate income tax registration within 15 days (notification to the tax office).
- Voluntary/compulsory VAT registration (compulsory after reaching a turnover of CZK 2 million).
- Registration of employees with the Social Security and Health Insurance Companies ( if the company employs employees). The company itself is not registered.
- Preparation of financial statements is obligatory for each a.s. from the moment of its establishment (i.e. the date of registration in the Commercial Register).
General meetings and annual obligations
- Ordinary general meeting within 6 months after the end of the financial year - approval of financial statements, distribution of profits, election of bodies.
- Notarial record of decisions on fundamental changes (change of articles of association, amount of capital).
- Entry of documents in the collection of documents (financial statements within 30 days of approval).
Disclosure and reporting
- Registration of beneficial owners (ESM), where you file an electronic notification of beneficial owners' data (form on the Ministry of Justice website) within 30 days of the company's formation. You also report any change in beneficial owner information.
- Monitoring the deadlines for filing changes to the Companies Register (change of registered office, bodies, articles of association).
- Mandatory audit of financial statements if you exceed the limits (40 million CZK assets, 80 million CZK turnover, 50 employees).
Tip: For a more detailed analysis of what all needs to be done after the incorporation of a company, you can check out our other articles and guides:
A quicker solution: buying a ready-made
a ready-made public limited company
You see, setting up a public limited company is a fairly complex process with many steps. If you need to start your business right away and do not want to undergo all the procedures described above, there is the option of buying a ready-made plc.
Ready-made companies from Jake&James have a clean past (they are new, they have not been in business) and we guarantee that they have no debts or receivables. This option is ideal if you value your time and want to avoid administration.
Benefits of a ready-made Inc.:
- Immediate availability: the company is already registered in the Commercial Register and has a ready-made articles of association, name, registered office, declared object of business and paid-up capital.
- The transfer to the new owner can be made within the next day after the contract is signed.
- No debts or history - we guarantee that the company has not been in business.
When you choose a ready-made Inc. from our offer, we will transfer the company to you on the basis of a share transfer agreement. At the same time , we will arrange to change the name (if you choose your own company name), registered office or other details as you wish. You can have a fully functional joint stock company and start doing business under its name within the next day after signing the agreement.
Do you need help with the preparation of documents or the complete incorporation of the Inc.?
Contact us - we will advise you on the preparation of articles of association, incorporation documents, arrange notaries and trade licenses and provide turnkey registration in the Commercial Register. If you want to avoid administration, we recommend a ready-made Incorporation, which we can transfer into your name within the next day of signing the agreement. With your new joint stock company you can start your business sooner than you would expect!
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