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Insolvency Lawyers in Czech Republic

Insolvency Lawyers in Czech Republic

The insolvency of a company is required when it can no longer pay its debts or when they exceed a certain threshold. Creditors must benefit from an effective and fair trial before the court and insolvency practitioners. If your company is facing such problems, we invite you to talk to our insolvency lawyers in  Czech Republic and find out what are the legal steps to recover in this direction.

How to declare a Czech company insolvent

When a company is at a standstill and can no longer pay its debts, shareholders can sue for insolvency. Czech Insolvency Law governs the insolvency regime in Czech Republic which involves two legal methods, as follows:

  •  Reorganization of an insolvent debtor;
  •  Bankruptcy of an insolvent debtor with liquidation.

What is important to note is that according to Insolvency Law in Czech Republic, the insolvency of several companies with consolidated accounts is not recognized. A company can be subject to insolvency proceedings only when one of the two tests is presented in court: either a balance sheet test or a liquidity test. More about these procedures can be provided by our insolvency lawyers in Czech Republic.

Liquidity test for insolvent companies

The Czech Insolvency Act stipulates the liquidity test and the methods by which a company can be declared insolvent. If at least two creditors are involved, if the debts have not been paid for at least 30 days and if there is no possibility to pay them, then the company can be considered insolvent through the liquidity test method.

Moreover, if the company has already started suspending payments or if 3 months have been registered since the last payment, then, according to Insolvency Law, the company is obliged to file for insolvency in court. We invite you to talk to our insolvency lawyers in Czech Republic and find out what are the steps to follow in the case of companies requesting insolvency.

Balance sheet for the insolvency of a Czech company

Another method of applying for insolvency in Czech Republic is to check the balance sheet, as mentioned by Insolvency Law. In this case, if there are at least two creditors and if the total amount of debt exceeds the value of the assets, considering any potential income from future operations, then the company can be declared insolvent.

It is important to note that if there is no guidance on how to calculate the value of a debtor’s assets, in some cases it can be quite difficult to determine whether the debtor meets the balance sheet criteria. Here, the opinions of a debtor and creditors may vary, but a specialist lawyer can tell you more.

Insolvency law in the Czech Republic

Under Insolvency Law in Czech Republic, creditors are not prohibited from exercising their rights of set-off until the campaign is declared insolvent by a court. Basically, in the period from the submission of the insolvency application until its declaration by the court, the creditors have the right to compensation.

Furthermore, it is important to note that after the declaration of insolvency, the compensation can take place in compliance with one of the following requirements:

  •  the conditions for set-off were met before the insolvency was declared by the court, and the claim for set-off was legally filed in the insolvency proceedings;
  •  the claim was not declared by an inefficient legal act
  •  the creditor has no arrears that exceed the clearing.
  •  the creditor did not know of the company‘s insolvency when it acquired the respective claim.

Therefore, insolvency proceedings and creditors’ compensation are quite complex issues that only an experienced lawyer can explain to you. Find out from our insolvency lawyers in Czech Republic what to do if you apply for insolvency.

The Czech Republic, an excellent business destination

Foreign investors are attracted by the business conditions offered by the Czech Republic. Affordable labor force, a number of attractive investment incentives, strategic geographical position, a stable financial system, quality infrastructure, and a stable economy are some of the attributes that the Czech Republic presents to foreign players who want to do business in this country.  The following figures and statistics can convince you that the Czech Republic is the right destination for your future economic activities:

  1. In 2019, more than 32% of total foreign investment was absorbed by financial and insurance services, followed by manufacturing, by about 28%.
  2. The Netherlands was the largest foreign investor in the Czech Republic, accounting for more than 18% of the total.
  3. According to the 2020 Doing Business report, the Czech Republic ranked 41st out of 190 world economies in terms of optimal business conditions.

Feel free to contact our insolvency lawyers in Czech Republic and see how you can receive legal guidance for your company and activities.