Weinhold Legal (Czech Republic) Article: November 2024 Legal Update

Legislation News

Amendment to the Sickness Insurance Act

On 25 October 2024, the Chamber of Deputies approved in the 3rd reading the Government Bill amending Act No. 187/2006 Coll., on Sickness Insurance (“Amendment”). The Amendment concerns in particular the implementation of sickness insurance and related areas. In particular, it contains  measures  to  introduce  the  electronification  of benefits, the introduction of sickness benefits for self-employed persons, changes in determining the local jurisdiction of employers and clarifications concerning the insurance of self-employed persons and employees. The Senate of the Czech Republic has until 5 December 2024 to comment on this draft amendment prepared by the Ministry of Labor and Social Affairs.

Sickness benefits

It is proposed to introduce entitlement to sickness benefits for self-employed and foreign employees participating in the sickness insurance, as well as insured employees working on the basis of an agreement on the performed work, an agreement on work activity and small-scale employment, if it is an employment relationship or an agreement on performed work.

In the event that the above-mentioned insured persons will pay sickness insurance premiums at the same rate as other insured persons, it would appear to be extremely unfair not to provide these listed insured persons with full social protection, i.e. entitlement to all sickness insurance benefits, including sickness benefit.

Historically, sickness benefits have only ever been granted to insured persons who had fixed working hours. However, as society changes, people’s needs and opportunities also change and it is essential to respond to them. Today, many employees in employment are already able to work flexible hours that are not fixed. On the other hand, the working hours of some ‘agreement’ or self-employed employees must be fixed if they are related, for example, to the activities of the establishment or the provision of services to the public.

Another aspect supporting the entitlement to these benefits is the introduction of the obligation to pay sickness insurance premiums for all insured persons, which must be paid from 1 January 2024.

Electronification

The main objective of the amendment to the Act on Sickness Insurance is the electronification of decisions on the need for nursing or long-term care, issuing applications for maternity and paternity benefits, including the electronification of the benefits agenda. These are mainly:

  • making the processes of payment of other sickness insurance benefits more transparent and faster, similar to the sickness insurance,
  • reducing the administrative burden on employers and employees,
  • the use of electronification to provide employers with up-to-date information on the occurrence, duration and termination of a social event giving rise to an entitlement to sickness insurance benefits for their employees,
  • the use of electronification to provide employees with up-to-date information on the status of their nursing benefit, maternity allowance, long-term care and paternity allowance claims,
  • adapting processes to support principles such as full e-filing or client e- services.

In the context of full electronification of other sickness insurance benefits, it will be sufficient for the insured to notify the employer of a social event, on the basis of which the employer will send an eSubmission, which will be similar to the current electronic “Application for benefits” with all the data necessary for processing the benefit.

The information will be transmitted similarly to the current eSick leave, i.e. the attending physician will notify the Czech Social Security Administration (“CSSA”) of the occurrence of a social event, whereas other information necessary for deciding on the entitlement to the benefit and its amount will come from the insured, the employer will transmit this information to the CSSA only in the form of an electronic submission.

Some other changes

The concept of “isolation” is abolished in the Sickness Insurance Act. Isolation will no longer be considered as quarantine but as temporary incapacity for work. It will therefore also be the same that temporary incapacity for work is established if the health condition justifying the isolation does not allow the performance of the previous insured activity. This is done so as to distinguish between temporary incapacity for work with isolation and quarantine only leading to unnecessarily complicated situations in practice.

Similarly, the notion of a home worker is being abolished, as this concept appears to be outdated in view of the numerous uses of home office work.

In the case of employers newly registering in the employers’ register with the CSSA, or employers who change their registered office or the location of their payroll office or set up a new payroll office, the CSSA will now determine the locally competent ÚSSZ, which will immediately inform the employer, upon receipt of the application to the employers’ register, which ÚSSZ is locally competent.

The Amendment remains to be approved by the Senate, signed by the President and published in the Collection of Laws to become valid and effective. According to the latest information, the Amendment should be effective from 1 January 2025.

Case Law

Is the right to a fair exit a fundamental shareholder right?

(Judgment of the Supreme Court of 12 September 2024, Case No. 27 Cdo 632/2023)

The plaintiff claimed payment of CZK 200,000 with accessories in respect of the right to adequate compensation pursuant to Section 131(4) of Act No. 513/1991 Coll., the Commercial Code (“Commercial Code”), for violation of the basic right of a shareholder to receive from the defendant pursuant to Section 186a(1) of the Commercial Code a public proposal for a share purchase agreement.

In the original proceedings, the Municipal Court in Prague dismissed the action on the grounds that the right to a public proposal of the contract cannot be considered a fundamental right of a shareholder. This conclusion was confirmed by the High Court in Prague. However, the plaintiff appealed the decision to the Supreme Court, arguing that the right to a public draft contract should be considered a fundamental right of a shareholder, especially when the shareholder does not agree to fundamental changes that he cannot influence.

The Commercial Code does not specify in any way which rights of a shareholder of a limited liability company or a shareholder of a joint stock company are fundamental rights, the violation of which may lead to the company’s obligation to compensate the shareholder for non-pecuniary damage caused to the shareholder pursuant to Section 131(4) of the Commercial Code. In the past, the Supreme Court has included among these rights the right to participate in the general meeting, the right to vote on the adoption of decisions of the general meeting, regardless of whether the decision is taken at the general meeting or outside the meeting, the right to information, the shareholder’s right to a share in the profit or the shareholder’s preferential right to subscribe for new shares.

The Supreme Court agreed that the rights of a shareholder can be divided into rights arising from participation in the company, i.e. connected with the share in the company, and rights arising from ownership of the share. However, the Commercial Code does not distinguish between the two groups of shareholder rights. If it is not possible to exclude a certain shareholder’s right by a provision in the articles of association, i.e. if its regulation is mandatory, it is difficult to accept any other conclusion than that it is a fundamental right also within the meaning of Section 131(4) of the Commercial Code.

The Supreme Court concluded that the shareholder’s right to a fair exit, provided for in Section 186a of the Commercial Companies Act, is a fundamental right of a shareholder within the meaning of Section 131(4) of the Commercial Companies Act. If the general meeting interferes with this right by an unlawful resolution and if the motion to declare the general meeting resolution invalid is rejected on the grounds defined in Section 131(3) of the Commercial Companies Act, the shareholder may claim that he has suffered a loss of his right under Section 186a of the Commercial Companies Act as a result of the resolution of the general meeting and the interference with his right under Section 186a of the Commercial Companies Act. The claimant shall also be entitled to reasonable compensation compensating for such non-pecuniary damage.

Limitation of the right of a joint stock company to fulfil its deposit obligation

(Resolution of the Supreme Court of the Czech Republic, Case No. 27 Cdo 1606/2022, dated 27 June 2024)

The appellant sought a declaration that the resolution of the general meeting of the joint stock company was invalid because the company sought to expel her for non-payment of the issue price of the shares.

In response to the application, the trial court held that the expulsion of the appellant from the company for default in payment of the issue price after more than 25 years from the time when the company could have done so was “wholly contrary to good morals and the principle ‘law favors the vigilant’ and cannot enjoy legal protection”. The High Court came to a similar conclusion.

The Supreme Court stated that the legal regulation of the Commercial Code provided that all rights arising from contractual relations are subject to limitation, with the exception of the right to terminate a contract concluded for an indefinite period (Article 387(2) of the Commercial Code). The relationship between the shareholder  and  the  joint-stock  company  concerning the shareholding in the company was a contractual legal relationship governed, inter alia, by the third part of the Commercial Code. The wording of the law thus leads to the conclusion that the right to fulfil the deposit obligation, which is a right under a contractual legal relationship, is subject to limitation. However, the interpretation of the language is merely an initial approximation to the legal norm of which the legislation is the medium. However, systematic and teleological interpretation lead to a different conclusion.

The Supreme Court also agreed with the opinion of a part of the expert literature according to which property rights which are not expressly provided for by the law, but the meaning and purpose of these rights require that they should not be subject to limitation, may also be time-barred if there are sufficiently serious reasons for this.

According to the Supreme Court, the meaning and purpose of a shareholder’s deposit obligation requires that the right of a joint stock company to enforce it not be time-barred. If the right of a public limited company to fulfil a shareholder’s deposit obligation is not time-barred, the right of the company to exclude a shareholder who is in default in the payment of the issue price continues.

For more information:

Banking, Finance & Insurance:
Daniel Weinhold, Václav Štraser, Ondřej Tejnský

Competition Law / EU Law:
Tomáš Čermák

Dispute Resolution:
Milan Polák, Zbyšek Kordač, Anna Bartůňková, Michaela Koblasová, Michal Švec

ESG – Environment, Social, (corporate) Governance:
Daniel Weinhold, Tereza Hošková

Family Office:
Milan Polák, Zbyšek Kordač, Michaela Koblasová

Insolvency and Restructuring:
Zbyšek Kordač, Jakub Nedoma

IT, Media & Telecommunication:
Martin Lukáš, Jakub Nedoma, Michal Przeczek

Labour Law:
Eva Procházková, Anna Bartůňková, Daša Aradská, Ondřej Tejnský

Mergers and Acquisitions:
Daniel Weinhold, Václav Štraser

Personal Data Protection:
Martin Lukáš, Tereza Hošková, Daša Aradská

Public Procurement & Public Sector:
Martin Lukáš, Tereza Hošková, Monika Švaříčková

Real Estate:
Pav Younis, Václav Štraser

Regulatory and Government Affairs:
Daniel Weinhold

Start-ups, Venture Capital and Cryptocurrency:
Pav Younis, Martin Lukáš, Jakub Nedoma, Michal Švec, Ondřej Tejnský