AD ALTA
JOURNAL OF INTERDISCIPLINARY RESEARCH
claim arose from the contracts’ subject-matter. The controlled
corporation XYZ had an agreement with the controlling
company ABC on the provision of advertising and other
cooperation in the field of advertising. Then, there were five
other contracts signed with the foreign group DEF. They
comprised a contract for work, a contract for ordering
advertising space, a contract for sublease and provision of
services, a contract for providing accounting services, and a
contract for the use of hardware and software.
The minority owner (TC) of XYZ believed that the performance,
based on issued invoices for the services of the controlling party
ABC, was disproportionately high, hence resulting in an
intentional decrease in profit of controlled party XYZ in order to
reduce dividends to be paid by TC as the minority owner of the
corporation XYZ. According to the authors’ findings in this area,
there was no invoicing of higher valuable consideration for the
services provided by the controlling party to the controlled party.
The consideration charged for invoiced services was reasonable
in the period under review and was in line with the current
market situation.
At the instigation of TC as the minority owner of the company
XYZ, a possibility that TC was not harmed by the controlling
party's conduct would also be reviewed.
In the matter of harm according to s. 71 and s. 72 of Act No.
90/2012 Sb. (being the subject to s. 82 (2) (f) Act No. 90/2012
Sb.), the controlled party (XYZ) was paid all issued and received
invoices based on cash flows between individual companies.
However, uneven invoicing intervals were identified here. This
undoubtedly violated contractual terms between the parties.
Some contracts were violated in the manner that that the
intervals were random, whereas other contracts were being
violated from their start. For instance, the accounting service
contract, where quarterly invoicing had been negotiated, was
actually invoiced on a monthly basis. However, there was no
harm to TC as a result of higher invoicing frequency and
reimbursement.
Moreover, particular inaccuracies in the invoicing process
between ABC and XYZ were identified as well. They result from
a specific part of the contract dealing with a manner of
invoicing. Non-compliance with the invoicing procedure did not
cause any injury to the controlled corporation XYZ, since it was
only to simplify the entire invoicing system between the above-
mentioned parties. In relation to the finding, it may be stated that
no injury was inflicted on XYZ or TC in this respect.
An interesting finding is also the structure of invoices issued by
XYZ to other members of the business group. While researching,
XYZ was found to be a 100% owner of the corporation X2
which is a 50% owner of the corporation X3. The controlling
corporation ABC is a 100% owner of the corporation X1. And
the foreign corporation DEF is a 100% owner of X4.
Table 1 shows a particular volume of invoices issued by XYZ to
ABC and X1 – X4 in 201X excluding VAT.
Tab. 1. Invoices issued by XYZ in 201X (excluding VAT)
Company
Amount [CZK]
ABC
169,427,982.8
X1
129,560.0
X2
7,347,479.6
X3
308,907.0
X4
11,351,544.9
Total
188,565,474.3
Source: Documents provided by XYZ.
As may be gathered from Table 1, XYZ invoiced most of the
receivables of controlling corporation ABC. Overall, it
represents 89.6% of the total invoiced receivables.
A different standpoint is provided in Table 2 which lists invoiced
receivables of X1, ABC and DEF towards XYZ without VAT.
Tab. 2. Invoices received by XYZ (excluding VAT)
Company
Amount [CZK]
X1
3,077,642.0
ABC
750,063.6
DEF
13,504,690.5
Total
17,332,396.1
Source: Documents provided by XYZ.
Table 2 clearly shows that the foreign company DEF had the
largest receivables in relation to the controlled company XYZ in
201X. This was 77.9% of the total invoiced liabilities.
In total, XYZ issued invoices for labor costs, rental of
advertising equipment, rental of advertising space, costs of the
selected period and other rental. From its business partners, XYZ
received invoices for construction, IT services, marketing, labor
costs from X1 and X4, landline and other charges, and costs over
invoice.
5 Conclusion
The Report on relations, drawn up by ABC as the controlling
party, was researched in the area of formal requirements placed
on it and assessed regarding possible occurrence of injury to the
controlled party XYZ and TC as the minority owner by the
controlling party ABC for a certain period. Considering the
violation of s. 71 and s. 72 Act No. 90/2012 Sb., no faults were
found in the controlling party’s conduct. The same conclusion
was also reached with regard to s. 82 (2) (a – d) Act No. 90/2012
Sb. In relation to s. 82 (2) (e) Act No. 90/2012 Sb.,
incompleteness was found in the list of all contracts made
between the controlling party and the controlled party.
There are also several inaccuracies, or minor faults, regarding
compliance with contracts on providing individual services.
However, these minor inaccuracies did not cause any injury to
the controlled party XYZ or its minority owner. The main issue
was the amount of negotiated and subsequently invoiced prices
for services provided and the lease to the controlled party by the
controlling party.
Thus, the agreed performance was verified. Owing to the nature
of the contract’s subject, the verification was performed by
comparing usual rents in the given location. The authors
determined a rent of non-residential premises and concluded that
the claimed performance broadly corresponds to the usual rent.
Also, the agreed monetary rewards for each service provided
were always commensurate with the regular prices for this type
of services in the reporting period.
Also, the adequacy of contractual performance on other
concluded contracts was examined. However, a specific nature
of the contract’s subject must always be taken into account. The
authors succeeded in verifying performance of the contracts for
advertising and other cooperation in advertising, the contract for
work, for ordering advertising space, accounting service
contracts and contracts for the use of hardware and software,
concluding that in all of the above contracts the consideration
agreed was proportionate to the nature of the contracts’ subject
and the current state of the market.
As regards the formal correctness of the Report on relations, it
should be noted that the Report did not give a clear indication of
the actual relationship between individual parties, and it was not
clear enough as to who in the group was in the position of
controlling party and controlled party. Given the complexity of
the whole structure, more attention should have been drawn to
this section.
In conclusion, it may be reported that the controlling parties did
not cause any injury to the controlled party or the minority
owner. This statement is based on all the findings made
throughout the research while finding answers to all the above
questions. Considering the scope of information available from
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