International ECM Listings Rules, Requirements & Obligations in Czech Republic

The regulated markets in the Czech Republic are regulated by the Czech National Bank (CNB). Shares must be admitted to trading on a regulated market for listed securities operated by a market operator authorised by the CNB: currently, the two market operators authorised by CNB are the Prague Stock Exchange (PSE) or the RM-SYSTEM Czech Stock Exchange.

The main market on the PSE is the largest and is made up of the Prime segment and Standard segment.

The Prime segment is intended for trading in the largest and most prestigious issues of shares of Czech and foreign companies. The Prime segment may accept issues of shares by companies which meet the demanding statutory requirements of the official securities market or the statutory requirements of the regulated market. The shares traded on the Prime segment are dematerialised.

The Standard segment is intended for trading in the large and prestigious issues of shares of Czech and foreign companies. The Standard segment may accept issues of shares by companies which meet the demanding statutory requirements of the official securities market or the statutory requirements of the regulated market. The Standard segment also allows admission of shares without the consent of the issuer if they have already been traded on another regulated market in the EU.

A joint stock company (akciová společnost) (A.S.)

In general, securities traded on the main market of the PSE must be: (i) issued in compliance with applicable legislation; (ii) transferable without restriction; and (iii) duly paid up.

Foreign issuers must submit a statement declaring that the issuer’s legal status is compliant with the law of the country in which the issuer has its registered office, and that the securities comply with the law of the country in which they have been issued.

A prospectus prepared and approved in accordance with the Prospectus Regulation is required when an issuer:

• first applies for a class of securities to be admitted to listing on the regulated market; or
• issues new shares in any rolling 12 month period which would exceed 20 % of its issued shares of the same class.

The (expected) market price of the shares multiplied by the number of shares that will be in issue must be at least the CZK equivalent of €1,000,000. If it is not possible to state the expected market price, the nominal value of the issuer’s equity must amount to at least the CZK equivalent of €1,000,000.

These conditions need not be fulfilled if shares of the same class are already traded on the PSE, or if the PSE is otherwise satisfied that there will be enough liquidity in the issuer’s shares.

At least 25% of the shares in respect of which admission to trading is applied for must be issued to the public in the EU or elsewhere either at the time of admission or shortly afterwards, or a sufficient number must be distributed to satisfy the PSE that there will be adequate liquidity in the issuer’s shares.

The issuer must have published financial statements for at least the last three years preceding the year in which the application for listing is filed. For issuers that have been in existence for less than three years, a derogation may be granted if the PSE is satisfied that admission is in the interests of the issuer, or investors, and investors have been provided with enough information to properly assess the issuer and its securities.

An issuer must have published and submit to the PSE consolidated or unconsolidated accounts covering the three years prior to admission prepared in accordance with applicable national legislation.

If the issuer has been in existence in its current legal form for less than three years, it must submit the financial statements of its legal predecessor or statements from the time of the company’s establishment/incorporation.

A foreign issuer that publishes financial information other than in accordance with IFRS need not restate its accounts under IFRS if its accounting standards are considered acceptable by the PSE and it provides a description of the material differences between its accounting standards and IFRS.

Shares must be issued in compliance with statutory provisions, have an ISIN number, be fully paid up and be freely transferable and negotiable.

There are no specific requirements regarding the issuer’s independence, but the influence of any controlling shareholder and any arrangements between it and the issuer, would need to be disclosed in the prospectus.

There are no Lock-in requirements under the PSE rules.

There is no requirement that an issuer appoints a sponsor or financial adviser in connection with an application for admission.  The issuer can therefore apply itself or, if it wishes, it can authorise a PSE trading member to apply for admission to the PSE on the issuer’s behalf, pursuant to a power of attorney.

In the case of the Standard segment, a PSE trading member may apply for admission without the issuer’s consent provided that the shares have already been listed.

Only PSE member firms can trade on the PSE, either on their own account or on behalf of other persons.

There is no requirement to appoint a market-maker or broker. Because PSE member firms tend to be banks (among others), it is not common to appoint a market-maker or broker.

Any advertisement relating either to an offer of securities to the public or to an admission of securities to trading on a regulated market must comply with the principles set out in the Prospectus Regulation.

Advertisements shall state that a prospectus has been, or will be, published and indicate where investors are, or will be, able to obtain it. Advertisements shall be clearly recognisable as such. The information contained in an advertisement must be accurate and must not be misleading and must be consistent with the information contained in the prospectus, where already published, or with the information required to be in the prospectus, where the prospectus is yet to be published.

All information disclosed in an oral or written form concerning the offer of securities to the public or the admission of securities to trading on a regulated market, even where not for advertising purposes, must be consistent with the information contained in the prospectus.

In the event that material information is disclosed by an issuer or an offeror and addressed to one or more selected investors in oral or written form, such information shall, as applicable, either:

1. be disclosed to all other investors to whom the offer is addressed, in the event that a prospectus is not required to be published; or
2. be included in the prospectus or in a supplement to the prospectus, in the event that a prospectus is required to be published.

Timing depends on the size and complexity of the company, and its state of preparedness for an IPO, but it will normally take at least four to five months.

When a company issues new shares for cash, shareholders enjoy preferential rights to subscribe.  Such preferential rights can be restricted or excluded only when it is essential to the interests of the company and provided the rights are disapplied in respect of all shareholders. A shareholder can also waive these preferential rights in writing.

Prospectus drawn up in accordance with the Prospectus Regulation:

Where a third country issuer intends to offer securities to the public in the EU or to seek admission of securities to trading on a regulated market established in the EU under a prospectus drawn up in accordance with the Prospectus Regulation, it must obtain approval of its prospectus from the competent authority of its “Member State”, i.e. the state where the securities are intended to be offered to the public for the first time or where the first application for admission to trading on a regulated market is made.

Once a prospectus is approved, it shall comply with all the rights and obligations provided for a prospectus under the Prospectus Regulation and the prospectus and the third country issuer shall be subject to all of the provisions of the Prospectus Regulation under the supervision of the competent authority of the Member State.

Prospectus drawn up in accordance with the laws of a third country:

The competent authority of the Member State of a third country issuer may approve a prospectus for an offer of securities to the public or for admission of securities to trading on a regulated market, drawn up in accordance with, and which is subject to, the national laws of the third country issuer, provided that:

1. the information requirements imposed by those third country laws are equivalent to the requirements under the Prospectus Regulation; and
2. the competent authority of the Member State has concluded cooperation arrangements with the relevant supervisory authorities of the third country issuer.

1. Where an offer of securities to the public is made or admission of securities to trading on a regulated market is sought only in the Czech Republic, the prospectus shall be drawn up in the Czech language; the English language is accepted in other cases;
2. The summary must be translated into Czech.

https://www.pse.cz/

Non-regulated market.

The Prague Stock Exchange (PSE) operates two MTF markets:

1. the Free market, trading on which is open to investment instruments admitted to trading based on their issuer's application, as well as investment instruments traded on other global stock exchanges, admitted to trading without the issuer’s consent; and
2. the START market, which is a market for innovative, small to mid-size Czech enterprises worth more than CZK 25m that want to raise new capital or whose owners want to withdraw partially or completely from the current business to capitalise on their existing activities.

A joint stock company (akciová společnost) (A.S.)

In general, shares traded on the non-regulated markets of the PSE must comply with the following requirements: (i) they must be issued in accordance with generally binding laws and regulations, (ii) are interchangeable, (iii) are transferable without any restrictions, (iv) are fully paid up.

The shares must be recorded in book-entry form in a central securities depository.

An information document must be prepared in accordance with the PSE rules for admission of securities to trading on the Free market or the START market and it must be published by the issuer on its website. The information document must contain similar information to that which would otherwise be required in a prospectus prepared under the Prospectus Regulation.

If a public offering of shares takes place prior to the admission of securities to trading on the Free market, a prospectus may be required.

A prospectus can also be prepared voluntarily.

None required.

None required.

None required.

Audited financial statements for the past three years or, if the issuer has been in existence in its current legal form for less than three years, it must submit the financial statements of its legal predecessor or statements since the company’s incorporation, must be submitted to the PSE, together with the application for admission of securities to trading.

If the application is submitted more than three months after the end of the last financial period, unaudited financial statements for the last closed financial quarter and the report of the board of directors on the statements must also be submitted.

The shares must be issued in compliance with statutory provisions, be freely transferable and negotiable.

There are no specific requirements regarding the issuers independence, but the influence of any controlling shareholder and any arrangements between it and the issuer, would need to be disclosed in the information document (in case of the START market) or prospectus, if required.

There are no Lock-in requirements under the PSE rules.

There is no requirement that an issuer appoints a sponsor or financial adviser in connection with an application for admission to the MTF markets.  The issuer can therefore apply itself or, if it wishes, it can authorise a third person to apply for admission to the PSE on the issuer’s behalf, pursuant to a power of attorney.

In the case of the Free market, such authorised representative acting under a power of attorney must be a PSE trading member.

In the case of the Free market, a PSE trading member may also apply for admission without the issuer’s consent, provided that the shares have already been listed on a European regulated market.

Only PSE member firms can trade on the PSE either on their own account or on behalf of other persons.

There is no requirement to appoint a market-maker or broker. Because PSE member firms tend to be banks (among others), it is not common to appoint a market-maker or broker.

None specified.

Timing depends on the size and complexity of the company and its state of preparedness for the IPO.

PSE’s chief executive officer shall decide on the application for admission within ten business days following the delivery of the application to the PSE. Such period is suspended if the PSE requests additional information, until such information is provided to the PSE.

The issuer is obliged not to terminate trading on the market or not to take any steps leading to termination of trading at least for the period of three years with respect to the Free market and two years with respect to the START market as of the date of admission of the shares to trading.

When a company issues new shares for cash, shareholders enjoy preferential rights to subscribe.  Such preferential rights can be restricted or excluded only when it is essential to the interests of the company and provided the rights are disapplied in respect of all shareholders. A shareholder can also waive the preferential rights in writing.

If the new tranche is issued after one year from the admission of the shares on the Free market, the issuer shall also prepare and publish a new information document.

None specified.

1. Application shall be submitted in Czech, English or Slovak; if a prospectus is required to be submitted as a part of the application, it must be prepared in accordance with applicable law (see the requirements summarised for the regulated market section above).
2. The summary shall be translated to Czech.

www.pse.cz

Regulated market.

Under Czech law, the shareholders in general meeting must approve any decision to:

• modify the articles of association of the company;
• increase or reduce the registered capital, or to set off against an amount due from a shareholder for her or his shares an amount owed by the company to that shareholder;
• issue bonds;
• elect or remove members of the board of directors or the statutory manager, unless the articles of association of the company state that this falls under the competence of the supervisory board;
• elect or remove members of the supervisory board, administrative board and other management bodies, except for those members of the supervisory board who are not elected by the general meeting;
• approve the company’s ordinary, extraordinary and consolidated financial statements and, where required by law, interim financial statements, and to decide on the distribution of profits or the company’s other own sources, or the settlement of the losses;
• apply for the admission of the company’s participating securities for trading on a European regulated market, or for the exclusion of such securities from trading on a European regulated market;
• dissolve the company by liquidation and to appoint a liquidator, where so provided in the articles of association;
• approve the proposed distribution of the liquidation balance;
• approve a transfer or a pledge of an enterprise or such a part thereof that would imply a significant change of the existing structure of the enterprise or a significant change in the objects or activity of the company;
• assume the effects of actions taken on behalf of the company before its incorporation;
• approve a silent partnership agreement, any amendments and termination thereof;
• approve a mandate agreement concluded between the company and a member of a corporate body, including any remuneration to be paid to such a member of a corporate body, and any amendments thereto;
• approve an acquisition by a company of assets exceeding 10% of its subscribed registered capital from a founder or a shareholder during the first two years after its incorporation; and
• effect a merger, division, transfer of business assets to a sole shareholder or a transformation of the company’s legal form.

There is no prescribed corporate governance code, but on admission the issuer must state with which corporate governance recommendations it intends to comply (if any).

The PSE rules for trading on the Prime segment and Standard segment of the Main Market do not contain any specific requirements.

Under Czech law, shareholders have, inter alia, the following basic rights:

• to be treated equally;
• to participate in the management of the company at general meetings of the shareholders;
• to challenge the validity of a resolution proposed at a general meeting; and
• a preferential right to subscribe for a part of the company’s new shares to be subscribed in order to increase the registered capital to the extent of their business share, where the issue price is to be paid in cash;

Qualified shareholder(s), i.e. shareholder(s) holding shares with an aggregate par value or in a quantity corresponding to at least (i) 3% of the registered share capital in a company with a registered capital exceeding CZK 100,000,000; (ii) 5% of the registered share capital in a company with a registered capital of CZK 100,000,000 or less; and (iii) 1% of the registered share capital in a company with a registered capital exceeding CZK 500,000,000, have extra rights, such as, inter alia, the right:

• to request a general meeting to be convened to discuss matters proposed by them;
• to request a certain matter to be added on the agenda of a convened general meeting; and
• to bring an action, on behalf of the company, against a member of the board of directors or supervisory board claiming compensation of damage caused to the company and/or the payment of the issue price by a shareholder who is in default.

Principal shareholder, i.e. a shareholder who holds shares the aggregate par value of which represents at least 90% of the company's registered capital, and to which at least 90% share of the voting rights in the company is attached, may demand the board of directors to convene a general meeting to decide on the transfer of all other participating securities to the principal shareholder (squeeze-out of the minority shareholders).

All issuers are subject to MAR and must disclose inside information as soon as possible.

Issuers can on their own responsibility delay disclosure if all the below conditions are met:

• immediate disclosure would probably jeopardise their legitimate interests;
• by delaying the disclosure, the public will probably not be misled; and
• the issuer can ensure confidentiality of the information.

Each year, an issuer must provide the PSE with a calendar of dates showing when it expects to publish its preliminary results, annual report, half-yearly results and other key financial information. The calendar must be provided within the first 30 days of each financial year and before any financial information for that year is published.

Issuers must publish preliminary financial results that include at least certain key items from the balance sheet and profit and loss account.

In accordance with the TD, an issuer must publish:

• consolidated annual results within four months of the financial year-end;
• consolidated half-yearly results, prepared in accordance with IAS 34, within three months of the end of the first-half of the financial year.

In addition, at any time when the PSE considers it necessary to protect investors and the smooth functioning of the market, it can require an issuer to publish further information about its business results and financial situation.

All issuers are subject to MAR, which restricts directors and certain senior employees (Persons discharging managerial responsibilities (PDMRs)) from dealing in the company’s shares during “closed periods" prior to the announcement of half-yearly and annual results and at any time when there exists any unpublished price-sensitive information relating to the company (whether or not the director who is proposing to deal knows of the information himself). Any dealings by such persons must be notified to the company, which must in turn announce details to the market.

Prospectus;

Takeover offer document;

Securities auction order.

Non-regulated market.

Under Czech law, the shareholders in general meeting must approve any decision to:

• modify the articles of association of the company;
• increase or reduce the registered capital, or to set off against an amount due from a shareholder for her or his shares an amount owed by the company to that shareholder;
• issue bonds;
• elect or remove members of the board of directors or the statutory manager, unless the articles of association of the company state that this falls under the competence of the supervisory board;
• elect or remove members of the supervisory board, administrative board and other management bodies, except for those members of the supervisory board who are not elected by the general meeting;
• approve the company’s ordinary, extraordinary and consolidated financial statements and, where required by law, interim financial statements, and to decide on the distribution of profits or the company’s other own sources, or the settlement of the losses;
• apply for the admission of the company’s participating securities for trading on a European regulated market, or for the exclusion of such securities from trading on a European regulated market;
• dissolve the company by liquidation and to appoint a liquidator, where so provided in the articles of association;
• approve the proposed distribution of the liquidation balance;
• approve a transfer or a pledge of an enterprise or such a part thereof that would imply a significant change of the existing structure of the enterprise or a significant change in the objects or activity of the company;
• assume the effects of actions taken on behalf of the company before its incorporation;
• approve a silent partnership agreement, any amendments and termination thereof;
• approve a mandate agreement concluded between the company and a member of a corporate body, including any remuneration to be paid to such a member of a corporate body, and any amendments thereto;
• approve an acquisition by a company of assets exceeding 10% of its subscribed registered capital from a founder or a shareholder during the first two years after its incorporation; and
• effect a merger, division, transfer of business assets to a sole shareholder or a transformation of the company's legal form.

Obligatory adherence to a corporate governance code is not prescribed.

The PSE rules for trading on the Free and START markets do not contain any specific requirements for disclosure of relationships with shareholders.

Under Czech law, shareholders have, inter alia, the following basic rights:

• to be treated equally;
• to participate on the management of the company at general meetings of the shareholders;
• to challenge the validity of a resolution proposed at a general meeting; and
• a preferential right to subscribe for a part of the company’s new shares to be subscribed in order to increase the registered capital to the extent of their business share, where the issue price is to be paid in cash;

Qualified shareholder(s), i.e. shareholder(s) holding shares with an aggregate par value or in a quantity corresponding to at least (i) 3% of the registered share capital in a company with a registered capital exceeding CZK 100,000,000; (ii) 5% of the registered share capital in a company with a registered capital of CZK 100,000,000 or less; and (iii) 1% of the registered share capital in a company with a registered capital exceeding CZK 500,000,000, have extra rights, such as, inter alia, the right:

• to request a general meeting to be convened to discuss matters proposed by them;
• to request a certain matter to be added on the agenda of a convened general meeting; and
• to bring an action, on behalf of the company, against a member of the board of directors or supervisory board claiming compensation for damage caused to the company and/or the payment of the issue price by a shareholder who is in default.

Principal shareholder, i.e. shareholder who holds the aggregate par value of which represents at least 90% of the company's registered capital and to which at least 90% share of the voting rights in the company is attached, may demand the board of directors to convene a general meeting to decide on the passing of all other participating securities to the principal shareholder (squeeze-out of the minority shareholders).

All issuers are subject to MAR and must disclose inside information as soon as possible.

Issuers can on their own responsibility delay disclosure if all the below conditions are met:

• immediate disclosure would probably jeopardise their legitimate interests;
• by delaying the disclosure, the public will probably not be misled; and
• the issuer can ensure confidentiality of the information.

TD does not apply; issuers must publish financial results according to following rules:

• audited consolidated annual report or audited financial accounts and its annexes without any delay after they have been drawn up and not later than six months after the financial year-end.

In addition, the issuers must - together with the audited consolidated annual report or audited financial accounts - prepare an analytical report, which will include, inter alia:

• a summary of financial data of the issuer for the last completed financial period consisting of the profit and loss statement, balance sheet and cash flow statement and the comparison thereof with the data for at least two preceding financial periods (except for situations where this is not possible due to the shorter existence of the issuer); and
• comparison of selected key indicators related to the issuer’s business in the form of tables or charts, at least for the last completed financial period and at least for two preceding financial periods (except for situations where this is not possible due to the shorter existence of the issuer):
• net profits and EBITDA;
• debt;
• cash flows;
• structure of the balance sheet of the issuer;
• return on equity (ROE) and return on capital employed (ROCE); and
• dividend revenues.

All issuers are subject to MAR, which restricts directors and certain senior employees (Persons discharging managerial responsibilities (PDMRs)) from dealing in the company’s shares during “closed periods" prior to the announcement of half-yearly and annual results and at any time when there exists any unpublished price-sensitive information relating to the company (whether or not the director who is proposing to deal knows of the information himself). Any dealings by such persons must be notified to the company, which must in turn announce details to the market.

None, except where a prospectus is required or drawn up or published voluntarily, which will then need to be approved by the CNB.