On 1 July 2017, the so-called “big amendment” to the Czech Insolvency Act came into force. The amendment contains more than 1,500 changes and – according to the reasoning statement – aims to improve the functioning of existing insolvency practice and enhance the efficiency and transparency of processes within the insolvency procedure.

The changes include:

  • protection from bullying insolvency petitions: new rules further specify the preliminary court assessment of insolvency petitions. The court will review the petition (at the latest on the next business day following the petition date), and if the petition appears to be bullying (i.e. there are doubts about its legitimacy), the petition will not be registered; moreover, the fine for filing a groundless petition has now been increased to CZK 500,000;
  • modification of the definition of bankruptcy by establishing a so-called “solvency gap“;
  • an insolvency petition must be supported by new evidence, e.g. by an auditor’s confirmation that the receivable in question exists in the creditor’s accounting;
  • mandatory deposit for insolvency procedure costs – CZK 50,000 (in case a creditor files an insolvency petition against a legal entity);
  • limitation of forum shopping: the new law prevents the calculated, sudden relocation of the debtor’s registered office immediately before the insolvency petition is filed. In the past this happened with the primary aim of making it more difficult for creditors to exercise their rights. The court will no longer take into account any registered office changes made six months or sooner prior to the start of the insolvency proceedings;
  • limitation of voting rights for concern members and persons closely associated with the debtor;
  • personal bankruptcy: only accredited and qualified persons can now offer personal bankruptcy services and the payment for preparing a personal bankruptcy petition is now capped at CZK 4,000 (or CZK 6,000 in the case of spouses);
  • insolvency administrator changes: the possibility to “exchange” a court-appointed insolvency administrator for a different one who has been agreed upon in advance is limited in personal bankruptcy cases and requires the consent of the majority of creditors, based not only on the value of their receivables, but also on the actual number of “creditor heads”. This should prevent the biggest creditor (i.e. with the biggest receivable) from taking over the whole proceedings;
  • the related decree introduces new, mandatory forms for various petitions.

The amendment affects many more areas that might concern you. For more information, please do not hesitate to contact us.

 

For more information, please contact Michal Zahradník or your contact person in our office.

 This article is for informational purposes only and does not provide legal advice on any subject matter.