Effective from January 1, 1996 a newly amended Trade License Act has come into effect. This law continues to regulate both physical persons and legal entities carrying on a trade in the Czech Republic for the purpose of making a profit. Initially coming into effect in 1992, the act has been substantially amended by law no. 286/1995 Coll., which can be expected to significantly effect the business activities of many companies and individuals in this country.

In general, the purpose of the act is to regulate the conditions for carrying on a trade. The act considers a trade to be a systematic activity conducted independently by a person or legal entity, in his / its own name and at his / its own liability, for the purpose of making a profit. Various professions and businesses are not considered as trades due primarily to the fact that they are regulated by other laws, i.e. professions such as auditors or stockbrokers and businesses such as banks or insurance companies.

General conditions for trade licenses are that the individual proposed to be named in the license is over 18 years of age, has capacity to make legal acts and is of unimpeachable character (in the sense of not having criminal record; not having been adjudged bankrupt within three years prior to applying for the license; or not having been prohibited from carrying out the trade by means of a judicial or administrative decision). Unimpeachability of character must be proved by the submission of relevant documents from the state of which the person is a citizen, as well as states in which the individual has had long term residency (over three months without interruption) during the three years prior to making the application for the trade license. these documents must be officially translated into the Czech language. In practice, it will undoubtedly prove somewhat difficult and time consuming to obtain the required documents for many foreign individuals. This will be especially true in the case of citizens of countries such as the U.S., due to the decentralized records for such information.

As was the case under the previous law, certain additional qualifications may have to be proved, such as specialized education and experience of certain duration, depending on the kind of activity. Only in cases of so-called "notifiable unregulated trades", no proof of education and experience in the activity is required.

Legal entities must still nominate a proxy with residence in the Czech Republic who fulfills both the general conditions for carrying on a trade, along with any specific conditions required for respective trade. If an entrepreneur cannot meet the specific conditions for exercising trade or does not have residence in the Czech Republic, he must nominate a representative who fulfills the conditions required and who has residence in the Czech Republic. Significantly, if the nominee is not a citizen of the Czech Republic, under the requirements of the recent amendment, he must now be able to prove his ability to communicate in the Czech language during an interview at the appropriate Trade License Office.

The amendments introduce a simplified procedure in cases of trades which include, as part of a single manufacturing or service rendering process, a number of sub activities, each of which by itself constitutes a trade. This procedure now allows the acquisition of a single trade license for the conducting of all sub activities involved in the manufacture of a particular product or the provision of a certain service. This should eliminate the previous situation, where large industrial firms were required to obtain and maintain multiple trade licenses in order to carry out their activities.

The amended law states that holders of a previously issued trade licenses or authorizations are allowed to continue their licensed activities on the basis of the existing license for a transitory period of one year, i.e., until December 31, 1996. However, by September 30, 1996 at the latest, both physical persons and legal entities must submit documents proving that they now meet the requirements of the new law or that they have appointed a proxy who meets the requirements.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.