Act No. 111/2022 Coll. on resolving imminent bankruptcy, implementing Directive (EU) 2019/1023 of the European Parliament and of the Council of 20 June 2019 on restructuring and insolvency, will come into effect on July 17, 2022.

The law is intended to legally regulate the situation of an entrepreneur who is in danger of bankruptcy due to imminent insolvency, with the aim to handle the entrepreneur’s situation in time to avert bankruptcy and allow the entrepreneur to carry on business activities.  

The entrepreneur’s imminent bankruptcy of is to be dealt with in the framework of a preventive proceeding, which is either public preventive restructuring or non-public preventive restructuring.

According to the explanatory memorandum to the bill, the law is aimed at providing debtors with sufficient scope for effective, efficient, fast and transparent preventive restructuring right at the outset when there is a danger of bankruptcy, thus preventing the debtor from going bankrupt and resolving the debtor’s situation by way of an insolvency proceeding. The purpose of the law is also to avoid job losses and loss of know-how, to maximize the overall value for creditors compared to what they would gain in a possible bankruptcy, as well as to prevent an increase in nonperforming loans.

Resolving imminent bankruptcy by way of a preventive proceeding is allowed, however, only in the case of a debtor that is a legal entity.