Commercial law regulates the relations between entrepreneurs and the overall functioning of the market environment. It contains necessary information for entrepreneurs, such as the regulation of contractual relations, the functioning of companies, etc. In this article, we will look at what falls under commercial law and which laws regulate it.
Business law is the part of private law that deals with various aspects of business and commercial relationships. The basic concepts of commercial law include:
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In the early Middle Ages, commercial law was not codified and commercial relations were mainly governed by custom and local rules. Guilds played a major role in the organisation of trade, regulating business, setting conditions for the operation of crafts and trade and protecting their members from competition.
In the 16th and 17th centuries, international trade practices, especially those inspired by German and Roman law, began to be applied.
In the 19th century, commercial law was codified in the Habsburg Monarchy. A key milestone was the General Civil Code, which brought modern regulation of commercial companies, bills of exchange and commercial obligations. This code was in force in this country until 1950.
In 1950, a new Civil Code was adopted. Commercial law became state-controlled economic law, which did not provide for free competition or private enterprise.
In 1964, a new Civil Code and Economic Code were again adopted to regulate relations between socialist enterprises. Private enterprise was virtually eliminated and commercial law in its original sense ceased to exist.
After the fall of communism in 1989, it was necessary to restore the legal framework for a market economy and entrepreneurship. Therefore, the Commercial Code was adopted and entered into force in 1992. This included the regulation of the general principles of commercial law, the functioning of companies and cooperatives, contractual relations, competition, etc. It was therefore one comprehensive law regulating several different areas of commercial law.
The Commercial Code was repealed in 2014 and replaced mainly by the Civil Code and the Commercial Corporations Act (the full name of the Companies and Cooperatives Act). However, commercial law is also regulated in other laws such as the Trade Licensing Act or the Insolvency Act.
At present, commercial law as such can be divided into several key areas:
Business law determines who is considered an entrepreneur and what activities can be classified as business. It provides that an entrepreneur is a person who carries on self-employment on his own account and responsibility, with the aim of making a profit. A business may be carried on by an individual (sole trader) or by a legal entity such as a company or cooperative.
Do you want to start a business, but don’t know whether to choose a sole proprietorship or a corporation? Learn the arguments and counter-arguments to help you decide which is better for you.
The legislation also regulates the business name, which is the name under which the entrepreneur acts in legal relations and under which it is registered in the commercial register. The question of the registered office of the entrepreneur is also regulated, which must be a real existing address where the entrepreneur can be contacted.
Another key element is the regulation of the entrepreneur’s actions, which may be carried out either by himself or through proxies, for example on the basis of a power of attorney or proxy.
How about a power of attorney? Find the answer in our easy-to-follow guide.
The law also addresses the commercial register, which records basic information about entrepreneurs, such as the business name, registered office, business objects and statutory bodies. In addition to the commercial register, there are other registers of entrepreneurs, such as the trade register or the register of beneficial owners.
Commercial companies and cooperatives have a special regulation in commercial law and are covered by the entire Companies Act. It regulates the conditions for their formation, management and dissolution.
The Commercial Corporations Act also regulates the rights and obligations of shareholders, shareholders and members of cooperatives, including rules for the payment of profit shares, transfers of shares and voting rights. It also sets out rules for corporate bodies such as the general meeting, the board of directors and the supervisory board, and addresses the liability of members of statutory bodies for the management of the company. The regulation also includes rules for transformations of companies, such as mergers, demergers or changes of legal form.
The basis for the existence and functioning of a limited liability company is the memorandum of association. In our article you will learn what are its mandatory elements and what else is good to include in the contract.
Commercial law governs a wide range of contractual relationships that arise between businesses. These relationships are most often based on contracts, the legal regime of which is regulated in detail by the Civil Code.
The most common commercial contracts include:
Business law also provides rules for liability, liability for damages, etc.
The relationship between the seller or service provider and the customer does not fall under commercial law, but under consumer law. If you feel discriminated against as a consumer, you can find help in our article.
Competition law protects the market from unfair practices and ensures a fair business environment. The main forms of unfair competition include various cartel agreements between businesses that distort competition (such as price caps or artificial limitations on production) or abuse of monopoly power.
Insolvency law sets out the rules for resolving the financial problems of entrepreneurs. If an entrepreneur becomes insolvent, insolvency proceedings may be initiated with the aim of a fair settlement of creditors.
The law distinguishes three basic ways of resolving insolvency:
Another method of winding up a business is liquidation, which is used when the business ends without insolvency.
Commercial law deals with the regulation of securities such as stocks, bonds or promissory notes. It lays down rules for issuers, i.e. companies issuing securities, and for trading on the capital market. The legislation also covers investor protection and financial market supervision by the Czech National Bank.
It lays down rules for issuers, the stock exchange and trading on the capital market.
International trade law regulates relations between entrepreneurs from different countries. The key areas are:
The regulation of international trade in goods and services, including customs regulations and World Trade Organisation rules, is also an important part of this.
Commercial law is part of private law and regulates business and commercial relations. Historically, commercial relations have been governed by customs and guilds. In the 19th century, commercial law was codified in the Habsburg Monarchy. After 1950 it adapted to a centrally controlled economy and after 1989 it was restored for a market economy. The 1992 Commercial Code was replaced in 2014 by the Business Corporations Act and the Civil Code.
The current legislation sets out the conditions of doing business, the legal status of companies and cooperatives, their formation, management and dissolution. Commercial law also deals with contractual relations between entrepreneurs, protection of competition and insolvency law, which resolves the bankruptcy of entrepreneurs through bankruptcy, reorganisation or insolvency. It also covers the regulation of the capital market and securities, which are supervised by the Czech National Bank. International trade law regulates relations between entrepreneurs from different countries.
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