If you have decided to set up business in the Czech Republic it is very important to be aware of the details of your company’s financial situation and anticipate difficulties in order to avoid bankruptcy.
Business brings with it frequent entrepreneurial risks, especially financial ones. In case business does not go well and the entrepreneur does not want to or is not able to adhere to his/her financial obligations, he/she may become insolvent.
The insolvency register is a publicly accessible list that contains about the insolvent party and the status and course of the insolvency proceedings stipulated by law. The insolvency register is also used to deliver a significant portion of court documentation related to the proceedings. It is, therefore, up to the creditors of the insolvent party to protect their rights and to monitor the proceedings that might be relevant for them by regularly monitoring the insolvency register. The insolvency register is accessible electronically.
There are several methods of dealing with insolvency. These include the traditional method when bankruptcy proceedings represent a gradual sale of the bankrupted property, the acquired revenue being divided among the creditors, which is a mostly liquidation solution for the bankrupt party, as well as new forms of bankruptcy solutions such as reorganization and discharge of debt.
Bankruptcy is the most frequent method of dealing with a debtor’s insolvency. Within the bankruptcy proceedings, the assets of the debtor are realized and the proceeds divided among creditors based on conditions stipulated by law, while claims of certain creditors will have a priority position. In the case of the debtor being a physical person, a non-entrepreneur, or where the annual turnover of the debtor does not exceed CZK 2 million and the debtor does not have more than 50 creditors, the court may decide on so-called minor bankruptcy, which is a shortened and simplified version of bankruptcy.