Structuring Investment Clubs and Private Equity Groups in the Czech Republic

What we are dealing with right now: From an informal club to a professional fund

Under Act No. 240/2013 Coll. (ZISIF), the pooling of funds from the public or from qualified investors for the purpose of their joint investment is subject to supervision by the Czech National Bank (ČNB) in the Czech Republic.

Many entrepreneurs do not realise that once they begin pooling funds and investing them under unified management according to a defined strategy, they may meet the legal definition of collective investment under Czech legislation. If you carry out this activity without authorisation, you face sanctions.

Our attorneys in Prague at ARROWS advokátní kancelář often handle situations where clients underestimated the line between a “club” and an “illegal fund”, while subsequent legalisation and negotiations with the regulator are significantly more demanding.

Main legal categories of investment groups in the Czech Republic

To understand the obligations, we need to clarify how Czech law (as of 2026) distinguishes between individual types of investment structures. This distinction directly affects the tax burden, reporting to the Czech National Bank (ČNB), and legal liability.

Asset management under Section 15 of ZISIF

In practice, this is the most common lawful form in the Czech Republic for smaller investment groups and clubs. These are managers who manage assets comparable to portfolio management, but do not exceed the relevant asset threshold. Such managers must register with the Czech National Bank (ČNB) and fulfil notification (reporting) obligations, but they are not subject to full supervision like large investment companies. However, they may not publicly offer their investments, and the circle of investors is limited.

Funds for qualified investors (FKI)

An FKI is a robust and prestigious model for groups of wealthier investors. It is intended exclusively for qualified investors—i.e., persons who meet the statutory conditions under Czech law. For individuals, the minimum investment is set at CZK 1,000,000. If the FKI structure meets the definition of a so-called basic investment fund under the Czech Income Taxes Act, it may benefit from a reduced corporate income tax rate of 5%. The fund must have its own manager and a depositary.

Venture capital funds and private equity

These funds specialise in investments in startups or established companies. They often operate as funds for qualified investors or as structures under Section 15 of ZISIF. They have specific features in the areas of valuation and risk management.

Related questions on legal categorisation

1. Can our investment club operate without registration?
Only if each member invests entirely independently on their own account and there is no pooling of funds or unified portfolio management. The boundary is thin, and we recommend an assessment by an attorney under Czech law.

2. When does it make sense to establish an FKI?
An FKI makes sense with a larger volume of assets, where the costs of administration, a depositary, and an audit are offset by the 5% tax advantage and the ability to offer the fund to a broader group of qualified investors.

3. What is an “illegal fund”?
An entity that, in fact, carries out collective investment without a permit or registration with the Czech National Bank (ČNB). This constitutes the criminal offence of unauthorised business activity and an administrative offence with substantial fines in the Czech Republic.

Regulatory framework and obligations towards the Czech National Bank

Once an investment group falls under ZISIF regulation, it is subject to supervision by the Czech National Bank (ČNB) in the Czech Republic. The scope of obligations depends on the type of entity. The ČNB and Czech legislation require, in particular, the following.

• Authorisation or registration: The manager must be properly authorised. For an FKI, this involves a full investment company licence; for “mini-funds”, registration under Section 15 of ZISIF.
• Fund depositary: An FKI must have a depositary (a bank) that monitors cash flow and the handling of assets. The depositary is responsible for ensuring that the fund’s assets are recorded and managed in accordance with Czech law.
• Asset valuation: Funds must value assets at fair value. For real estate or equity interests in companies, it is necessary to use expert valuations and transparent methods.
• AML obligations: Investment structures are obliged entities under Act No. 253/2008 Coll. and must carry out client identification and due diligence.

Administration and licensing

Establishing a fund is not just about drafting articles of association. It is a process involving the setup of internal policies, risk management, compliance, and reporting. The articles of association of an FKI are approved by the Czech National Bank (ČNB) or fall within the remit of the investment company. Our Prague-based attorneys at ARROWS advokátní kancelář manage the entire process—from designing the structure, through communication with the depositary and auditor, to finalising the filing with the Czech National Bank (ČNB).

Related questions on regulation

1. How long does it take to be entered in the register under Section 15 of ZISIF?
If the filing is error-free, the Czech National Bank (ČNB) typically makes the entry within 1–2 months. Licensing proceedings for a full-fledged FKI take significantly longer (6–12 months).

2. What are the fines for breaching ZISIF?
Fines can be crippling. For unauthorised collective investment, a fine of up to CZK 150,000,000 or 10% of total annual turnover may be imposed.

Tax aspects and obligations towards the tax authority

Tax optimisation is a common reason for establishing investment structures in the Czech Republic, but the rules are strict. It is necessary to distinguish between different tax regimes.

Tax regimes

• Standard business corporations (s.r.o., a.s.): They are subject to the standard corporate income tax rate, which is 21% in 2026 in the Czech Republic.
• Qualified Investor Funds (FKI): If the fund meets the definition of a basic investment fund, a 5% rate applies. Note: Not all FKI will qualify for this rate automatically.
• Taxation of investors: Profit shares (dividends) paid to investors (individuals) are subject to 15% withholding tax.

Time test and exemption

For individuals, income from the sale of securities is exempt from income tax if the period between acquisition and sale exceeds 3 years. For ownership interests in an s.r.o., this time test is 5 years.

Tax risks

The tax authorities focus on so-called abuse of rights under Czech tax rules. If a fund is established purely artificially, without economic substance, solely to obtain the 5% rate, the tax administrator may deny the benefit and assess tax in full, including penalties. ARROWS attorneys work together with tax advisors to ensure that the fund structure is defensible and aligned with current case law in the Czech Republic.

Agreements and the fund’s internal structure

High-quality contractual documentation helps prevent future disputes. Properly setting up the documents protects the interests of both founders and investors.

Articles of association and the fund statute

The statute is the key document defining the investment strategy, risk profile, fee policy, and investors’ rights. It must comply with ZISIF (the Czech Act on Investment Companies and Investment Funds). Any ambiguity in the statute may be used against the fund manager.

Shareholders’ Agreements (SHA)

For private capital groups, a Shareholders’ Agreement is essential. It governs relationships between shareholders beyond the articles of association, such as exit rules, non-compete provisions, or deadlock resolution.

Compliance and monitoring – living with regulation

Registration is not the end of obligations—it is the beginning. Compliance is an ongoing process requiring constant attention. Funds and managers under Section 15 of ZISIF must submit reports to the Czech National Bank (ČNB) at regular intervals via the SDAT system.

Limits on asset concentration (e.g., maximum exposure to a single asset), leverage, and liquidity must be monitored. The manager must prioritise investors’ interests over its own. ARROWS, a Prague-based law firm, provides outsourced compliance services, where we oversee reporting deadlines and the alignment of internal processes with Czech legislation.

Public offering vs. private placement

A critical point is how the fund acquires investors. We distinguish between a public and a non-public offering. A public offering of securities requires approval of a prospectus by the Czech National Bank, which is an extremely costly and complex process.

Most FKI and private groups therefore operate under a private placement regime or an offering addressed exclusively to qualified investors. If you were to promote the fund publicly without meeting the statutory requirements, you would be committing an administrative offence in the Czech Republic.

Resolving issues in practice – when to contact an attorney

The best defence is prevention, but in practice we also handle crisis situations. A fast response can mitigate the impact on the fund’s operations.

If you receive a notice of the commencement of an inspection or a request to provide explanations from the Czech National Bank (ČNB), it is essential to involve an attorney immediately.

We often address disputes over strategy or profit distributions, where we apply mechanisms from shareholders’ agreements. Liquidation of a fund is then a formal process requiring the regulator’s consent, settlement of assets, and deletion from the register. ARROWS attorneys have experience representing clients before the Czech National Bank and in Czech courts in capital markets matters.

Conclusion

The legal framework for investment clubs and groups in 2026 is strict in the Czech Republic, and mistakes are not forgiven. The decision between an informal club, registration under Section 15 of ZISIF, and a fully regulated FKI should be supported by thorough legal analysis.

The ARROWS law firm in Prague combines expertise in financial law, corporate law, and tax matters under Czech legislation.

We help clients set up structures that are safe, tax-efficient, and compliant with regulation. If you are planning to establish an investment group or need a review of an existing structure, contact us at consultation@arws.cz.

Notice: The information contained in this article is of a general informational nature only and is intended to provide basic guidance on the topic under Czech law. Although we strive for maximum accuracy, legal regulations and their interpretation evolve over time. To verify the current wording of the relevant regulations and their application to your specific situation in the Czech Republic, it is therefore necessary to contact ARROWS, a Prague-based law firm, directly (consultation@arws.cz). We accept no liability for any damages or complications arising from the independent use of the information in this article without our prior individual legal consultation and professional assessment. Each matter requires a tailored solution, so please do not hesitate to contact us.

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