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10 Questions

with Josef Jaroš
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January 23rd, 2008 issue

Jan Přerovský/THE PRAGUE POST
Jaroš says EU accession has helped in starting businesses, but problems still persist.
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THE JAROŠ FILE

Job title: Business manager, SMART Office & Companies
Age: 29
Nationality: Czech
Education: MBA, Czech Management Institute Prague — ESMA Barcelona
Family: Married, no children

It often seems navigating the web of bureaucracy needed to start a business in the Czech Republic could not get any worse. Yet, in the 2008 rankings of the World Bank, the country dropped 12 spots in ease of starting a business — to 91st in the world, directly behind Sierra Leone and Serbia. That promises a continued and thriving business for firms that specialize in selling ready-made companies. Josef Jaroš, a business manager at one such firm, Smart Office & Companies, talks to The Prague Post about the caprice of judges and the government’s push to reduce paperwork.
➊ Why did the Czech Republic drop in the World Bank’s most recent ranking?
The revisions and reforms of the laws concerning the starting of businesses we’ve seen have not been sufficient. The Commercial Register remains complex, lengthy and is still quite unpredictable, since individual judges and officers can have completely different approaches. There are horror stories. Imagine that you file three companies with the exact same structure, and yet somehow the court rules on each company in three different ways.
The other reason for the drop is that the World Bank made some adjustments to the methodology in how it calculates the time and number of procedures needed.
➋ Do you see similar problems in other countries in the region?
Countries with similar approaches — well,  basically all the other Central and East  European countries have issues like this.
➌ What single component of starting a business is the most difficult and time consuming?
Definitely it is the inscription of the company into the Commercial Register that remains the most difficult, yet crucial, part. This very obstacle, however, can be avoided with the purchase of the ready-made company.
➍ The Civic Democrats (ODS) came to power promising to simplify paperwork. How do you think they’ve done so far?
We have not seen any significant simplification so far. Any essential improvement will take time and guts. The truth is that much has been said and written but there’s much more to be done.
➎ What changes promised by the ODS most appeal to you?
There’s been much talk about establishing the Common Commerce Register since May 2006, unfortunately without much of a tangible result.
We expect the register to serve as a single and unified portal to access complete information on legal and physical persons from the databases of the Commercial Register, Trades Licensing Office and Tax Administration. Unfortunately, we also expect that we will have to wait a long time for this.
➏ Since accession into the European Union, has it become simpler for Europeans to start businesses here?
Partially. Some of the paperwork has been simplified. For instance, the requirements and conditions for members of statutory bodies — directors, members of supervisory boards, etc. — were eased. And residence permits for EU citizens are not required anymore. However, essential local differences persist, like language barriers in offices.
➐ Speaking of the EU, do you expect the services directive, passed in late 2006, will damage your business much, eliminating the need for companies to establish Czech subsidiaries?
Frankly, we don’t expect a significant change, and it won’t inflict damage on our business in any way. The directive will not affect most of our clients, despite expectations.
➑ With your clients, are you seeing rising interest from any countries or regions?
We are seeing rising interest from Eastern Europe and the former USSR countries as well as Southeast Asia. That interest, however, is in both directions. That’s why we expanded our services portfolio to incorporate Russia, Ukraine, Bulgaria and Romania, among others.
➒ You offer both joint-stock companies and limited-liability companies. Why should a business choose one or the other?
It is not a question of the virtue of one or the other. Joint-stock companies and limited-liability companies are two different legal tools, each fitting particular use and intention. Generally, joint-stock companies are more complex to administer, but on the other hand are more stable financially, due to larger amounts of share capital. We consult with each client individually.
➓ You also offer virtual offices, which provide physical addresses and services like boardroom rentals to companies. Why would your clients use a virtual office, rather than establish themselves on their own?
It’s a question of prestige and cost efficiency. For a small portion of the cost of a real office, our clients receive an office and assistant services at their immediate disposal. Recently, we brought a complex electronic solution — eOffice — into practice. Our clients can read any mail coming to their address online, including letters from authorities and institutions. It’s convenient for those who travel a lot.
Want your manager to answer our 10 Questions? Contact Paul Voosen at pvoosen@praguepost.com


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