New Preventive Restructuring Framework Finally Arrived In The Czech Republic

After a delay of more than a year, an Act on Preventive Restructuring (the "Act") implementing the EU directive on preventive restructuring frameworks finally became effective in the Czech Republic on 23 September 2023. The long-awaited Act introduced a brand-new legal tool enabling viable enterprises in temporary financial distress to achieve restructuring outside insolvency proceedings. It is a voluntary and flexible process requiring cooperation with creditors, but not necessarily with all of them.

Who can use it?

Access to preventive restructuring is limited to corporate debtors that (i) are in good faith regarding the restructuring, viability and restoration of the business, (ii) are not insolvent in the form of illiquidity (cash-flow insolvency), (iii) are facing financial difficulties so serious that failure to implement the proposed restructuring would render the company insolvent, and (iv) are excluded from preventive restructuring in cases where