Summary of the recent legislative news for the Czech Republic

Preventive Restructuring

In connection with the implementation of the European Parliament and Council Directive 2019/1023 dated 20 June 2019 concerning the preventive restructuring, debt elimination and disqualifications, and measures raising effectivity of restructuring, insolvency and debt elimination, a new institute of preventive restructuring will be introduced into Czech insolvency law. The legislative process is still in the early stages (with only the nomination of the expert committee), and the current post-COVID-19 epidemic situation may welcome the implementation of such measure.

In theory, preventive restructuring should be a tool for entrepreneurs who have a strong business case but find themselves in difficulty and cannot reach an agreement with their creditors. Negotiations between the debtor and its creditors moderated by the court will be the key factor of this hybrid procedure. Unlike in restructuring or insolvency, the core will not be an all-encompassing solution concerning all debts of a debtor, but rather the focus will be on claims of creditors selected by the debtor.

The goal of preventive restructuring is to reach an agreement in the form of a restructuring plan. In this respect, a test of the debtor’s strong business case (i.e. its ability to keep its business running and profitable) will play a crucial role. If the creditors do not support the restructuring plan, there are other solutions for passing the business case test (e.g. an opinion by a restructuring advisor, auditor, or a test for the modified cover gap).

There are certain receivables that cannot be included on the “selected” list for preventing restructuring. They include employees’ claims, alimony claims, claims based on delicts and disputed claims.

It is questionable whether preventive restructuring will be considered an important progression in Czech insolvency law or whether the institute is only to implement all changes the directive introduces concerning restructuring and insolvency.

Prohibition of arranging legal presumptions and fictions in contractual relationships

In the current contractual practice, it is a common to arrange for so-called legal fictions or presumptions (both rebuttable and irrebuttable). It will be necessary to reconsider this practice, given the recent judgment of the Supreme Court, which decided that it is not rightfully possible to arrange for legal fictions or presumptions in contracts.

Typical fictions and presumptions read as “we take for granted that,”, “it deemed that”, “it is considered”, or “it is regarded”.

Most frequently, they are used in connection with delivering mail (“a document is considered delivered three days after being dispatched”), the moment of payment (“it is deemed that the purchase price is paid at the moment of its crediting to the account of the seller”), or the moment of delivery or handover (“fulfilment is considered accepted in case…”).

The reason for using them is obvious – they easily enable the parties to arrange for or determine a presupposition, which may be fulfilled in reality, but may not. Finally, what occurs is a rise in legal certainty concerning several questions which may otherwise be disputable or hard to prove.

The possibility of arranging for presumptions and fictions in contracts did not make its first appearance in the decision-making practice of courts. The Supreme Court had dealt with them already in the period of 2008-2010, with the unambiguous conclusion that a legal presumption may be determined by law only, not on the grounds of parties’ agreement. The court argumentation was built on the fact that a legal presumption agreed in a contract does modify (reverse), in its effect, the burden of proof in a potential dispute (i.e. it changes the public institute of procedure law, the modification of which is not permitted by procedure regulations).

However, these rulings only applied to situations complying with the regulations that were effective before the 2014 civil law recodification. At the same time, it was not completely unambiguous whether the rulings should be applied to so-called irrebuttable presumptions only, or whether they apply to presumptions and fictions in general. As a consequence of this lack of clarity, the rulings were questioned as to their applicability by both academia and practice, and it was generally considered acceptable to arrange for at least rebuttable presumptions in contracts. Moreover, this approach was strengthened after the aforementioned 2014 recodification, as the new civil code placed the autonomy of the contract parties’ wills at the basis of the civil law.

All doubt was, it seems, dispelled by the present verdict of the Supreme Court, which, following the older rulings, explicitly confirmed that it is not possible to arrange for, via an agreement of parties, any type of fictions and presumptions, including those that are rebuttable.

Despite the fact that even in the most recent verdict the court ruled on the issue having its basis in the legal rules in force before the recodification, the core of the court’s argumentation lies in the conflict with the procedural rules (which were not changed in this respect). It is thus expected that the approach of the Supreme Court will be the same as to the contracts concluded after 2013. The (relative) invalidity of all presumptions and fictions concluded in that way is the direct consequence of the ruling; this may considerably influence the balance of rights and duties of the parties in contracts, and it may disturb legal certainty, not only in the case of emergence of disputes.

For the negative effects to be minimized, we recommend that all contracts are checked, and if they contain any presumptions or fictions, the contract parties shall try to agree upon amendments dealing with problematic formulations. It is very likely that it will be possible to rephrase such provisions, keep them in force, and thus raise legal certainty.

Changes in delivery of documents concerning labor law

Delivery of labor law documents is one of the evergreens of labor law. The amendment of the labor code, which was approved by the Senate on 10 June 2020, attracted the attention of all practitioners.

The changes that it introduced include the delivery of documents concerning formation, changes and termination of employment, or contracts of work not performed within the standard employment relationship, documents concerning removal of leading employees from their post, remuneration (pay or salary notices), and a record of employees breaking rules on sick leave. At present, these documents need to be delivered personally (under Section 334/1 of the labor code). In practice, this happens either in the workplace, in a flat, or wherever the employee is met, or via a network or service of electronical communications, and it if it is not possible, via a provider of post services (according to Section 334/2 of the labor code).

The amendment replaces the current concept (according to which it was actually possible to choose the delivery method in practice) and introduced the “priority” preferred option, which is the personal delivery in the workplace (i.e. the present “obligatory” attempt at delivering documents in an employee’s flat or elsewhere, where they were to be met, was dropped).

If it is not possible to deliver the respective paperwork to the employee in person, the paperwork can be delivered:

• wherever the employee can be met;
• via their data box;
• via a provider of post services; or
• via a network or service of electronical communications.

Although this has already been happening in practice for a couple of years, the list also explicitly includes an alternative option of delivery to a data box, if it is not possible to deliver to the employee in person at the workplace. It is quite practical, as in such cases it is not necessary to fulfil some other conditions (the document does not have to be signed with a recognized electronic signature, and the employee does not have to confirm the acceptance of such a document to the employer via a data message signed with their recognized electronic signature within three days).

However, it is important to mention (besides the obvious catch that very few natural persons have set up a data box) that an employer is free to use this method only if the employee has given their written consent (either for each individual case of delivery, or generally).

As to the written delivery via a provider of post services, the main difference lies in the fact that an employer will not send the document to the latest known address, but to the address that an employee has provided in written form (thereby, part of responsibility of the delivery is shifted to the employee). It is a pity that the lawmakers did not add a detailed description of the option of delivery via email (which would be a very effective means of delivering documents in labor relationships); despite this, the amendment is a giant step forward.