The process of incorporation and formation of a business corporation

More detailed information on the process of incorporation and formation of a business corporation.

Business corporations and cooperatives are formed in two stages. In the first stage, the company is incorporated and in the second stage, it is formed as a legal entity on the date of its registration in the Commercial Registry. The mere incorporation of a company does not imply its legal existence. In the period between incorporation and formation, the company does not have legal personality (it cannot acquire rights and obligations either by its own actions or by the actions of other persons) and its bodies do not exist. The shareholders of a company are only in the position of founders, not members.

If someone (the founders or any other persons) acts on behalf of the company before its establishment, they are entitled and obliged to do so (e.g. entering into a lease agreement to rent the premises where the company will carry out its activities, etc.). If more than one person acts, they are jointly and severally entitled and obliged.

In the event that the company assumes the effects of these acts for itself within three months of its incorporation, the company shall be deemed to have been entitled and obligated to these acts from the outset. In such a case, it shall make it clear to the other parties involved that it has done so. Failing that, the persons who acted on behalf of the company prior to its formation will remain bound by those acts. However, the law does not preclude such persons from assigning claims arising from such acts to the company or from the company assuming or acceding to the liabilities so incurred.

The incorporation and formation of companies and cooperatives is essentially a complex process of successive legal and related actions and it is common for founders to entrust this activity to their legal representatives, attorneys, who prepare all necessary documents, manage the entire incorporation and formation process of the company or cooperative and communicate with the relevant courts and authorities.

Legal actions concerning the incorporation, formation, amendment, dissolution or winding up of a business corporation require a written form with certified signatures, otherwise such actions are void. The invalidity need not be argued before the court, as it is taken into account even without a petition.

Business corporations are incorporated by a memorandum of incorporation signed by all the founders. If a capital company, i.e. a limited liability company or a joint stock company, is being established, the articles of association must be in the form of a public deed. One type of public deed is a Notarial deed. A Notarial deed must contain:

• the place, day, month and year of the legal act,
• the name and surname of the notary and his/her registered office,
• the name, surname, residence, birth number (if not, the date of birth) of the parties and their representatives,
• a declaration by the parties that they have legal capacity,
• an indication of how the identity of the participants was verified,
• the content of the legal act,
• an indication that the deed has been approved after being read by the participants,
• signatures of the participants or their representatives,
• the notary’s official stamp and signature.

The notarial deed shall be prepared by the notary on the basis of documents and facts communicated and documented by the founder or his legal representative. The price for the notarial deed is charged according to the notarial tariff. The Memorandum of Association, which establishes the cooperative, is concluded by adoption at the constituent meeting.

The founder may also authorise his general agent or attorney to establish the company on the basis of a special power of attorney. However, the signature of the principal - founder must be officially certified on said power of attorney. This power of attorney forms a part of the memorandum of association.

If a company is established by a single founder (which is permitted by law in the case of a limited liability company and a joint stock company), the memorandum of association is replaced by a deed of incorporation, which must be in the form of a public deed.

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