Czech Republic

The new regime for insolvent individuals and insolvent companies became into force in the begging of 2008 replacing the infamous Act on Bankruptcy and Composition, 1991. Leading by an effort to replace this Act the Government object of new Act on Insolvency and Its Resolution was admitted in 2001.  The Act on Insolvency and Its Regulation no. 182/2006 Coll. was passed by Parliament of Czech republic on March 30th 2006 and become into force since January 2008. The essential aims of new regulation are as follows:

• To ensure more transparency and foreseeability of insolvency proceedings
• Confirm status of creditors
• Motivate debtor to commence dealing with his insolvency in time
• Discharge debtor in proper cases
• Overall speed up and effectiveness of insolvency proceedings
  
  

Key Legislation

Act on Insolvency and Its Regulation, 2006
Act on Insolvency Trustees, 2006
Act on Regulation on Examination of Insolvency Trustees, 2007

Insolvency Procedures

The Act on Insolvency and Its Regulation regulates the resolution of insolvency and impending insolvency of a debtor by a judicial proceedings using one of the methods set out in this Act to satisfy the debtor’s creditors to the greatest extend possible and essentially on pro rata basis. The debtor is insolvent if it has multiple creditors and has due and payable monetary obligations overdue for more than 30 days, and is unable to satisfy such obligation. A debtor is deemed unable to satisfy its obligations if it has suspended payments under a substantial portion of its payment obligations, or it is default in the payment of same for more than 3 months past the due date, or it is impossible to satisfy certain due and payable obligations of the debtor by an enforcement of a decision or by execution, or the debtor failed to meet its obligation to submit lists referred in the Act, imposed by the insolvency court.

Once the debtor is insolvent the Act provides several methods of resolution of insolvency or impending insolvency of a debtor in insolvency proceedings. They are:

• Bankruptcy
• Reorganization
• Discharged from debts for individuals not engaged in business
• Special methods of insolvency resolution set forth in the Act with regard to certain entities or certain types of cases /banks, savings and loans Cooperatives, insurance companies, Electronic money institutions and persons authorized to issue electronic money, certain foreign banks/

Commencement of the insolvency proceedings is associated with some effects concerning debtor and creditors. Upon the instigation of insolvency proceedings claims and other rights pertaining to the assets of the estate may not be claimed by virtue of an action, these may be sought by means of an application; right to satisfaction from security pertaining to assets owned by the debtor or assets forming property of the estate may be asserted and newly acquired only on terms set out in the Act; the enforcement of a decision or execution that would affect assets owned by the debtor or assets forming property of the estate, may be ordered but not carried out.

Roles

Role played by government
Ministry of Justice of the Czech Republic is responsible for insolvency agenda in the Czech Republic which includes insolvency legislation, both for insolvency proceedings and regulating the insolvency trustee profession. Ministry of Justice organizes examinations for applicants to obtain an insolvency trustee license or special insolvency trustee licence which is required to act as insolvency trustee. Ministry of Justice is also the administrator of Insolvency Register which contains List of Insolvency Trustees, List of Debtor and Insolvency Files. Insolvency register is publicly accessible and has its essential part in delivering court decisions, summons, notices and other documents made by insolvency court or other parties.

Role played by private sector practitioner
Only an insolvency trustee in the list of trustees may be appointed by Head of the insolvency court. The Act on Insolvency Trustees, 2007, requires several conditions to be fulfilled to obtain license authorizing to act as insolvency trustee.

Insolvency trustee is one of the subject of the insolvency proceeding who disposes with rights and duties which are imposed upon him by the Act or by the decision of the insolvency court in a manner to satisfy the debtor’s creditors to the greatest extend possible and essentially on pro rata basis. Business activities shall be performed in his own name but on debtor’s account. These are mainly realizing of the assets of the property of the insolvency estate or other disposal of the insolvency property, acting as a party in adversary disputes in place of debtor and others. Insolvency trustee takes care of maintaining of business if it is a part of the property of the estate. In according to insolvency court insolvency trustee is the most essential subject of insolvency proceeding.

Role played by the court
Insolvency court is one of the essential subject in the insolvency proceeding. It renders rulings contemplated or stipulated by the Act on Insolvency and its Resolution 2006, supervises the procedures and activities undertaken by the other procedural subjects /including insolvency trustee/ and rules on all matters incidental thereto. As part of the supervisory activities, insolvency court shall rule on matters pertaining to the progress of the insolvency proceedings, adopt requisite measures in order to fulfill its purpose, and impose obligations regarding the activities of the individual parties subject to the insolvency proceeding.

Insolvency court is obliged to publish in chronological order following information:

• Insolvency court decisions issued in the insolvency proceeding and adversary disputes
• Any and all submissions placed on the file maintained by insolvency court with respect to the debtor

Further information so designated by the Act

At a Glance

Does the insolvency system in the Czech Republic allow for: