Business News

Privatisation of Commercial registry: out of the frying pan and into the fire?

The process of registering a new business or making changes to its statutes has often been criticised by both local and foreign companies. In a situation where making an entry in the Commercial Register takes several weeks, the system is seen as one of the major obstacles to doing business in the Czech Republic. There is a wide consensus that reform is necessary but only recently have a group of MPs from across the political spectrum come up with an initiative to change the system completely, by introducing a network of private registrars who would take over the work currently handled by commercial courts.

However, the proposed amendment has come under heavy criticism for a number of serious shortcomings. On the one hand, the amendment aims to speed up the registering procedure by stipulating shorter terms for the registrar to make an entry in the registry, but on the other it does not introduce necessary mechanisms to ensure it.

One of the main points of criticism is that the proposal was not discussed at all with entrepreneurs - those whom the commercial registry should serve in the first place. The Czech Chamber of Commerce is convinced that the new law in some ways actually goes against the interests of entrepreneurs. The head of the Chamber's analytical department, Vaclav Smejkal specified the main objections:

Mr. Smejkal claims that the amendment even paves the way for corruption in the process of registering a business:

The government on Monday did not recommend adopting the proposal, nevertheless it will now be submitted to parliament for the first reading. The Czech Chamber of Commerce suggests that the draft be rejected and has come up with its own initiative, suggesting that the Czech Republic could seek inspiration in the Netherlands, where the Commercial Registry is administered by the Chamber of Commerce and works to the satisfaction of all the parties involved. According to a survey conducted by the French market research institute - IFOP-Gallup in Paris, the Netherlands ranks second in Europe as far as the ease of establishing a business is concerned. Mr. Smejkal summarised the benefits of adopting the Dutch model:

The Czech Republic has two separate registers - the Commercial Register and the Trade Register. While in the Netherlands, there is only one register containing data on the whole range of businesses from sole entrepreneurs to joint-stock companies, it would be impossible to merge the two Czech registers without far reaching consequences and major legislative changes. The question also is whether handling data on businesses should be in fact entrusted in the hands of businesses themselves and whether the Commercial Register should not remain under state control, and just be made more effective.

Besides the need to change the current system which makes life difficult for both Czech entrepreneurs and foreign investors who want to set up a business here, the Czech Republic needs to bring its legislation concerning the commercial register in harmony with that of the EU before January 2003. The Czech Chamber of Commerce believes it is worth taking the time to widely discuss and draft a high quality law that would finally help to bring more transparency and legal certainty to the business sphere: