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In corporate transformations, should one differentiate between time limits and time periods?

In the Czech Republic, draft terms of transformations must be lodged in the collection of deeds, and disclosure and notification duties must be discharged, at least one month before approving a transformation. What if the end of this period falls on a weekend?

Sec. 33 of the Czech Act on Transformations of Companies and Cooperatives (the "Transformation Act") requires the participants to lodge the draft terms of transformation in the collection of deeds kept by the Commercial Register and to publicly announce this fact along with an instruction for creditors. This is to be done at least one month before approving the transformation. In other words, a month must first pass before the transformation may be approved (on the following day).

The issue here is that the Czech Civil Code provides for special rules (in Sec. 605 - 608) to calculate the passing of time. The end of deadlines or time periods which are measured in months falls on the day whose numerical date is the same as that of the day on which the event occurred that triggered the deadline. If no such day exists in the relevant month, then the last day of the deadline or time period is the last day of the month. If the last day of a time limit or deadline (lhůta, in Czech) falls on a Saturday, Sunday, or public holiday, then the deadline expires on the nearest following working day.

The Czech Civil Code differentiates between lhůta (a time limit or deadline) and doba (a period of time). The former describes a segment of time during which a certain right may be exercised. By contrast, the latter describes a segment of time upon whose lapse a right or obligation automatically ceases to exist. Time limits (i.e., the lhůta) serve to provide room for the exercise of a right (i.e., they are meant to protect rights), and because of this, they are being extended if their last day falls on a weekend or holiday. In the case of a time period, nothing happens when this occurs, because the end of the time period merely marks the expiry of a right or obligation, and the exercise of any right whatsoever could do nothing to change that.

The one-month period stipulated in Sec. 33 of the Transformations Act serves the purpose, among other things, of allowing third parties to inspect the draft terms of transformation – i.e., in particular, the participants’ creditors and shareholders. Upon reviewing the draft terms of transformation, shareholders may (but are not obliged to) vote in favor of the transformation (i.e., approve it), and creditors may exercise the rights bestowed upon them in Sec. 35 et seq. of the Transformations Act in connection with their access to and inspection of the draft terms.

We believe the one-month time segment described above does not match exactly the definition of either limit/deadline or time period within the meaning of the Civil Code, but tend towards the view that it represents a time period: no particular right is supposed to be exercised within the period, and it should therefore not be extended if its last day falls on a weekend or public holiday. On the other hand, we cannot rule out that others will arrive at a different interpretation. Hence, unless the issue has been authoritatively decided in a Supreme Court ruling, it is advisable to be prudent and to approve the transformation only after the entire time period, including a hypothetical extension by weekend days and holidays, has passed.

Source:
Act No. 125/2008 Coll., on transformations of companies and cooperatives, as amended
Act No. 89/2012 Coll., the Civil Code, as amended

 

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