Business judgement rule in Czech Corporations Act

• Author: Jaromír Koziak
• Position: Department of Commercial Law, Masaryk University in Brno, Czech Republic
• Pages: 126-135

Business judgement rule in Czech Corporations Act

Assistant professor JUDr, PhD Jaromír KOŽIAK

1

Abstract

Czech private law is curren tly under going a thorough transformation. This

inclundes adoption of a br and n ew Corporations Act, which is to super sede the curr ent

Commercial Code. The new legislation introduces severa l new rules governing liability of

company executive officers. One of these is business judgment rule. It should provide

company executive officers with a certa in level of protection against litigan tion – if specific

terms are met, it is pre sumed, that they ca rried out their r esponsibilities with proper car e. I

intend to demonstra te, that the czech business judgment r ule is flawed, despite the fact tha t

it draws from foreign examples and tha t this regula tion, a lthough seemingly

groundbrea king, in fact changes no thing in examination of the decisions of the company

executive officers in Czech Republic.

The main goal of this a rticle is ther efore to analyze and criticize the business

judgment rule in the new Czech legisla tion and to compar e it to notable foreign legal

systems. The methods used ar e inductive and deductive reasoning, a uthor‘s own analysis of

legal text, compar ative method and compilation of availa ble resources r elating to the topic

of the article.

Keywords: Business judgment, Company executive oficer, co rporate body,

company, corpora tion, Corporate la w.

JEL Classification: K22, K40

Introduction

Bailes Manning once said: „Some people are fortunate since they have

never heard of the business judgment rule.“2 That has been true for most Czech

lawyers, as the concept of business judgment rule (further referred to as BJR) is a

new one in Czech law. However, the BJR is included in the new Corporations Act

that should enter into force on 1st January 2014 and plays only a small role in

thorough reform of Czech Civil and Commercial law that is currently in the final

phase of its introduction into our legal system. Therefore we stand before the

question of how to cope with the new legislation and whether it will improve our

legal system or not.

As this legislation is completely new, this paper will provide basic analysis

of the regulation and compare it with similar rules in foreign legal systems.

Therefore the main research methods used include authors own analysis of a legal

1 Jaromír Kožiak - Department of Commercial Law, Masaryk University in Brno, Czech Republic,

jkoziak@seznam.cz

2 Manning, B., SYMPOSIUM: CURRENT ISSUES IN CORPORATE GOVERNANCE: The

Business Judgment Rule in Overview, available at https://litigation-essentials.lexisnexis.com/

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