Czech News - December 1997 - Bankruptcy Act

Parliament approved an amendment to the Bankruptcy Act, which should be effective as of 1 April 1998. The amendment especially expanded the definition of a bankrupt so that, in particular, a debtor is bankrupt provided that he is not able to pay his due obligations (current long-term insolvency is hence not required). Further important changes of the law:

• The circumstances under which persons are obliged to submit a bankruptcy proposal are widened,
• A guarantor that settled an obligation instead of the debtor must claim and register his receivable,
• Penalties for late payment of taxes, customs duties, social security and health contributions will qualify as debts for these purposes,
• the situation of employees is now worse, as their claims may be settled during the bankruptcy proceedings only for claims arising after bankruptcy was declared,

Parliament also passed a resolution calling for the government to present a new bankruptcy law by the end of 1998. This new law should be designed to revitalise indebted companies.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

For further information on the above, please contact Mr Richard Fletcher by telephone on +420 2 2440 1300 or E-mail directly to richard.g.fletcher@arthurandersen.com