The right to set-off claims and obligations in insolvency proceedings is an important tool for creditors in order to protect themselves against the insolvency risk of a contractual counterparty. This article gives a short overview of the rules for set-off in insolvency proceedings in Austria and certain CEE jurisdictions not taking into account special provisions for close-out netting and similar transactions.

Austria

Set-off in insolvency proceedings

This guide provides a comparative analysis of certain key areas of law and procedure for those involved in or affected by financial distress of a corporation and the trading of distressed debt across Europe.

We are pleased to present this Summer 2011 edition of the CMS Restructuring and Insolvency in Europe Newsletter.

The Ministry of Justice, in response to the economic impact of the current crisis resulting from the government measures related to the COVID-19 epidemic, has prepared an act on certain measures to mitigate the effects of the SARS CoV-2 coronavirus epidemic on parties involved in legal proceedings, harmed persons, crime victims and legal entities, and to amend the Insolvency Act and the Enforcement Code (hereinafter the “Act on the Mitigation of the Impact of an Epidemic”)

Analysts expect that GDP will plummet as a consequence of the restrictions on economic activities imposed as a consequence of the COVID-19 pandemic, and that the global economy, and with it the Czech economy, will slow down considerably. Various entities from across numerous industries are facing, or may soon face, an immediate liquidity shortfall.

The Czech Government has prepared several measures that should help people and businesses in the challenging times related to the outbreak of COVID-19. These measures are currently divided into several draft laws, covering topics such as insolvency, loans, leases, employment, and court proceedings. We have chosen relevant fields briefly described below and we will provide more detailed information about these relevant fields once the final laws are passed by the Parliament (which should be shortly due to the state of legislative emergency).

Act on the Mitigation of the Impact of an Epidemic”).

The Act on the Mitigation of the Impact of an Epidemic contains a number of significant changes, particularly in the areas of procedural, insolvency and corporate law. The changes seek to respond to the consequences of the emergency measures taken by public authorities as a result of the Coronavirus COVID-19 (hereinafter the “Coronavirus”) epidemic (hereinafter the “Epidemic”).

The draft Lex Covid, which amends insolvency and enforcement laws and draft law on certain measures related to repayment of loans in relation to the COVID-19 pandemic, has been approved by the Czech Parliament and must now be counter-signed by the President.

The insolvency law-related measures include:

Debtor's delay in payments

With respect to the dynamic course of events regarding the coronavirus disease 2019 (COVID-19) commonly known as the "coronavirus" we address the threat of insolvency and related liability of the statutory bodies (Directors), and provide a list of practical mitigating steps.

Test the Liquidity of Your Company

The company is insolvent in a form of illiquidity (in Czech: padek) if (a) it has several creditors; (b) due and payable debts for more than 30 days; and (c) it is not able to fulfil them. Therefore, keep up-todate records about due payments and remaining periods.

In response to the economic impact of the current crisis resulting from Czech government measures related to the COVID-19 pandemic, amendments to Act No. 182/2006 on insolvency procedures (the “Insolvency Act”) are currently being prepared. A number of changes are currently being drafted by the Ministry of Justice in cooperation with the Ministry of Finance. A draft amendment to the Insolvency Act has also concurrently been submitted by judges from the Insolvency Section of the High Court in Prague. 

Amendment prepared by the Ministry of Justice