Managing directors decide on business management by majority, and with two directors that means the consent of both; a refusal by one blocks the decision. Towards third parties, however, each director may act individually unless the memorandum of association provides otherwise, so a signature given without the other’s consent will generally bind the company and the dispute shifts to the question of liability. The general meeting may reserve the decision for itself, but where the shareholders hold equal interests and both attend, the deadlock merely moves up one level. The solution belongs in the memorandum of association and the shareholders’ agreement before a dispute arises.
The company is owned by two shareholders holding equal interests and both are managing directors. For as long as they agree, the company runs without formalities. The problem arises when one of them wants to buy a new machine, hire a salesperson or terminate a lease and the other fundamentally disagrees. Both hold the same position in the Commercial Register and both ask whether they may decide on their own. The answer depends on whether the matter concerns acting towards third parties or a decision taken inside the company.
Each may act, but deciding requires a majority
The Commercial Code separates two things. The first is the power to act on the company’s behalf towards third parties:
The statutory body of the company is one or more managing directors. Where there are several managing directors, each of them is entitled to act on the company’s behalf individually, unless the memorandum of association provides otherwise.
— Section 133(1) of Act No. 513/1991 Coll. (unofficial English translation)
The second is internal decision-making on business management, that is, on what the company will actually do:
A decision on the business management of the company falling within the powers of the managing directors requires the consent of a majority of the managing directors, unless the memorandum of association stipulates a higher number of votes.
— Section 134 of Act No. 513/1991 Coll. (unofficial English translation)
With two managing directors, only the consent of both amounts to a majority. If one of them disagrees, no decision has been adopted. If a director entitled to act individually signs the contract nonetheless, the company will generally be bound: the law separates the power to act towards third parties (Section 133(1)) from internal decision-making (Section 134), and the counterparty need not examine whether the directors decided the matter in advance. The director is, however, acting without the decision the law requires and is breaching the duty to exercise his or her powers with due professional care (Section 135a(1)). If the company suffers loss, he or she is liable for it (Section 135a(2)).
When the shareholders decide
The general meeting may reserve for itself decisions on matters otherwise falling within the powers of other bodies (Section 125(3)), and it decides by a simple majority of the votes of the shareholders present, unless the law or the memorandum of association requires more (Section 127(3)). Where the number of votes follows the amount of the contributions (Section 127(2)) and the shareholders hold different interests, a dispute between the directors will therefore usually be settled by the majority shareholder. With a 50:50 split, the deadlock merely moves up to the general meeting: if both shareholders attend, neither obtains a majority. The general meeting nevertheless has a quorum once shareholders holding at least half of all votes are present, unless the memorandum of association provides otherwise (Section 127(1)). A shareholder who does not attend a duly convened meeting may therefore be outvoted. The same applies to the removal of a managing director, which falls to the general meeting [Section 125(1)(f)] and the proceedings of which must be certified by a notarial deed [Section 127a(4)(c)]. For more, see the question on how to remove an s.r.o. managing director
Czech law gives the memorandum of association more room
The same starting point applies in Czechia: unless the constitutional act provides otherwise, each managing director represents the company individually (Section 164(2) of Act No. 89/2012 Sb.) and business management is decided by a majority of the managing directors (Section 195(1) of Act No. 90/2012 Sb.). The difference is that Czech law allows the memorandum of association to lay down a different decision-making rule, whereas Slovak Section 134 expressly permits only a higher number of votes. The memorandum of association may make the managing directors a collective body (Section 194(2)) and the powers of its members may be divided by area; the remaining members must then still supervise how the company’s affairs are administered (Section 156(2) of the Civil Code). The general meeting may likewise reserve for itself decisions on matters that the law assigns to another body (Section 190(3) of Act No. 90/2012 Sb.). Its reach over business management is narrower, however, because no one may give a managing director instructions concerning business management unless the director asks for them (Sections 195(2) and 51(2) of Act No. 90/2012 Sb.).
How to avoid deadlock
The most reliable rules are agreed while the shareholders are still in agreement. The options include an odd number of managing directors, a list of decisions reserved to the general meeting, joint action on fundamental steps and a procedure for disagreement: a period for negotiation, an independent expert’s opinion and, finally, a separation mechanism in the shareholders’ agreement (Section 66c of the Commercial Code), such as put and call options or the rights described in the question on drag-along and tag-along. We help design these rules through corporate governance and company bodies and shareholders’ agreements. If a dispute between the shareholders is already under way, we can help resolve it through our shareholder disputes service.
This answer provides general information on the law as at 12 September 2026. It does not constitute legal services or replace an assessment of an individual case. The details of your situation may differ. Book a consultation to discuss them.
