print ]10 Questions with Tomáš Chrobák
By František Bouc
Staff Writer, The Prague Post
June 16, 2005
As of July 1, the nightmare of lengthy company registration in this country should disappear. An amendment to the Business Code will set a five-day deadline for making a company entry in the business register. The change represents a challenge for Tomáą Chrobák, director of the firm Companies Online, which has made a business by forming and selling ready-made companies to help clients avoid lengthy registration delays. He talked with The Prague Post about what differences can be expected and whether the legislative changes could ruin his business.
How anxious should businessmen feel nowadays about wanting to establish a company in this country?
Talking to clients who get lost in the various administrative requirements related to company formation is the core of our business. They [clients] often report that launching a company here requires a deep knowledge [of local conditions] a lot of energy, patience and often some good luck. In a way, it's similar to trying to repair a car or computer on your own.
* How significant is the amendment to the Business Code that should speed up the process of making an entry in the business register? What will be the main advantages and disadvantages?
An advantage will be speeding up, to some extent, entries in the business register and reducing the amount of documents required [for making the company entry]. However, the pace of the process will not speed up radically since the amendment only deals with the last step in forming a company, which is the entry in the business register. All of the other steps, including preparation of documents, incorporation of a company in the presence of a public notary, getting a report on your criminal record, getting a business license, and other steps, will remain unchanged.
A disadvantage is that the content of documents presented to the business register will not be re-examined [as part of the process], so many void or incorrect company registrations will occur.
* According to a recent World Bank report, the average length of forming a company here was 40 days, while the same process took merely four to 15 days in some other EU member states. Is it excessive bureaucracy or the poor performance of Czech officials that is to blame?
The main difference lies in the quantity of documents required. Apart from [the large amount of] time, excessive administration also brings about errors in documents that later lead to dismissals of registration applications by the business register. And this can in the end result in a significant delay in the registration process, or can even completely halt it.
* The new Business Code that will take force in July aims to shorten the process of entering a company in the business register to a maximum of five days, but it does not limit the number of steps required. Which of these steps should be eliminated?
The things that need to be eliminated are the issuance of business licenses in areas that don't require special education or experience and the need to submit [evidence about] criminal records from both here and abroad. On the other hand, I don't agree that most steps should be eliminated because this would enable the registration of companies that do not fulfill basic legal requirements.
* The amendment may make the company registration process faster, but it does not deal with the process of acquiring a business license, which can create significant delays in the registration process. Isn't the planned amendment merely half the answer?
It's an interesting observation. Actually, Slovakia witnessed a similar change in legislation in February 2004. Company registration takes five to 10 days there, but the entire incorporation procedure still lasts around 45 days due to many other legal steps that need to be taken. At the same time, we can see [in Slovakia] many court cases resulting from unlawful company registrations due to the presentation of incorrect company documents. Such entries occurred precisely because of the elimination of re-examination procedures for the business register.
* Was the lengthy process of forming companies in this country the reason for launching your business of off-the-shelf companies?
We were inspired by foreign experience. The off-the-shelf market functioned quite well for a while in places such as Britain, the United States and Germany. This concept was successful in this country and in Slovakia as well because the process of forming companies here is so complicated and almost impossible without expert assistance.
* What is the current interest in off-the-shelf firms?
We sold 512 firms in 2004, out of which two-thirds were public limited companies [s.r.o.] and one-third were joint-stock companies [a.s.]. Every third joint-stock company registered in Prague over the past few years was in fact formed by us as an off-the-shelf entity. The price of a public limited company is about 60,000 Kč [$2,500], and joint-stock companies cost 120,000 Kč.
* What's the main reason foreigners purchase ready-made firms?
The prime reason is to purchase real estate. Foreigners, including EU and non-EU citizens, cannot purchase or own real estate and land here unless they've got a long-term residency permit in this country. Through the acquisition of a ready-made firm, they can purchase real estate immediately, without any limitations or delays.
* How will the main advantages for foreigners related to purchasing ready-made firms change with the new business code?
The main advantage is that the acquisition of a ready-made firm enables [the new owner] to start acting on behalf of the company immediately. Also, the new owner does not need to have the equity capital required for registering the firm. Last but not least, when we sell a ready-made firm we guarantee compliance with legislative requirements related to corporate law and bookkeeping. This is a factor that sets us apart from competitors and makes us attractive to clients. The new legislation will have no impact on these advantages.
* Aren't you afraid that if it simplifies the process of registering companies, the new legislation could in effect hurt your business?
The upcoming changes will be similar to those that took place in Slovakia. [The Slovak] experience showed that it did not significantly affect our field of business. The connection between ready-made firms and Companies Online has become well known to the public, especially among lawyers, developers and accountants who generate regular demand for our services.
TOMÁŠ CHROBÁK
- Job title: Director, Companies Online, a service firm that sells ready-made companies
- Age: 30
- Nationality: Czech
- Education: University of Economics in Prague
- Family: Married, one daughter
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