According to the constitutional principle, restrictions on the freedom of economic activity are solely allowed by law and only for important public interest. One example of such a restriction is the prohibition to carry out a certain economic activity imposed as a punitive measure.
Punitive measures are an additional inconvenience imposed on the perpetrator of an offence in addition to, or in some cases instead of, a penalty. They are an additional way of holding the offender accountable for the act committed. One punitive measure that is often more severe than the penalty itself, as it restricts earning capacity, is precisely the prohibition from carrying out certain economic activities.
A prohibition to engage in a specific business activity may be imposed by the Court in the event of a conviction for a criminal offence committed in connection with the conduct of the business activity in question, if the continuation of the business activity threatens important goods protected by law. A specific prohibition to carry out a specific business activity under the Code of Commercial Companies is the prohibition to perform functions on the management board and the supervisory board.
Under what conditions may the court impose the above prohibitions?
When imposing a prohibition to carry out a certain business activity, the court is bound by the definition of ‘business activity’ set out by the legislator in the Business Activity Act – business activity is an organised profit-making activity performed on one’s own behalf in a continuous manner. Consequently, on the basis of the criminal provisions, the court may prohibit any type of economic activity. The purpose of this prohibition is to stop the conduct of an activity, which threatens goods protected by law, in the future. Therefore, such a prohibition may be imposed by the court even if the offender is no longer engaged in such activity at the time of sentencing. What is important from the offender’s perspective, however, is that the court cannot impose a prohibition to carry out all economic activities but must define the material scope of the prohibition in relation to the nature of the imputed act.
The prohibition to perform functions in the management and supervisory boards of companies is not a punitive measure defined in the Criminal Code in the same way as the prohibition to carry out specific business activities, but it serves as a consequence of conviction for certain offences. A catalogue of offences has been defined by the legislator in the Commercial Companies Code and includes:
The prohibition to perform functions on the management board and supervisory board of companies covers with its object members of the management board, supervisory board, audit committee, liquidators and proxies in a limited liability company, joint-stock company, and in special cases also in a partnership and in a limited joint-stock partnership.
Duration of prohibitions.
The prohibition to carry out a certain business activity is imposed by the court in years ranging from one to 15 years. The length of the prohibition depends on the individual jurisdiction of the case, the court’s discretion and the public harmfulness of the act committed. The prohibition to carry out a specific business activity is effective as soon as the judgment becomes final.
In contrast, the prohibition to perform functions in the management and supervisory boards ceases with the expiry of the fifth year from the date the conviction becomes final, unless the conviction is erased earlier. The prohibition may be imposed as a result of the commission of an act both before taking up office and while holding office.
Prohibition of business activities.
Accordingly, the court may declare a prohibition to carry out a certain business activity or a prohibition to perform functions on the management and supervisory boards in certain situations and in a certain field of business activity, as also the latter prohibition is limited to one type of activity. These prohibitions are linked to and have their basis in the criminal law provisions. Nevertheless, the legislator has also provided for the prohibition of business activities in the provisions of the Bankruptcy Law and can be imposed on a person who behaves in a negative manner in connection with bankruptcy, once the conditions set out in the law have been met.
A person subject to such a prohibition may not carry on a sole entrepreneurial activity or an activity within a civil partnership. Moreover, such a person may also not act as a successor administrator, member of a supervisory board, member of an audit committee or be a representative or proxy of a natural person conducting a sole proprietorship, commercial law company, state-owned enterprise, cooperative, foundation and association. This prohibition may be ordered by the court for a period of one to 10 years.
Due to the extent of the subject matter of this prohibition, it is one of the most severe restrictions on freedom of economic activity.
11.07.2024
