Act No 284 / 2023 Coll.

Law on preventive restructuring

Valid Law Effective from 23.09.2023
284
THE LAW
of 23 August 2023
on preventive restructuring
Parliament has decided on this law of the Czech Republic:

ČÁST PRVNÍ

GENERAL PROVISIONS
§ 1
Subject matter
This law implements the European Union1), builds upon the directly applicable European Union2), and regulates the rules on business access to preventive restructuring.
§ 2
Definition of basic terms
For the purposes of this Act:
(a) a preventive restructuring procedure aimed at preventing bankruptcy and maintaining or restoring the business establishment (hereinafter referred to as the "plant") of an entrepreneur;
(b) a document drawn up under this Act, which describes and evaluates the results of the business and operation of the business establishment, analyses the causes of the financial difficulties encountered and presents a proposal for solutions;
(c) a restructuring plan for a document drawn up under this law defining the legal status of the parties concerned and containing a summary of the restructuring measures to prevent bankruptcy and to preserve or restore the business capacity of the undertaking;
(d) partner and member of the cooperative;
(e) by the party concerned, a creditor or a member whose right will be directly affected by the restructuring plan and who has received a written invitation to open negotiations on the restructuring plan;
(f) secured by the party concerned, the right of which is guaranteed by a matter belonging to an entrepreneur, only by lien, detention, limitation of the transfer of real estate, transfer of a right or transfer of a claim for collateral or similar law under foreign law, and an agent for collateral under the bond law;
(g) an untouched party creditor or partner who is not the party concerned;
(h) directly concerned by the inclusion of the right in the restructuring plan in order to change the amount, order, maturity or other characteristics of the right or other right associated with it;
(i) a member of the elected body of a person who is a member of the business body and is elected, appointed or otherwise called to office;
(j) related person
1. a person controlled by an entrepreneur, a person controlling an entrepreneur or, where appropriate, all persons acting in agreement with a view to controlling an entrepreneur;
2. a member of an elected body of an entrepreneur, a person in a similar position as a member of an elected body without account being taken of the relationship he has with the entrepreneur, or a natural person representing a legal person who is a member of an elected body of a trading corporation, in the performance of the duties of a member of the elected body,
3. a person controlled by a person under points 1 and 2; or
4. Person close to persons referred to in points 1 and 2;
(k) the court of restructuring before which the restructuring procedure is pending and the court which decides on the appeal in the restructuring procedure.
§ 3
Personal application of the law
(1) This law applies to the preventive restructuring of a commercial corporation.
(2) This Act does not apply to preventive restructuring
(a) the securities dealers' guarantee fund and the financial market guarantee system and funds managed by it;
(b) banks, savings and credit cooperatives and other credit institutions as referred to in Article 4 (1) (1) of Regulation (EU) No 575 / 2013 of the European Parliament and of the Council on prudential requirements for credit institutions and amending Regulation (EU) No 648 / 2012, as amended,
(c) a securities dealer and an investment firm as referred to in Article 4 (1) (2) of Regulation (EU) No 575 / 2013 of the European Parliament and of the Council, as amended, or a collective investment undertaking as referred to in Article 4 (1) (7) of Regulation (EU) No 575 / 2013 of the European Parliament and of the Council, as amended,
(d) CSDs referred to in Article 2 (1) (1) of Regulation (EU) No 909 / 2014 of the European Parliament and of the Council on improving securities settlement in the European Union and CSDs and amending Directives 98 / 26 / EC and 2014 / 65 / EU and Regulation (EU) No 236 / 2012, as amended,
(e) CCPs referred to in Article 2 (1) of Regulation (EU) No 648 / 2012 of the European Parliament and of the Council on OTC derivatives, central counterparties and trade repositories, as amended,
(f) persons who are an institution, financial institution or financial holding person, a mixed financial holding person or a mixed holding person under the Financial Market Recovery and Resolution Act;
(g) health insurance companies established under the Act on departmental, branch, corporate and other health insurance companies and general health insurance companies of the Czech Republic,
(h) insurance or reinsurance undertakings under the Insurance Act.

ČÁST DRUHÁ

PREPARATION OF RESTRUCTION

HLAVA I

PREPARATION OF THE RESTRUCTION PLAN

Díl 1

General provisions
§ 4
Acceptance of preventive restructuring
(1) The entrepreneur shall be entitled to initiate or continue preventive restructuring only if it is in good faith in maintaining or restoring the business of the entrepreneur by restructuring measures.
(2) Preventive restructuring is only authorised by the entrepreneur to initiate or continue operations if it is not bankrupt in the form of insolvency, but in view of all the circumstances, it can reasonably be assumed that its financial difficulties are of such gravity that, should the proposed restructuring measures not be adopted, it would be bankrupt.
(3) Financial difficulties shall be deemed to satisfy the condition of sufficient seriousness as set out in paragraph 2 where the operation of the establishment does not generate income sufficient to cover cash debts arising during the last year within the maturity deadlines.
§ 5
Inadmissibility of preventive restructuring
(1) Preventive restructuring is not entitled to start or continue an entrepreneur following an unfair intention.
(2) The unfair intent of an entrepreneur may be considered in particular if:
(a) initiate or continue preventive restructuring if he had to know or reasonably assume that he was not entitled to do so;
(b) knowingly disclose false or incomplete information in the call for a preventive restructuring or a bailout project, or at any time during a preventive restructuring;
(c) in breach of the Agreement pursuant to Article 7,
(d) conclude an agreement which confers an advantage on the party concerned not covered by the restructuring plan in exchange for a specific vote on the restructuring plan;
(e) make use of a general or individual moratorium in order to harm its creditor unfairly;
(f) has not provided proper and timely synergies to the restructuring trustee;
(g) it has acted in contravention of the restrictions resulting from the decision under Paragraph 83;
(h) confer an advantage on the party concerned not covered by the restructuring plan in exchange for a method of voting or a method of action during the preventive restructuring;
(i) set up groups of interested parties for the purposes of voting on a restructuring plan with a view to unjust damage or unlawful advantage to certain interested parties;
(j) the restructuring plan submitted deviates unjustifiably or inappropriately from the restructuring project; or
(k) has been convicted of an intentional offence committed in connection with, or subject to, an undertaking, unless it is viewed as not being convicted.
(3) An unfair intention by an entrepreneur may also be considered if, within 1 year before or during the start of a preventive restructuring, he has paid off to related parties profit shares or other own resources, provided them with extraordinary service, has prematurely paid off a loan or loan or burdened his property for their benefit. Similarly, the transfer of the business assets to the trust fund shall be assessed. The first sentence shall not apply where the payment of the share of the profits in a personal company to members with unlimited liability, the performance paid by an entrepreneur in good faith and, as appropriate, the circumstances of the case or transactions subsequently returned.
(4) Preventive restructuring is not entitled to start or continue business
(a) in liquidation,
(b) where bankruptcy has been detected in the last 5 years by a final decision of the court in insolvency proceedings; or
(c) for which the preventive restructuring ended in the last 5 years before its resumption by declaring the inadmissibility of the preventive restructuring for an unfair intention.
§ 6
Initiation of preventive restructuring
(1) Preventive restructuring is launched by a written invitation to open negotiations on the restructuring plan to the parties concerned. The date on which the initial call for negotiations on the restructuring plan was reached by the first party concerned shall be deemed to be the date on which the preventive restructuring is initiated.
(2) At the same time as the written call referred to in paragraph 1, the operator shall send the remediation project to all parties concerned or make the remediation project available to them free of charge in a way that allows remote access.
(3) At the same time, the operator will notify the restructuring court of the initiation of the preventive restructuring. The annex to this notification is a written invitation and a rehabilitation project.
(4) The public authority in the capacity of the party concerned shall be sent by the entrepreneur to the public authority by a written invitation referred to in paragraph 1, the remediation project and other documents, in the manner and under the conditions laid down for submission to such an authority.
§ 7
Facilitating the preparation of preventive restructuring
If, in order to facilitate the preparation and negotiation of the restructuring plan with the entrepreneur, the creditor has concluded an agreement that, for the duration of the preventive restructuring, in particular:
(a) shall not claim payment of the entire claim for failure to comply with any instalment or for breach of any other obligation;
(b) not terminate financing through an existing loan;
(c) not to transfer the claim to another person; or
(d) shall not pursue the enforcement of the debt, the exercise of the lien, the netting of mutual claims, the termination of financial leasing or the application of penalties resulting from breach of the obligation;
such an agreement or individual concessions granted to an entrepreneur may be made conditional on changes in the casting of members of the elected bodies of the entrepreneur. Such an agreement shall not, in itself, be considered to be an influence or control under the Commercial Corporations Act, nor shall it in itself establish the relationship of persons related to each other.

Díl 2

Recovery project
§ 8
Basic provisions
The operator shall present in the remediation project, at least in essential terms, restructuring measures to monitor the maintenance or restoration of the operation of the plant based on realistic assumptions, the business plan for the period in which it intends to carry out preventive restructuring, the nature of the direct concern of the parties concerned and shall describe and justify its ability to ensure the proper functioning of the plant and the ability to meet current and future commitments at least until the expected date of entry into force of the restructuring plan.
§ 9
Requirements of the remediation project
(1) The rehabilitation project must include:
(a) a description of the business model;
(b) an assessment of the existing business activity, competitiveness and economic position on the relevant market;
(c) a description of the ownership structure indicating the beneficial owner of the entrepreneur, provided that he has it under the law governing the registration of the beneficial owners;
(d) a description of the operator's operational, financial, personnel and organisational conditions;
(e) data to the extent of the relationship report under the Commercial Corporation Act on the date of the construction of the remediation project;
(f) a description of the causes and severity of the entrepreneur's financial difficulties;
(g) a description of the main risks, obstacles and conditions of further proper operation of the plant;
(h) an estimate of the value of the plant determined in a profit-making manner under the Asset Valuation Act and an estimate of the value of each item of collateral for which the creditor is the party concerned, determined in the manner prescribed for that item of collateral under the Asset Valuation Act;
(i) an indication of the local jurisdiction of the restructuring court for the purpose of conducting the restructuring procedure; and
(j) other information of a financial and non-financial nature enabling an objective and balanced understanding of the state and realistic assumption of the continued operation of the business.
(2) The rehabilitation project must also include:
(a) a description of the capital and liquidity measures necessary to maintain or restore the firm's sound financial situation, including the expected sources of funding;
(b) a description of the preparatory measures taken or intended to be taken by the entrepreneur in order to facilitate the implementation of the restructuring plan and the expected impact of these measures on the parties concerned and unaffected;
(c) a description of the preparatory measures taken or intended to be taken by the entrepreneur in the field of financial management to ensure the timely liquidity to operate the plant;
(d) the financial plan for the period up to the expected date of completion of the restructuring plan, treated in a similar manner as the outlook for liquidity developments under the business insolvency order, including the cost plan for carrying out preventive restructuring; and
(e) an estimate of the time frame for preventive restructuring, in particular the implementation of substantial aspects of the restructuring plan, indicating the timetable for the achievement of the sub-objectives.
(3) The firm shall attach to the remediation project interim accounts drawn up on the last day of the calendar month preceding the date of dispatch of the call for negotiations on the restructuring plan and the accounts for the last 3 financial years. Where the last day of the calendar month is the first balance sheet day, the entrepreneur shall attach the last sound financial statements and the accounts for the previous two financial years.
§ 10
Definition of the parties concerned
(1) In the remediation project, the entrepreneur shall define the range of parties concerned and list those rights of the parties concerned which will be directly affected by the restructuring plan (hereinafter referred to as "the list of rights concerned '). Furthermore, the entrepreneur shall define in the remediation project a range of untouched parties and list those rights of unaffected parties which will not be directly affected by the restructuring plan (hereinafter referred to as" the list of untouched rights').
(2) The definition of the range of interested parties will be justified by the entrepreneur. In particular, the entrepreneur shall state the reasons for which he did not include the rights of the untouched parties and certain rights of the parties concerned in the list of rights concerned and for which he considers that they will be properly and in a timely manner.
(3) For each party concerned, the entrepreneur shall indicate the information certifying its identity, if available, and whether it is related.
§ 11
Indication of the rights of the parties concerned
(1) For each right directly concerned, the entrepreneur in the remediation project shall provide at least information on the creditor and the reason for the creation, amount, maturity, order and enforceability of that right; for secured rights, indicate the reason, method and order of the collateral. For subordinate rights, it shall indicate the degree of subordination, the indication of the superior law and other relevant circumstances concerning subordination.
(2) The entrepreneur shall expressly state the rights to be directly affected by the restructuring plan in the remediation project,
(a) the amount by which those rights should be reduced;
(b) the duration of the deferral of their maturity or enforceability,
(c) the amount at which the interest rate will be changed;
(d) the amount to be converted into foreign currency;
(e) which consists of other interference in the rights of the parties concerned.
(3) In the list of rights in question, the entrepreneur shall indicate separately those rights which he considers to be questionable. For each such right, it shall state in detail what it sees as the reason for the dispute.
(4) Furthermore, the entrepreneur shall separately indicate the conditional rights in the list of rights concerned. For each such right, it shall specify in detail whether it is bound by the fulfilment of the untying or postponement conditions in which that condition lies and shall estimate the likelihood of its fulfilment.
§ 12
Binding by definition of the parties concerned
(1) The extension or narrowing of the scope of the parties concerned or the list of rights concerned may only be possible, on request of the first party concerned, on the basis of a proposal from the entrepreneur and with the agreement of the majority of the parties concerned mentioned in the remediation project, at the latest until the submission of the restructuring plan for voting.
(2) The narrowing of the circle of interested parties, depending on the outcome of the preliminary review of the claim, is not affected by paragraph 1.

Díl 3

Restructuring plan
§ 13
Establishment of a restructuring plan
The restructuring plan shall be drawn up by the entrepreneur.
§ 14
Content of the restructuring plan
(1) The restructuring plan defines the legal position of the parties concerned as a result of preventive restructuring, on the basis of the proposed restructuring measures.
(2) The restructuring plan is divided into a descriptive and binding part.
(3) The description of the restructuring plan contains:
(a) identification of the entrepreneur and his partners, the members of the elected bodies and the beneficial owner of the entrepreneur under the Real Owners' Register Act, if any;
(b) assets and other assets, liabilities and other liabilities, as well as assets and liabilities not recorded on the balance sheet on the last day of the calendar month preceding the date of submission of the restructuring plan, indicating the estimated market value of the assets of the entrepreneur as determined in accordance with the Asset Valuation Act;
(c) a description of the economic situation of the entrepreneur and a description of the causes and extent of the entrepreneur's financial difficulties;
(d) the number of employees of an entrepreneur in a basic employment relationship, including whether that relationship has been negotiated for a fixed or indefinite period;
(e) the groups to which the parties concerned have been classified, including the amount of their claims and the share of votes in the group concerned;
(f) a justification explaining why the restructuring plan has reasonable prospects of preventing the bankruptcy of the entrepreneur and retaining or restoring the operational capacity of his establishment, including the necessary assumptions for the success of the preventive restructuring;
(g) a justification explaining why, after the adoption of the restructuring plan, the parties concerned would find themselves in a more favourable position than they would have been if the insolvency proceedings had dealt with the insolvency proceedings; and
(h) an estimate of the value of the transactions likely to be received by the parties concerned if the bankruptcy of the entrepreneur was dealt with in insolvency proceedings.
(4) The binding part of the restructuring plan contains:
(a) a list of the rights concerned, indicating how the restructuring plan will directly affect them;
(b) a description of whether and how the restructuring plan will directly affect the parties concerned and, where a new security is envisaged, the details and conditions of the new security;
(c) the way in which assets and liabilities not recorded in the balance sheet are handled, in particular where there is a presumption of acquisition of ownership of such assets;
(d) details of the restructuring measures, including in particular:
1. a description of the restructuring measures;
2. the duration of the restructuring measures;
3. the arrangements for informing employees' representatives, the effects of preventive restructuring on employees and the overall effects on employment, in particular whether there is a reduction in the number of employees in the basic employment relationship by at least one quarter;
4. the envisaged new financing pursuant to Article 27 (2), which is envisaged in the framework of preventive restructuring, including an indication of the way, the amount and conditions of its receipt and recovery, and the reasons why it is necessary to implement the restructuring plan;
(e) the procedure in case the restructuring plan is not adopted,
(f) the method of monitoring the implementation of the restructuring plan;
(g) the extent and manner of providing information to the parties concerned on the implementation of the restructuring measures, the financial plan and the costs incurred for preventive restructuring;
(h) the facts which will certify that the restructuring plan has been completed or not and which will involve the closure of the preventive restructuring; and
(i) a procedure in case the conditions of the restructuring plan are not fulfilled.
(5) The restructuring plan may provide for the creation of a sufficient cash reserve to satisfy, where appropriate, any additional satisfaction of all interested parties who have objected pursuant to Paragraph 98 (2) (e) and the way in which that reserve will be handled to the extent that it will not be used. A sufficient monetary reserve shall be understood as the amount of funds which:
(a) it shall be deposited in custody with the restructuring administrator at the latest by the date of submission of the application for confirmation of the restructuring plan in a special bank account set up solely for that purpose; and
(b) achieve at least the amount of the difference between the total amount of the claims of all the parties concerned who object under Paragraph 98 (2) (e) and the total amount of the transactions to be received by those parties under the restructuring plan.
(6) The annex to the restructuring plan shall be the remediation project, even if it has made a change after it has been dispatched or made available to the parties concerned.
(7) In particular, guarantees issued, financial hedging instruments, future contracts or outstanding financial leasing contracts shall be considered as assets and liabilities not recorded on the balance sheet. In particular, assets acquired in the form of financial leasing or assets used for business with a right to buy shall be considered as assets not recorded on the balance sheet.
§ 15
Relationship with public lists and registers
The effective restructuring plan shall be the basis for the registration of a public register or a public list, provided that:
(a) expressly stating the necessary manifestations of the will of the persons concerned; and
(b) the rights or other data entered are defined in the manner in which they are to be entered in such a register or list.
§ 16
Restructuring measures
(1) Measures to avert financial difficulties include, in particular, asset restructuring, debt restructuring, equity restructuring or operational change.
(2) For each restructuring measure, the restructuring plan must indicate how it contributes to the purpose of preventive restructuring and how it affects the operation of the business and the rights of the parties concerned.
(3) Where a restructuring measure affects a right that is entered in a public list or register, that right and its establishment, modification or termination in the restructuring plan shall be defined in the way in which it is to be entered in such a list or register.
(4) Restructuring measures leading to a change in the ownership structure of an entrepreneur, a change in the rights associated with shares or a transfer or termination of an establishment or a part of the assets that would entail a material change in the actual business or business of an entrepreneur may be implemented only with the agreement of the highest authority of the corporation if it were otherwise required by the Founding Act or the Commercial Corporation Act.
§ 17
Restructuring of assets
The restructuring of assets for the purposes of this Act means in particular:
(a) the sale of assets, including the plant or part thereof;
(b) the sale of a case owned by an entrepreneur with subsequent closure of the lease on the same case;
(c) the issue of part of the property to the parties concerned;
(d) the transfer of a part of the property to the newly created legal person in which the parties concerned obtain participation; or
(e) the adoption of new funding.
§ 18
Restructuring of liabilities
(1) The restructuring of commitments for the purposes of this Act means in particular:
(a) the extension of the maturity of the debt, the establishment of a payment schedule or other conditions of repayment;
(b) conversion of a short-term claim by a creditor to a long-term linked to a change in the original nature, for example, of a loan or loan;
(c) a change in the content of the undertaking, the method of securing or fixing, and the time, order or manner of satisfaction;
(d) a change in the content of the undertaking in terms of interest, interest on late payments, late payment or determination other than the agreed currency of performance;
(e) a change in the content of the undertaking in terms of arrangements other than payment terms;
(f) the capitalisation of the creditor's debts, indicating the amount and method of capitalisation; or
(g) remission of debt or part thereof.
(2) Paragraph 1 shall also apply to debt on bonds and other debt securities or book-entry debt securities.

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Regulation Information

CitationAct No 284 / 2023 Coll., on preventive restructuring
Regulation TypeLaw
Author-
CollectionCode of Laws
Date of Promulgation22.09.2023
Effective from23.09.2023
Effective until-
Status Valid
Parliamentary Paper: Paper No. 371

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Source: Hlídač státu (CC BY 3.0 CZ)
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