Good practice and GM decisions on profit distribution


In a decision on October 10, 2018 (file no. 27 Cdo 1499/2017), the Czech Supreme Court assessed whether a general meeting’s decision to distribute profits had complied with good practice. Failure to observe good practice may invalidate the decision of a general meeting of a limited liability company.

The court found that if a stake in a limited liability company is transferred after the general meeting approves a profit distribution but before that distribution is made, the right to the profits passes to the transferee. This is part of its acquired rights based on its interest in the company.