Jana Nováková Tel: +420 221 622 111 Email: jana.novakova@kinstellar.com Kinstellar Prague Na Příkopě 859/22 110 00 Prague 1 Czech Republic Tel: +420 221 622 111 Fax: +420 221 622 222 www.kinstellar.com

1. The Legal Framework for US Investments
in the Czech Republic
27 May 2014
Kamil Blažek
Partner, Kinstellar Prague

2. Introduction
About Kinstellar

3. Kinstellar is a leading independent law firm in Emerging Europe,
Turkey and Central Asia, with offices in Almaty (Kazakhstan),
Belgrade (Serbia)*, Bratislava (Slovakia), Bucharest (Romania),
Budapest (Hungary), Istanbul (Turkey) and Prague (the Czech
Republic).
Operating as a single fully-integrated firm, Kinstellar delivers
consistently high-quality services across all jurisdictions in an
integrated and seamless style. We are particularly well suited to
servicing complex transactions and advisory requirements spanning
several jurisdictions.
We deliver:
 market experience and local knowledge across a wide range of
sectors
 in-depth understanding of the legal, regulatory and commercial
issues surrounding any type of transaction or project in the region
 a dedicated team of local and internationally-qualified lawyers
 a responsive, commercial approach and style
 value for money.
Emerging Europe and Central Asia’s
Leading Independent Law Firm
Regional experienceKinstellar offices
* Kinstellar advises international and local clients in Serbia in cooperation with Zajednička advokatska kancelarija Marić & Mujezinović.

4. Established in 1992, our Prague office is a leading law firm in the
Czech Republic. Our work advising multinationals, international
financial institutions, governments, and domestic clients covers many
of the most significant transactions ever completed within New Europe.
The Prague office is comprised of five Partners, four Counsel / Of
Counsel, and close to 30 Associates, qualified in one or more of the
following jurisdictions: Czech Republic, Slovakia, United Kingdom,
Germany, and Canada. The core of our team has been working
together in the Czech Republic for over 16 years and is well balanced
between senior, mid-level and junior lawyers, complemented by
translators, paralegals and support staff. Our diverse language
capabilities, covering Czech, English, Slovak, Armenian, German,
French, Russian, enable us to offer a truly flexible service to our
international clients.
Our market leadership in the Czech Republic has been repeatedly
recognised by independent reviewers and achieved top directory
rankings in the following areas:
 Corporate/M&A
 Banking & Finance and Capital Markets
 Real Estate and Construction, and
 TMT
THE AREAS OF PRACTICE OF THE PRAGUE OFFICE INCLUDE:
 Foreign Direct Investments
 General Industry, Manufacturing and Engineering
 Corporate, Mergers and Acquisitions
 Banking, Finance & Capital Markets
 Competition / State Aid
 Compliance, Risk and Sensitive Investigation
 Dispute Resolution
 Energy
 Infrastructure & Projects
 Life Sciences & Healthcare
 Private Equity
 Real Estate
 Restructuring & Insolvency
 Telecoms, Media and Technology
Kinstellar Prague

5. What Clients say about our Prague team ...
‘Excellent for corporate and M&A advice’. Legal 500, 2013
Kinstellar ’s ‘friendly and professional’ team ’ [...].
Legal 500, 2013
Kinstellar displays ‘great knowledge and negotiating skills’.
Legal 500, 2013
It has a growing reputation for its ability to field highly
experienced lawyers on cross-border deals.
Chambers Europe, 2013
Kinstellar is ‘good value, with quick turnaround times, and is
very commercially oriented’. Legal 500, 2013

6. The Legal Framework for US
Investments in the Czech Republic

7. Content
 Market overview
 Legal System of the Czech Republic
 International Treaties
 Corporate Establishment
 M&A in the Czech Republic
 Case Study

8. Market Overview
Access to EU markets
EU 28 countries all are part of the European
single market – free movement of goods, capital
and workers.
CEE countries still enjoy significant cost
advantages over EU 15, while at the same time
having full market access and advantages of full
EU membership.

9. Market Overview
Need for infrastructure
Much infrastructure is still below EU standard
Massive infrastructure investment will continue in the next decade
 Railways
 Motorways
 Electricity generation
 Energy infrastructure
 Municipal infrastructure
EU funds will continue to be allocated to improve
Regional quality and local development

10. Market Overview
Drivers of inward investment in the Czech
Republic and CEE region
 Cost efficiencies
 Expanding EU market
 Excellent platform for access to EU market for
new EU countries
 Attractive labour force
 Attractive tax regimes
 Incentives from local governments
 Proximity CIS, CEE, SEE – springboard to New
Europe

11. Market Overview
Decisive factors for investments in the
Czech Republic
 Labour cost and quality
 Logistics (transportation networks)
 Industrial background
 Governmental support and transparency in
procedures
 Stability: financial, political, legal
 Standard European economy
 Friend of the United States
 Good opportunity (No. 5 in TOP 20 Emerging
Markets by Bloomberg)

12. Legal System in the Czech Republic
 Civil law system
 Very similar (and comparable) to Germany.
 Part of the European Union. Fully compliant with EU legislation
 Extensive reform of legal system and modernisation after EU accession
 Still formalistic: requirements like notarisation and legalisation can be onerous
 Stable environment with sufficient protection of rights
 Established and efficient court system
 In brief: standard European jurisdiction

13. Important International Czech – US Treaties
 Bilateral Investment Treaty
 Treaty concerning Encouragement and Reciprocal Protection of Investments, entered into force
on 19 December 1992 (amended on 1 May 2004)
 Double Taxation Treaty
 The Convention for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with
respect to Taxes on Income and Capital, entered into force on 23 December 1993
 Other Treaties
 Agreement on Social Security between the Czech Republic and the United States of America,
entered into force on 1 January 2009

14. Corporate Establishment
 First steps
 Available corporate structures
 Commercial Register
 Trade licences
 Limited liability company
 Joint-stock company
 Branch office

15. First Steps
1. Choosing an appropriate corporate structure
2. Establishing the company, branch or
purchasing a shelf company
3. Applying for trade licences
4. Registering in the Commercial Register
5. Registering for taxes, social security, and
health insurance

16. Available Corporate Structures
1. Limited Liability Company (in Czech “společnost s ručením omezeným” or “s.r.o.”)
2. Joint-Stock Company (in Czech “akciová společnost” or “a.s.”)
3. General Commercial Partnership (in Czech “veřejná obchodní společnost” or “v.o.s.”)
4. Limited Partnership (in Czech “komanditní společnost” or “k.s.”)
5. Cooperative (in Czech “družstvo”)
6. Branch office (in Czech “organizační složka”)

17. Trade Licences
 Obligatory application
 Different requirements in respect of obtaining
different types of trade licences
 Types of trade licences
• Licensed trades
• Notifiable trades
– craft trades
– regulated trades
– unregulated trades

18. Limited Liability Company
• Legal entity
• Created by registration
• Typically used for small to medium-size
enterprises
• Chaining restriction
• Minimum capital CZK 1 (approx. EUR 0.04)
• Executive directors
• General meeting

19. Joint-Stock Company
• Legal entity
• Created by registration
• Typically used for larger enterprises
• Unlimited number of shareholders
• Minimum capital of CZK 2,000,000 or EUR 80,000)
• Bearer or registered shares in the form of either certificated or book-entred shares
• Board of directors
• Supervisory board
• General meeting

20. Branch Office
1. Not a legal entity
2. Created by registration
3. Unlimited liability of the founder
4. No share capital
5. Branch manager

21. Comparison Limited Liability
Company
Joint-Stock Company Branch Office
Liability of the
Founder
Not liable if capital paid
up (with exceptions)
Not liable if capital paid
up (with exceptions)
Founder fully liable
Establishment By notarial deed By notarial deed Notarial deed not
necessary
Minimum Registered
Capital
CZK 1 (approx. EUR
0.04)
CZK 2 million or EUR
80,000
Not applicable
Executive Body Minimum one executive
director
Minimum three
members of board of
directors
One branch manager
Supervisory Board Voluntary Minimum three
members
Not applicable
Timing
(establishment) *
1 month 1 month 1 month
Registration fees Approx. EUR 500 Approx. EUR 500 Approx. EUR 350
* Does not include time necessary for obtaining all documentation from the investor.

22. M&A in the Czech Republic
 All sectors of the Czech economy are opened to foreign investments
 No restrictions – foreign and domestic investors treated identically
 Incoming investment mainly from the Netherlands, Germany, Austria, the United States, South
Korea, Japan and Switzerland
 Active smaller private equity funds (e.g. Genesis)
 Trends:
 Smaller number of larger transactions
 Domestic investors play increasingly important role

23. Top 10 Deals in the Czech Republic (2013)

24. Czech Republic and Emerging Europe
 Czech Republic: ranked as the best performer in the CEE (overall M&A maturity score of 71%)
 Strategic advantage: buyers able to do deals in various currencies
 CEE M&A transactions increased by 28% (from 378 in 2012 up to 485 in 2013)
 The deal value increased proportionately by 26% year-on-year
 Emerging Europe: generally healthier economies than Western Europe
 Relatively sound financial sector
 Technically advanced economies

25. Czech Republic and Emerging EuropeE
Europe
 Proximity: Similar cultural, historical or
language background. Similar approach to
business.
 Atractivity: Turkey, Romania and Poland.
Czech Republic remains competitive.
 Success: Investments in the Czech Republic
will be most successful if seen as part of the
Emerging Europe. Build on Czech strategic
advantages.

26. Why the Czech Republic?
 Optimistic mood – more active M&A market expected in 2014. Why?
 Strong industrial tradition
 Safe destination: Very limited legal and cultural issues. Single market
 Growing acquisitions of small- and mid-sized companies
 Number of small- and mid-sized enterprises up for sale (with founders being close to retirement and
searching for suitable buyers)

27. Quickly and safely? Comments on Czech M&A Deals
Preliminary Steps
• Initial commercial discussions
• Structuring and valuation
• Process Letter / Information Memorandum
• Due diligence / Data room
• Confidentiality / Exclusivity / Break fee agreement
• Agreement in principle / heads of terms?
Contract negotiation
• SPA
• Other documents
Signing / Announcement
• Sign SPA
• Satisfy conditions precedent:
• Public / private approvals
• Other conditions
• Prepare for transfer – pre-closing obligations
Closing
• Post completion matters
• Price Adjustment
Purchaser
Due
Diligence
Vendor Due
Diligence

28. Quickly and safely? Comments on Czech M&A Deals (Cont.)
 Stable institutions and rule of law
 Faster and more efficient work of courts
 Representations and warranties
 Ways how to enable financial assistance
New Private Law
 The new Civil Code and the new Business
Corporations Act effective from January 2014
 Significantly limit the reasons for the invalidity of
contracts

29. Case Study

30. Case Study
NET4GAS
 The sale of Czech Transmission System Operator Net4Gas was the one of the biggest and the most
complex M&A deal in the Czech Republic in 2013
 Type of business: NET4GAS operates more than 3,600 kilometres of pipelines in the Czech
Republic and is responsible for the national transmission of natural gas as well as international gas
transit
 Parties involved: RWE (Seller), Borealis Infrastructure Management Inc./Allianz SE (Purchasers),
NET4GAS (Target)
 Deal Value: appr. EUR 1.6 billion
 External bank financing (syndicated loan with more than 20 banks participating – approximately
EUR 1.2 billion)

31. NET4GAS Transmission System

32. Questions?

33. Contact Information

34. The main contact
Kamil Blažek is a Partner and firm-wide Head of the Projects & Infrastructure practice at Kinstellar. He has been with the firm
since 2000. Kamil specialises in Commercial Law, M&A, Foreign Direct Investment, Energy, Project Finance and Real Estate &
Construction Law.
Kamil studied law at Charles University in Prague and Regensburg University in Germany. He has worked as professional legal
advisor in the Czech Republic and Central and Eastern Europe for close to 20 years. From 2000, he worked at the global law
firm Linklaters and since 2008 has been as a partner in the Prague office of the international law firm Kinstellar, which
exclusively focuses on the emerging markets in the Central and Eastern Europe and CIS. Kamil has been involved in a number
of complex transactions in the Czech Republic, other Central and Eastern European countries, Russia, and China.
He has advised numerous clients in the automotive sector (for example, Denso, Inteva, Hyundai, Toyota Tsusho and Delphi), in
the real estate sector (ECE, ECM Real Estate Investment, Hochtief Development, Unibail, Czech Property Investments, and
Babcock & Brown), in the banking sector (KBC/ČSOB, Erste/Česká spořitelna, Merill Lynch, ING, and BNP Paribas), and in the
energy sector (RWE, Ruhrgas/E.ON, Electrabel, EnBW, ČEZ, Duke Energy and Statkraft).
Kamil is Chairman of the Association for Foreign Investments (AFI) in the Czech Republic. In co-operation with governmental
agencies and institutions, primarily the Ministry of Industry and Trade of the Czech Republic and CzechInvest, AFI is actively
supporting foreign investors entering the Czech market, the promotion of domestic investments, the enhancement of Czech
companies’ competitiveness, and a favorable business environment in the Czech Republic. AFI also promotes innovation be
encouraging co-operation between the public research/development sector and the private sector.
Kamil speaks Czech, English, German and Russian.
Kamil Blažek
Partner

35. Kamil Blažek
Partner, Prague
Corporate/Projects
Tel: +420 221 622 160
Mob: +420 725 730 968
Email: kamil blazek@kinstellar.com
Contact Information