Ministry to ease register hassles
Bureaucracy-busting plan may speed process, cut paperwork
Locals hoping to launch a business and foreign investors considering putting their money here received some good news from the government in August. The Justice Ministry announced that it would introduce a plan to reform the system of entering companies into the nation's business register. The process of registering companies in the Czech Republic is notoriously slow and difficult for investors. Before being entered into the register, a company is prohibited from any business activity in the country. While being entered into a business register takes a matter of days in European Union countries, the process can take months in the Czech Republic.
Better west of here
"The issue of lengthy registration has
been a big problem for Czech businesses," said Jana Viskova,
spokeswoman for investment
agency CzechInvest. It would be good to follow the experience from the
EU. In France, for example, the process of making an entry into
the business register usually takes no longer than one day." Viskova
said that the current process of registering new companies takes
two to three months on the average. Business law specialist Ladislav
Storek of law firm Altheimer & Gray said that the crucial problem
is the lack of deadlines for the business registry to make requested
changes in the register. Storek said that the only possible defense
against such delays is to appeal to a higher court, but such a process
could take years. Eva Kavkova, head of Relocation Management
International (RMI), a business-service company, said that another
obstacle for investors entering the Czech market was the registry's
excessive bureaucracy. The most difficult part of the process is the
large number of supporting documents that need to be assembled
to support the application, and the fact that there does not appear to
be a standard' set," Kavkova said. In its reform plans, the Justice
Ministry proposes to simplify the document-submission process and
increase the speed and efficiency of administrative proceedings.
Deputy Justice Minister Vladimir Kral said that the new registration
forms should be easy to understand and available electronically.
We plan that the submission of the registration forms will be possible
via the Internet," Kral said.
Go-betweens benefit
Viskova said that the lengthy process
of registering businesses in this country has led to a market for
intermediaries helping companies
through the process. They make a profit by selling already-established
off-the-shelf" companies that help their clients avoid the long wait
to launch a business. Increasing demand for company incorporations made
RMI adjust its business strategy to provide such services, Kavkova
said. As its name indicates, the company originally focused on
providing relocation services for foreign businesspeople. Service
companies
abroad inspired the idea of selling ready-made companies, said Tomas
Chrobak , director of Companies Online (Spolecnosti Online), a firm
that specializes in off-the-shelf businesses. Specialized firms offer
already-established companies in such wealthy foreign markets as the
United Kingdom, the United States and Germany. In the Czech Republic,
off-the-shelf companies are basically those that have been incorporated
and registered in the commercial registry exclusively to be sold to an
end-user. Such companies have fully paid-up share capital and have yet
to
conduct any type of business activity. Therefore the client can acquire
them and use them to do business immediately. But that's not the only
attraction for foreign clients, to whom the bulk of such companies are
sold. The reason for the interest of foreign clients in a ready-made
company
is obvious," Chrobak said. If a foreigner wishes to incorporate [a
limited-liability company] and become its director, he has to apply for
a long-term visa.
The visa application procedure usually takes two to three months and
only then can the registration of a new company - which takes another
month - take place. However, if a foreigner becomes a director in a
ready-made company, he can act immediately on the company's behalf
while
the visa application and the registration of changes in the business
register are processed separately." Chrobak said that Companies Online
sells
250-300 ready-made companies annually, half of which are smaller
limited-liability companies and half are larger joint-stock entities.
Prices
range from 60,000 Kc to 120,000 Kc ($2,000 to $4,000), depending on the
type of company. Around 80 percent of Companies Online's clients
are Czech, while its foreign customers come mainly from EU nations or
the United States. Foreigners usually acquire a ready-made company
for the purpose of buying real estate or starting a small business in
the Czech Republic, Chrobak added.
Not scared of change
Although the planned simplification
of business registration in the Czech Republic could theoretically hurt
the intermediaries, business-service providers
do not seem afraid of losing sales. I do not expect [the reform] to
reduce our business," Kavkova said. In fact, speeding things up will
help us provide faster,
more-efficient service to clients." Chrobak said that the process of
registering limited-liability companies has become more efficient over
the past year,
so the implementation of new legislation should not bring dramatic
change. Storek said that law offices did not need to worry about their
business being
affected, either. Given the increasingly difficult [Czech business]
legislation, corporate lawyers' assistance in registering firms and
making other changes
in the Business Register will still be needed," he said. Kral said that
the Justice Ministry will submit its draft to the Cabinet by the end of
this year.
Kral said that if the Cabinet and later Parliament pass the
legislation, it could come into effect in January 2005.
