The public offering of securities in the Czech Republic is regulated by Act No 591/1992 Coll on Securities (the Securities Act). The most recent amendments to the Securities Act include provisions intended to harmonize the legal framework for the regulation of the Czech capital market with EU law in anticipation of the accession of the Czech Republic into the EU in 2004.
In general, securities that are not admitted for trading on a Czech public market under the Securities Act can only be offered to the public after a prospectus in relation to the offering is approved by the Czech Securities Commission (SEC).
A prospectus must contain all the information necessary to allow an investor to be able to make an informed assessment of the security and the issuer's assets and liabilities, financial situation, profit or loss, and future prospects. The information contained in the prospectus must be clearly presented in a manner that facilitates analysis of the issuer. The minimum requirements for a prospectus are stipulated in Decree No 82/2001 of the Ministry of Finance (effective March 10 2001).
The SEC does not review the accuracy of information contained in an application for approval of a prospectus or in the prospectus itself. The SEC must decide on the approval of an application for a prospectus within 30 days of receipt. Should the SEC not act within the specified time period, the prospectus is deemed to be approved and the public offering can proceed after publication of the prospectus.
In addition to the prospectus, an application to the SEC for approval of a public offering must indicate the public market to which the application for admission of a security for trading relates and, in the case of a certificated security, a specimen of the security.
The full text of the prospectus (in the Czech language) must be published either in the form of an advertisement in one or more daily newspapers distributed throughout the country or in the form of a brochure available free of charge at the issuer's registered office. The selected method and place of publication must be described and published in the Official Commercial Gazette.
Significant changes to the information contained in a prospectus (or in the event that information set out in the prospectus proves to be inaccurate, incomplete or misleading) that could influence an investor's accurate and fair assessment of the issuer or the securities being offered and that occur or are discovered before expiration of the public offering must be disclosed in a supplement to the prospectus. Supplements are subject to the approval of the SEC and must be published in the same form as the original prospectus.
The Securities Act exempts certain transactions from the public offering requirements, including the obligation to obtain SEC approval of the prospectus and the publication requirements. Exemptions apply to offerings of securities that are:
- limited to institutional investors, brokers or to a maximum of 100 persons;
- that do not exceed an aggregate value of €40,000 (based on issue price multipled by the number of securities offered);
- that may be acquired for consideration exceeding the equivalent of €40,000 per investor;
- whose unit price amounts to at least the equivalent of €40,000;
- in the form of participation certificates issued by open-ended unit trusts;
- issued by the state (government) or the Czech National Bank;
- offered in connection with the restructuring of companies;
- offered free-of-charge to existing shareholders;
- offered in exchange for other shares of the same issuer without a concurrent increase of the issuer's registered capital;
- offered to employees; and
- offered in exchange for convertible bonds or on the basis of the exercise of rights attached to preference bonds, provided that a prospectus has been published in relation to such convertible or preference bonds in compliance with the Securities Act.
In addition to this, two other exceptions will apply with effect from the date of accession of the Czech Republic into the EU:
- securities issued by the government of a member country of the EU or by the government of another country belonging to the European Economic Area; and
- Euro-securities (defined in the Securities Act) which are not the subject of a public advertising campaign and which are not offered for acquisition on the basis of contracts concluded outside the business premises of the issuer.