In a decision on 27 March 2019 (file no. 27 Cdo 3885/2017), the Czech Supreme Court held that the general meeting of a joint stock company may decide to distribute part of its profits to the company’s elected officers without distributing any profits (dividends) to shareholders. There is nothing in the business corporations regulations that precludes such a decision.
For such a resolution to be valid, the following requirements must be met: (i) the company’s Articles must allow for the distribution of all or some of the profits to its elected officers (or persons other than shareholders in general) and (ii) there must be significant reasons for not distributing (the rest of) the profits among shareholders. In defining these grounds for the non-distribution of profits, the court referred, for example, to provisions of the company’s Articles on the use of profits.