In its judgment dated 12 June 2018 (file no. 29 Cdo 3064/2016), the Czech Supreme Court considered the precise time when a shareholder’s interest in a joint stock company terminates. The court held that even in cases where the company’s board of directors declares a person’s shares invalid because it did not present them within a statutory grace period (e.g. for the purpose of recording their decreased or increased nominal value), the shareholder will retain its interest in the company.

This means that the shareholder’s interest in the company will not expire and it will still be entitled to be issued new shares to replace the older shares that were declared invalid. The person’s interest in the joint stock company and its right to be issued new shares will only terminate if the new shares are acquired by a third party (either on a regulated market or during a public auction).

In sum, a declaration of invalid shares by the board of directors will not on its own terminate a shareholder’s interest in a joint stock company. The shareholder’s right to be issued new shares cannot be denied until that new stock has been acquired by a third party.

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