[BANKRUPTCY, INSOLVENCY & REHABILITATION PROCEEDINGS IN CZECH REPUBLIC] 35
After the liquidation of the insolvency estate, the insolvency trustee will submit a final report. Once the court's decision approving the final report becomes effective, the insolvency trustee should submit a draft distribution resolution to the court, specifying the amounts to be paid to the creditors. Reorganisation The purpose of reorganisation is to restore the debtor's business to financial health and satisfy the creditors' claims proportionally. Reorganisation may take place for debtors (entrepreneurs) whose total annual net turnover for the last accounting period was at least CZK 50,000,000 or if the debtor employs at least 50 employees. This restriction shall not apply if, by the time the declaration of insolvency is made, the debtor submits a reorganisation plan to the insolvency court that has been accepted by at least half of the secured and unsecured creditors calculated according to the value of their claims (pre-pack reorganisation). Reorganisation is carried out on the basis of a reorganisation plan approved by the court. The debtor has priority in drawing up the plan. The reorganisation plan must specify the method of reorganisation and the measures for its implementation, as well as information on how it will affect the debtor's business and their employees. The reorganization plan includes various measures, such as restructuring creditors' claims, selling the debtor's assets, transferring part of the debtor's assets to creditors, merging the debtor with another legal entity, issuing shares, and securing financing. The insolvency court calls a meeting of creditors to vote on the adoption of the reorganisation plan. Voting on the approval of the plan takes place in groups. Each group consists of creditors with the same (or similar) legal status or
economic interests. The reorganisation plan is adopted by a particular group of creditors if the plan is approved by a majority of the voting creditors whose claims represent at least half of the total nominal value of the group's claims. The insolvency court may approve the reorganisation plan even if it was not adopted by all creditor groups (cram-down). In such case, the court will approve the reorganisation plan if the plan is fair to the group which did not approve the plan. For a group of unsecured creditors, the plan is considered fair if the creditors in that group receive at least as much under the plan as they would have received in liquidation bankruptcy. Czech insolvency law also allows for preventive restructuring, which involves significantly less court intervention than reorganization under the insolvency proceedings described above. Debt relief Debt relief is a remedial method of resolving insolvency (or imminent insolvency), intended primarily for natural persons who are not entrepreneurs. However, the court may also grant debt relief to a legal entity that is not an entrepreneur but has debts arising from business activities, provided the creditors expressly agree (it is assumed that the creditor agrees to the debt relief unless they express disagreement when filing their claim). The petition must be drafted by a lawyer, notary, bailiff, insolvency trustee or person accredited by the Ministry of Justice. Under Czech law, debt relief can be achieved by either liquidating the debtor's assets or fulfilling a repayment schedule involving the liquidation of the debtor's assets.
ILN Restructuring & Insolvency Group – Bankruptcy, Insolvency & Rehabilitation Series
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