Background

The bill implementing the EU Preventive Restructuring Directive – a means of financial relief for entrepreneurs (companies only) – should have originally been enacted and introduced last year. As the bill has not yet been approved by the Chamber of Deputies, the deadline has been moved to July 2022.

What's new?

The new government has amended the original proposal, drafted by its predecessor.

Once enacted into Czech Law, preventive restructuring should be a flexible way of offering a range of measures to help entrepreneurs in financial difficulties and support them in continuing to do business.

In a major intervention in the relationship between the debtor and their creditors, the proposal aims to help entrepreneurs who have identified early financial problems but are not yet insolvent, allowing more timely intervention.

As restructuring proceedings are not public, this would allow the entrepreneur to avoid negative publicity should they be successful. The proposal generally relies on the negotiation of the restructuring measures that make up the restructuring plan between the entrepreneur and their key creditors.

As opposed to insolvency proceedings, courts are only involved in separate proceedings necessary to resolve partial issues (eg, approval of the restructuring plan in case of disagreements), which gives the entrepreneur more freedom to solve their financial issues. The restructuring measures may include an asset sale, a change of debt structure and investor finance.

However, entrepreneurs may not initiate preventive restructuring if they have been declared insolvent within the last five years.

Key takeaways 

• It remains to be seen whether the bill will be approved in its current form or whether it will undergo any substantial changes. 
• If successful, preventive restructuring should help entrepreneurs to avoid insolvency altogether.

Find out more

To discuss the reforms in more detail, please contact a member of our Restructuring & Insolvency team. 

Take a look at our new European Restructuring & Insolvency online tool to compare the restructuring and insolvency regimes across 23 European jurisdictions.