THE MINISTRY OF JUSTICE IS PREPARING AN AMENDMENT TO THE INSOLVENCY ACT IN CONNECTION WITH CORONAVIRUS
The Ministry of Justice, headed by Marie Benešová, is preparing an amendment to the Act No. 182/2006 Coll., The Insolvency Act (hereinafter the “Insolvency Act”). The amendment aims to mitigate the undesirable consequences of the Covid-19 pandemic, in particular by preventing the general insolvency of entities and at the same time protecting insolvency courts from overloading them. The amendment to the Insolvency Act should be ready for discussion during the next week in a state of legislative emergency[1].
The actual wording of the amendment to the Insolvency Act was prepared in cooperation with judges of the Insolvency Section of the High Court in Prague. According to the authors, it is necessary to “quickly prevent the domino effect of declaring bankruptcy of debtors by the proposal of creditors”.[2] According to the judges, it is also necessary to provide debtors with a longer timeframe to overcome their insolvency caused by the state of emergency, in particular by making the institute of reorganization accessible also to small and medium-sized enterprises. Last but not least, barriers to access to debt relief institute for the self-employed should also be removed.[3]
One of the proposed changes will be, for example, a modification of a debtor´s (who is a legal person or a natural person entrepreneur) duty to file an insolvency petition without undue delay after the debtor realized or, with due care, should have realized its insolvency. The judge-drafted amendment proposes that the debtor should not be obliged to file an insolvency petition for the duration of the state of emergency or state of war and subsequent 18 months after its termination in case that the debtor became insolvent as a result of declaration of state of emergency or state of war.
The chairman of the High Court in Prague sent the draft amendment to the Insolvency Act to the Ministry of Justice of the Czech Republic.[4] Further details regarding the amendment to the Insolvency Act can be expected in the coming days.
For more information on this subject, please feel free to contact:
JUDr. Monika Rutland, partner
rutland & partners, law firm
tel: +420 226 226 026
email: monika.rutland@rutlands.cz
[1] LUKÁŠ, Petr. Covid-19: P Novela má ochránit firmy před insolvencí a pomoci lidem, kteří přijdou o příjmy [online]. archiv.ihned.cz, 27. března 2020 [cit. 27. March 2020]. Available at: < https://archiv.ihned.cz/c1-66741700-novela-ma-ochranit-firmy-pred-insolvenci-a-pomoci-lidem-kteri-prijdou-o-prijmy >.
[2] Unknown author. Covid-19: Na Vrchním soudu v Praze vznikl návrh novely insolvenčního zákona pro „zlé časy“ [online]. justice.cz, 26. března 2020 [cit. 27. března 2020]. Available at: <https://www.justice.cz/documents/14009/2211486/Pandemick%C3%84%E2%80%9A%C3%8B%E2%80%A1+novela+Vrchn%C3%84%E2%80%9A%C3%82%C2%ADho+soudu+v+Praze.pdf/b5a5c20a-9940-4a10-9b19-4d468f698823 >.
[3] Ibidem.
[4] Ibidem.
