Death of the Company Member in the Czech Republic –
Inheritance Proceedings Concerning Shareholding in Different Types of Companies
Generally, a share in a company is part of decedent’s estate under Czech law. The first issue that has to be considered when dealing with any type of inheritance is whether it was part of the common property of the spouses (“společné jmění manželů”, “SJM”). If the share in the company was acquired during marriage and from common funds, and at the same time there was no agreement between the spouses regulating the common property of the spouses, such share in a company will be usually part of the common property of the spouses. In such a case, under an agreement between the surviving spouse and the heirs, the court will first determine whether the share in the company will go to the spouse or whether it will be inherited.
Partnership (v.o.s.)
According to the prevailing opinion, the partnership is cancelled by the death of one of the owners, unless the memorandum of association permits the inheritance of the share. If it permits, the heir who is not interested in the partnership can reject the share within the period of three months which is calculated from the day on which the court’s decision on the inheritance took effect.
Limited liability company (s.r.o.)
If the testator was the only shareholder in a limited liability company, the heir cannot avoid participation in such company. If the heir is not the only shareholder, the heir may apply for the cancellation of his participation. However, only in cases where there are reasons that his ownership of the company cannot be fairly demanded.
The heir has three months right for the application to withdraw from the company. This time-limit is calculated from the day on which the court’s decision on the inheritance took effect.
An heir who seeks to withdraw from the company is not allowed to participate in the company’s activities, even if the memorandum of association requires it. The heir may participate in the company’s activities only if there is a written agreement with the other partners in the company.
The memorandum of association can also prohibit the inheritance of the ownership interest.
Joint-stock company (a.s.)
Stocks, as they are deemed to be ”things“ under Czech law, are a normal part of the inheritance. They have no special treatment under Czech law. The memorandum of association thus cannot prohibit the inheritance of the stocks.
Limited partnership company (k.s.)
The limited partnership is a personal company in which at least one partner is liable for debts only up to the amount of his contribution – the limited partner (“komanditista”), and at least one partner is liable for debts without limitation – the general partner (“komplementář”).
In case of death of the general partner, the procedure is the same as in case of the partnership.
But in case of death of the limited partner, the share can will be inherited unless it is prohibited by the memorandum of association.
