Manual COVID-19: Motion for mitigation of the impacts of COVID-19 epidemy in the field of insolvency

In response to the COVID-19 epidemic and the crisis measures, on 31 March 2020 the government submitted a bill on Certain Measures to Mitigate the Effects of the Covid-19 Epidemic on Litigants, Victims, Victims of Crime and Legal Persons and on Amendment of the Insolvency Act and the Execution Code (hereinafter referred to as the “Act”). The discussion of the Act is scheduled for 7 April 2020.

In connection with crisis measures, many entrepreneurs become temporarily insolvent. The government thus seeks to mitigate these negative effects by proposing the Act and to enable entrepreneurs to handle this situation.

For filing insolvency petitions
  • The Act temporarily abolishes the obligation of the debtor to file an insolvency petition from the day the Act enters into force until the expiration of six months from the termination or cancellation of the emergency measure in the event of an epidemic. This does not apply if the bankruptcy occurred before the adoption of the Act or as a result of circumstances unrelated to the crisis measures.
  • At the same time, this does not impose the burdensome liability of statutory bodies on the grounds that they have breached a legal obligation and have not acted with due managerial care by not filing an insolvency petition in such a situation.
  • Simultaneously the court will not take into account insolvency petitions filed by the creditor in the period from the entry into force of the Act until 31 August 2020.
Extraordinary moratorium
  • Until 31 August 2020, a debtor who is an entrepreneur and who was not insolvent up to 12 March 2020 may file a petition for an extraordinary moratorium with the insolvency court as a result of emergency measures during the COVID-19 epidemic. The extraordinary moratorium shall enable otherwise viable companies to face the consequences of the current crisis.
  • The extraordinary moratorium lasts three months.
  • This moratorium does not require the consent of creditors and its announcement does not have the effects of the initiated insolvency proceedings.
  • Liabilities directly related to the maintenance of business operation and which arose after the announcement of an extraordinary moratorium, the debtor is entitled to pay for these liabilities during an extraordinary moratorium in preference to previously due liabilities.
  • Designated persons - contractual partners may not terminate contracts and must continue to perform contracts under the conditions stipulated by the Insolvency Act.
  • The time limits for exercising the rights against the debtor for the duration of the extraordinary moratorium do not begin or no longer continue.
Periods in insolvency proceedings
  • The insolvency court shall, at the request of the person concerned, grant a waiver of the delay due to emergency measures in the event of an epidemic, if it prevented him from performing the act to which he is entitled under the Insolvency Act.
  • The possibility to waive a delay is subject to the fact that the matter to which the act relates hanot yet been decided
  • In the case of remedies in form of appeal or objection, failure to comply with the time limit may be waived if the decision to which the remedy relates has not become final and conclusive.
  • The time limit for performing the missed action is set seven days and shall not end earlier thaseven days from the end of the emergency.

We will be happy to discuss the specific impacts of proposed changes to the law on your business and the possibilities of applying them in practice.

Autoři: Veronika Odrobinová a Dominik Beran