Obstacles to Operating a Trade (Section 8 and Section 8a)

Meeting the general conditions for doing business is not enough. Even an entrepreneur with a clean criminal record and full legal capacity may not operate a trade if one of the obstacles to operating a trade arises in their case. These obstacles are governed by Section 8 and Section 8a of the Trade Licensing Act (No. 455/1991 Coll.) and concern in particular insolvency, a court-imposed prohibition of activity, and the consequences of having a trade licence revoked for breaching the rules.

What the law says

Bankruptcy (Section 8(1)). A trade may not be operated by a person on whose assets bankruptcy has been declared, namely from the day of the "sale of the business by a single contract within the monetisation of the bankruptcy estate", or from the day on which the decision by which the court terminated the operation of the business becomes legally effective.

Unsuccessful insolvency (Section 8(2)). For a period of 3 years, a trade may not be operated by a person whose insolvency petition ended in dismissal on the ground that "the debtor's assets will not suffice to cover the costs of the insolvency proceedings", in termination of the proceedings due to wholly inadequate assets, or in cancellation of the bankruptcy on the same ground. If the bankruptcy was cancelled for another reason, this obstacle does not arise. The Office may waive the obstacle if the debtor proves the "prerequisites for the proper performance of obligations in business and for the proper performance of financial commitments".

Administrator's consent (Section 8(3) and (4)). Where disposal of the bankruptcy estate is restricted, or after bankruptcy has been declared, acts relating to the creation, change, or cancellation of a trade licence and notifications of the suspension of a trade may be carried out "only with the written consent" of the (preliminary) insolvency administrator.

Prohibition of activity (Section 8(5)). A person on whom a prohibition of activity has been imposed may not, for its duration, operate a trade "within whose scope this activity falls". For an unqualified (free) trade, the prohibition applies only to the field concerned.

Three-year block after revocation of a licence (Section 8(6)). If a licence has been revoked under Section 58(2) or (3) (serious breach of the conditions of a concession, of the act, or of special regulations), the same person may not operate the same trade for 3 years. The block also extends to members of the statutory body of a company from the time when the grounds for revocation arose, and to companies in whose body such a person serves.

Beneficial owners (Section 8a). Selected trades and fields in Annex No. 6 may not be operated by a legal person whose "beneficial owner does not have a clean criminal record" or whose member of the statutory body does not have a clean criminal record.

Commentary and explanation

The purpose of the obstacles is to protect creditors and the integrity of the market. The state does not want a person who ended up insolvent with inadequate assets to continue in business, nor does it want a court-imposed prohibition to be circumvented through another trade.

It is important to note that, when an obstacle arises, the Office revokes the licence ex officio under Section 58(1)(b). The obstacle is therefore not a formality that could simply be ignored. On the contrary, many obstacles are temporary (3 years) or can be waived, so the situation need not be permanent.

Watch out for the difference between a bankruptcy cancelled for inadequate assets (three-year obstacle) and one cancelled for another reason (no obstacle arises). Likewise, the insolvency administrator's consent is not an "optional" piece of advice — without it, acts relating to the licence cannot be validly carried out.

Practical impacts and examples

• Self-employed person after bankruptcy: A bankruptcy cancelled for inadequate assets means that for 3 years you cannot establish the same trade. The solution is to ask the Office for a waiver and to demonstrate that you are already meeting your commitments.
• Tradesperson with a driving ban: A court ban on driving vehicles does not in itself block a craft trade. However, a prohibition on carrying out a specific activity will halt the operation of the corresponding trade.
• Former managing director: A company where you were a managing director had its licence revoked by the Office for a serious breach. You too may be blocked for 3 years — unless you prove that you "made every effort" to prevent the breach.
• Ltd. company and the beneficial owner: For a trade from Annex No. 6, the beneficial owner, not just the managing director, must have a clean criminal record.

Related topics

The obstacles are closely linked to a clean criminal record (integrity) and the general conditions for doing business (Section 6), and to the grounds for revoking a trade (Section 58). Before you start a business, verify that no obstacle applies in your case. You will find an overview of fields and conditions in the catalogue of trades, and a practical procedure in the guide on how to set up a trade. If you are dealing with a specific insolvency situation, we recommend consulting an insolvency administrator or an attorney.