Before a Public Takeover Bid | Czech Republic | Global Public M&A Guide

3. Before a Public Takeover Bid

[Last updated: 1 January 2025, unless otherwise noted]

3.1 Shareholding rights and powers

The table below provides an overview of the different rights and powers that are attached to different levels of shareholding within a Czech listed corporation:

Shareholding	Rights
One share	The right to attend and vote at general shareholders' meetings. The right to obtain a copy of the documentation submitted to general shareholders' meetings. The right to submit questions to and receive answers from the company at general shareholders' meetings (either orally at the meeting, or in writing prior to the meeting). The right to submit proposals and counterproposals relating to issues on the agenda of a general shareholders' meeting. The ability at a general shareholders' meeting to block a decision to merge shares if the shareholder holds at least one share to be merged. The ability at a general shareholders' meeting to block a decision to change the type of shares to non-voting shares if the shareholder holds at least one share to be changed. The right to request the nullity of decisions of general shareholders' meetings for conflict with law, bylaws or good morals. In case of a merger or de-merger, the right to file a liability claim against directors or to request the nullity of the merger or de-merger.
1% of shares in a company having registered share capital over CZK500 million or 3% of shares in a company having registered share capital over CZK100 million or 5% of shares	The right to put items on the agenda of a general shareholders' meeting and to table draft resolutions for items on the agenda. The right to request the board of directors to convene a general shareholders' meeting. The right to request a supervisory board to check performance of duties by the board of directors. The right to claim damages on behalf of the company against a member of the board of directors or the supervisory board. The right to bring a claim for payment of the issue price on behalf of the company against a shareholder who is in default with payment of such issue price.
More than 10%	The ability to block a splitting-up of a joint- stock company with an unequal exchange ratio. The ability to block a decision to transfer assets of a company to a shareholder.
More than 25% (at a general shareholders’ meeting)	The ability to block a transformation of the company. The ability at a general shareholders' meeting to block the following decisions: change of type or form of shares; change of the rights attached to a certain type of shares; restriction of the transferability of registered shares or book-entry shares; exclusion of participating securities from trading on a European regulated market; exclusion or restriction of the preferential right to acquire convertible or preferential bonds; distribution of profit or other resources to persons other than the shareholders; exclusion or restriction of the shareholder's preferential right when the registered share capital is being increased by subscription of new shares; and increase of the registered share capital with in-kind contributions.
More than 33% (one-third)	The ability to block a decision to provide financial assistance. The ability at a general shareholders' meeting to block following decisions: an amendment of the bylaws; those resulting in an amendment of the bylaws; authorizing the board of directors to increase the registered share capital; the possibility to set off a pecuniary receivable towards the company against a receivable from the payment of the issue price; the issuance of convertible or preferential bonds; liquidating the company; and distributing the liquidation balance.
More than 50% (at a general shareholders’ meeting)	The right to take decisions for which no special majority is required.
90%	The possibility to force all other shareholders to sell their shares (a "squeeze-out").

3.2 Restrictions and careful planning

Czech law contains a number of rules that already apply before a public takeover bid is announced. These rules impose restrictions and hurdles in relation to prior stake building by a bidder and announcements of a potential takeover bid by a bidder or a target company. The main restrictions and hurdles have been summarized below. Some careful planning is therefore necessary if a potential bidder or target company intends to start up a process that is to lead towards a public takeover bid.

3.3 Insider dealing and market abuse

Before, during and after a takeover bid, the normal rules regarding insider dealing and market abuse remain applicable. For further information on the rules on insider dealing and market abuse, see 6.3 below. The rules include, among other things, that manipulation of the target's stock price, e.g., by creating misleading rumors, is prohibited. In addition, the rules on the prohibition of insider trading prevent a bidder that has inside information regarding a target company (other than in relation to the actual takeover bid) from launching a takeover bid.

3.4 Disclosure of shareholdings

The rules regarding the disclosure of shareholdings and transparency apply before, during and after a public takeover bid.

Pursuant to these rules, if a potential bidder starts building up a stake in the target company, it will be obliged to announce its stake if the voting rights attached to its stake have passed an applicable disclosure threshold. The relevant disclosure thresholds in the Czech Republic are 5%, 10%, 15%, 20%, 25%, 30%, 40%, 50% and 75%. The initial threshold in companies with registered share capital over CZK 100 million is 3%. For companies with registered share capital over CZK 500 million, the initial threshold is 1%.

When determining whether or not a threshold has been passed, a potential bidder must also take into account the voting securities held by the parties with whom it acts in concert or may be deemed to act in concert (see 3.9 below). These include affiliates. The parties could also include existing shareholders of the target company with whom the potential bidder has entered into specific arrangements (such as call option agreements).

3.5 Disclosures by the target company

The target company must continue to comply with the general rules regarding disclosure and transparency. These rules require that a company must immediately announce all inside information. For further information on inside information, see 6.1 below. The facts surrounding the preparation of a public takeover bid may constitute inside information. If so, the target company must announce this. However, the board of the target company can delay the announcement for serious reasons as long as the public is not misled thereby and the company is able to protect such information. The CNB must be provided with a written explanation of reasons for the delay immediately after the information is disclosed to the public.

3.6 Announcements of a public takeover bid

Prior to the public announcement of the takeover bid upon a notification containing information that there are no reasons for prohibition of such announcement (or a failure to issue a letter of prohibition) by the CNB (see 6.2), no one is permitted to announce the launching of a public takeover bid. This prohibition not only applies to a bidder, but also to the target company (even if the target company has to announce the launch of a bid pursuant to the general disclosure obligations described in 3.5).

A bidder that intends to announce a public takeover bid must first inform the CNB of its intention and wait for its reaction. If the CNB issues a notification containing information that there are no reasons for the prohibition of such announcement (or if it fails to issue a letter of prohibition), the bidder will announce the takeover bid. If the CNB fails to issue a letter of prohibition, the takeover bid will be announced no sooner than 15 days and no later than 30 days after the bidder notified the CNB. If the CNB issues a notification not prohibiting the announcement, the bid may be announced even sooner (following the notification). The bid may be withdrawn if such possibility is expressly set out in the bid and provided that the CNB, following a prior notice of the intention to withdraw the bid, does not prohibit such withdrawal.

If there are substantiated rumors or leaks that a (potential) bidder intends to launch a public takeover bid, there is a legal obligation to make an announcement or to act in a manner that will give rise to an obligation to make a takeover bid (see 3.7).

3.7 Early disclosures – Put-up or shut-up

Early disclosure demanded by the Czech Takeover Bids Act
If serious fluctuations of the target company's share price occur or if there are rumors or leaks that a bidder intends to launch a takeover bid and it is reasonably foreseeable that such rumors or leaks are connected with the preparation of such takeover bid, the bidder will announce its intention to make a takeover bid or act in a manner that will give rise to an obligation to make a takeover bid. Such information must be provided to the CNB.
Put-up or shut-up
In addition to the foregoing rule, a bidder that has announced its intention to make a takeover bid must publish such bid within 90 days. If the bidder fails to comply with this rule, a 1-year protection period as in 7.3 below will apply, i.e., the bidder and the persons acting in concert with the bidder cannot make another bid aimed at acquiring securities of the same target company unless an obligation to make a takeover bid arises or in a case of a counter-bid.

3.8 Due diligence

Czech public takeover bid rules do not contain specific rules regarding the question of whether or not a prior due diligence can be organized, nor how such due diligence is to be organized. Be that as it may, the concept of a prior due diligence or pre-acquisition review by a bidder is generally accepted.

3.9 Acting in concert

For the purpose of the Czech takeover bid rules, persons "act in concert":

if they collaborate with the bidder in order to acquire or execute control of the enterprise of target company, e.g., by coordinated exercise of voting rights; or
if a person cooperates with the target company in order to frustrate the success of a takeover bid.

Under the Czech Takeover Bids Act, the following persons are deemed to act in concert:

controlling and controlled entities;
persons who entered into an agreement relating to the exercise in concert of their voting rights for election of members of bodies of the target company; and
members of a group of companies.

In view of the above rules and criteria, the target company could be one of the persons with whom a shareholder acts in concert or is deemed to act in concert. For example, this is the case where a target company is already controlled by a shareholder.

The concept of persons acting in concert is very broad, and in practice many issues can arise to determine whether or not persons act in concert. This is especially relevant in relation to mandatory takeover bids. If one or more persons in a group of persons acting in concert acquire voting securities as a result of which the group in the aggregate would pass the 30% threshold, the members of the group will have a joint obligation to carry out a mandatory takeover bid, even though the individual group members do not pass the 30% threshold.

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