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The Czech Republic’s Ministry of Justice, in response to the economic impact of the current crisis resulting from the government measures related to the coronavirus (COVID-19) epidemic, has prepared an act on certain measures to mitigate the effects of the coronavirus epidemic on parties involved in legal proceedings, harmed persons, crime victims and legal entities, and to amend the Insolvency Act and the Enforcement Code (hereinafter the ‘Act on the Mitigation of the Impact of an Epidemic’). Written by Václav Kment of Kinstellar, s.r.o., advokátní kancelář, Prague.
The Act on the Mitigation of the Impact of an Epidemic contains a number of significant changes, particularly in the areas of procedural, insolvency and corporate law. The changes seek to respond to the consequences of the emergency measures taken by public authorities as a result of the coronavirus (COVID-19) epidemic (hereinafter the ‘Epidemic’). This news analysis provides an update to our earlier News Analysis on this subject: Coronavirus (COVID-19) Czech Republic proposals to amend insolvency laws.
Most of the changes proposed by the Ministry of Justice will be temporary for the duration of (i) the economic and social consequences of the Epidemic, (ii) the state of emergency declared by the Government of the Czech Republic due to health threats associated with the occurrence of coronavirus (COVID-19) (hereinafter the ‘State of Emergenc’”) and (iii) related to the emergency measures taken by public authorities.
Consequently, the proposed amendment does not contain generally applicable measures. Relief granted to its recipients merely aims to mitigate the situations caused by the epidemic for the duration of its consequences.
Changes in Czech insolvency law include:
On 31 March 2020, the draft of the Act on the Mitigation of the Impact of an Epidemic was approved by the Government of the Czech Republic, and has now been sent to the Chamber of Deputies to be adopted in an abbreviated procedure under a State of Legislative Emergency. The adoption of the Act on the Mitigation of the Impact of an Epidemic can therefore reasonably be expected to occur during the first half of April 2020.
Prior to the approval of the draft Act on the Mitigation of the Impact of an Epidemic, a draft amendment to the Insolvency Act was also submitted by judges of the insolvency section of the High Court in Prague. The draft aims to both mitigate the effect of the Epidemic and to introduce provisions to protect debtors in the event of any future crisis or emergency situation. Its authors argue that the current regulations contained in the Insolvency Act do not reflect and anticipate crisis situations of the current type, including the wide-scale potential insolvency of business owners in the Czech Republic. However, amendments in the form proposed by the judges of the High Court in Prague have not been implemented in the draft Act on the Mitigation of the Impact of an Epidemic.
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