Bankruptcy only after the pandemic
Among the measures adopted in the so-called judicial package is an extension of the time limit set for filing a petition for a declaration of bankruptcy in the case of over-indebtedness.
The situation so far
Act No. 7/2005 Coll. on bankruptcy and restructuring and amending certain acts provides genuinely comprehensive rules on the rights and obligations connected with establishing a state of insolvency and on the necessary steps you are obliged to take once such a state has been established.
Under the act, you find yourself insolvent if you are unable to pay or over-indebted. Persons over whose assets bankruptcy is to be declared must mandatorily meet at least one of these two criteria.
You are unable to pay if you are unable to meet at least two monetary obligations to more than one creditor 30 days after their due date. This means that you have at least two debts owed to at least two persons and their due date has already passed.
You are over-indebted if you have more than one creditor and the value of your obligations exceeds the value of your assets. It should be added, however, that only an entrepreneur can be over-indebted, as this is tied to persons who are obliged to keep accounts.
If you meet the second criterion, i.e. you are over-indebted, then under the previous rules you were subject to an obligation to file a petition for a declaration of bankruptcy within 30 days of when you learned, or, exercising due professional care, could have learned, of your over-indebtedness. In addition to you, the same obligation lies, on your behalf, with the liquidator or legal representative, and, in the case of a company, with the statutory body or a member of the statutory body.
CAUTION! If a company of which you are the statutory representative has become insolvent, you face a fine of EUR 12,500 if you fail to fulfil your obligation to file a petition for a declaration of bankruptcy. The penalty for statutory representatives who fail to fulfil their obligation is laid down by law. You therefore cannot escape the obligation to pay the fine even by concluding a contract with the company concerned, and all such contracts, declarations or agreements are void.
This means that if a contract between you as the statutory representative and the company whose statutory body you are contains a contractual provision that, in the event of a failure to file a petition for a declaration of bankruptcy, cancels your obligation to pay this statutory fine, or reduces the amount of the fine to, say, EUR 5,000, such a provision of the contract is void. If you have drawn up a separate contract for such a case, the entire contract becomes void. So whether it is an agreement to cancel the obligation to pay the fine for failing to file a petition for a declaration of bankruptcy, or a declaration by the company that it will pay this fine on your behalf, you cannot rely on such a legal act and must pay the fine.
The new rules
As we already explained to you in the previous article, the coronavirus pandemic has largely affected the length or running of certain time limits. The same applies to over-indebtedness.
If your over-indebtedness arose between 12 March 2020 and 30 April 2020, then under the new measure you have an extended time limit of 60 days to file a petition for a declaration of bankruptcy.
This means that if:
- you are an entrepreneur,
- you have at least two debts,
- the sum of these debts is greater than your assets,
- you learn of this, or could have learned of it, within the time frame mentioned above,
you have 60 days to file a petition with the competent court. If you became insolvent on, say, 13 March 2020, you may file the petition with the competent court no later than 13 May 2020.
Bankruptcy proceedings begin only upon publication of the resolution on the commencement of bankruptcy proceedings in the Commercial Bulletin. It is therefore likely that the actual commencement of the bankruptcy proceedings would occur only at a time when the legislature expects the situation in the country to improve.
Whether the 60-day time limit will also apply to insolvent parties who became over-indebted after 30 April 2020 is not yet known. An extension of the measure’s validity was, however, envisaged already in the bill itself, and any change to it will depend on how the situation develops in connection with the spread of the new COVID-19 virus.
Authors: JUDr. Ondrej Steiniger and Magdaléna Karvaiová
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