In its decision file no. 27 Cdo 4030/2017 dated 28/02/2019, the Supreme Court of the Czech Republic commented on the dissolution of a corporation that is unable to carry on with its business. A court may dissolve a legal entity and order its liquidation if the conditions specified in Section 172 of the Civil Code are met. On the other hand, a court does not have sufficient information to decide on the dissolution of a company and its liquidation when based only on the fact that a taxable entity does not operate its business or fails to generate taxable income for a period exceeding 4 years (Section 238 (4) of the Rules of Tax Procedure). Section 238 (4) of the Rules of Tax Procedure is thus subordinated to Section 172 of the Civil Code. It should, however, not be read as a specific cause specifying the general rule in Section 172 (1)(d) of the Civil Code, but rather as a legal standard ordering the tax authority (as long as the requirements of Section 238 (4), second sentence of the Rules of Tax Procedure are met) to demand dissolution of a legal entity and its liquidation, i.e., a legal standard releasing the tax authority from the duty to prove legal interest in the dissolution and liquidation of the legal entity. In other words, Section 238 (4) of the Rules of Tax Procedure is a special standard in relation to Section 172 of the Civil Code; however not by presenting an independent (new) cause of dissolution (and liquidation) of a legal entity but merely releasing the tax authority from the duty to prove legal interest in the proposed dissolution of the legal entity, meaning that the petition should not be dismissed on the grounds of lack of such interest.
Section 93 of the Business Corporations Act supplements Section 172 (1) of the Civil Code by defining other (special) causes of dissolution and liquidation of a business corporation by court decision. Unlike Section 172 (1) of the Civil Code, a court may only dissolve a business corporation based upon Section 93 of the Business Corporations Act if the relevant petition is filed.
Under Section 93 (b) of the Business Corporations Act, a court shall dissolve a business corporation and order its liquidation if such legal entity is incapable of carrying out its activity for a period reaching 1 year and, as a result, is not able to serve its purpose. Such incapability cannot be deemed equal with passivity or the inability to duly carry out its activity.
This means that a court may only dissolve a business corporation based upon Section 93 (b) of the Business Corporations Act if the corporation is objectively unable to carry out its activity (and, as a result, to serve its purpose), not merely due to the fact that the corporation does not carry out its activity.
Whether a corporation is incapable of carrying out its activity and, thus, serve its purpose, must always be judged in relation to the specific circumstances of each given case. For example, the fact that a corporation actively contests the dissolution petition indicates (may indicate) that the corporation is (likely) capable of carrying out its activity. And conversely, if a corporation fails to actively participate in the proceedings (on conditions of Section 238 (4), second sentence of the Rules of Tax Procedure), it will be possible to conclude, in most cases, that the requirements for dissolution and liquidation of the corporation under Section 93 (b) of the Business Corporations Act, have been met.