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News 3/2017

AMENDMENT TO THE CIVIL CODE

Although Act No. 89/2012 Coll., the Civil Code (hereinafter the “NCC”) came into effect only 3 years ago, it has already required several substantial amendments. Many of them have been published in the Collection of Deeds, some of them have come into effect and some will come into effect in future. In this issue of our News, you will find an overview of some important amendments to the NCC.

A comprehensive amendment to the NCC was approved before the end of 2016. It was promulgated as Act No. 460, of 14 December 2016. The individual provisions will come into effect gradually. The amendment will involve, among other things, the following changes:

Amendment Effective from
Form of a power of attorney 28/02/2017
Reduction of the maximum security deposit when leasing residential premises from six times to three times the rent 28/02/2017
Pre-emption right upon transfer of a co-ownership interest 01/01/2018
Possibility of restricting legal capacity up to 5 years (formerly up to 3 years) 14/12/2016
Implementation of a separate public register of trust funds kept with registration courts 01/01/2018

Detailed comments on some of the changes are presented below.

Form of a power of attorney

The form of granted powers of attorney has been one of the most discussed topics ever since the very moment the NCC came into effect. According to the original wording of the NCC, a power of attorney should have the same form as the legal act for which it has been granted. If a legal act (such as a contract for establishing a company) is required by the Civil Code to have the form of a notarial deed, the power of attorney authorising the agent to perform this legal act should also have the form of a notarial deed.

Since this requirement has proven impractical and clearly was not the intention of the legislators, the practice established over the years allows the principal to grant a power of attorney with an authenticated signature instead of a notarial deed. The legislators have responded to the above objections and specified in the amendment that if a legal act requires the form of a public deed, a power of attorney granted in a written form with an authenticated signature is sufficient to perform this legal act.

Reintroduction of the statutory pre-emption right related to real estate

The original version of the NCC did not adopt a provision concerning the pre-emption right of the co-owners of real estate. According to the authors of the NCC, this provision was omitted to support the principle of contractual freedom. However, this provision on the pre-emption right will be reintroduced to the NCC with effect from 1 January 2018.

Now, if co-owners transfer their co-ownership interests in real estate, the other co-owners will have the right of pre-emption. The only exception will be transfers to related persons. In the event of a breach of the right of pre-emption, another co-owner may demand that the transferee transfers the co-ownership interest to them under the same conditions under which the transferee acquired it. If the transferee refuses to do so, the co-owners may claim their right by legal proceedings.

Public register of trust funds

The NCC introduced trust funds into Czech law. They are entities without legal personality and are not presently to be entered in any public register.  This situation should change on 1 January 2018.

After 1 January 2018, entry in the register of trust funds will be a necessary condition for the establishment of a fund. Trust funds that were or will be established under the previously applicable rules will have to be entered in the register within six months of the date this amendment comes into force. If no application for entry is filed within the above deadline, the administration of the trust fund will expire.

Facts to be entered in the register of trust funds are similar to those concerning foundations, i.e., in particular, identification data, founder of the trust fund, trustees and beneficiary.