News

The End of the Two-Year Period for the Process of Opting-in to the Regime of the Act on Business Corporations Is Getting Closer

It is generally known that the new Civil Code and the new Act on Business Corporations became effective on 1 January 2014. These two new regulations have abolished and replaced the old Civil Code and Commercial Code.

In this regard, significant new obligations were imposed on all companies including the adjustment of founding documents to comply with the new legislation, file them in the collection of deeds and adjust the entry in the Register of Companies so that it complies with the new regulation. All these obligations were to be honoured by 30 June 2014. If a company fails to do so, the ultimate sanctions include the possibility of a court order for the company to be dissolved and liquidated.

In addition, companies were given a two-year period to opt in to the new legal regulation as a whole, by adjusting their founding documents. The period will end at the end of 2015. Most companies have used the two-year period for opting-in to the regime of the new legislation mainly due to its practicality regarding day-to-day operations. Companies that have not taken any steps to comply with the new legislation are in a situation where the new as well as the no-longer-effective old regulation apply to them to a limited extent. This leads to legal uncertainty and interpretation difficulties.

Given that the end of the two-year period for opting-in to the new regime is approaching, the issue of the nature of the period is being debated once again. Is it a non-mandatory period, after which, ie after 1 January 2016, the companies will still be able to proceed to opt-in to the regime of the new regulation? Or is it a mandatory period, after which the companies will not be able to opt-in to the new regime and would thus be inevitably and invariably caught in the combined regime of the old and new regulations and in extreme cases even face court ordered dissolution on the grounds of non-compliance with the Business Corporations Act?

The prevailing professional opinion is that corporations will be able to opt-in to the regime of the new legislation even after the expiration of the two-year period. However, the nature of the period will definitely only be clarified by the courts’ ruling practice.

In order to ensure legal certainty and transparency of legal relations in business corporations, we advise our clients to fully opt-in to the regime of the new Act on Business Corporations no longer than by the end of 2015.