The latest amendment to the Czech Insolvency Act applies a shorter debt discharge period to both entrepreneurs and non-entrepreneurial individuals.

Background

The Czech Parliament has finally approved an amendment to the Czech Insolvency Act, reducing the debt discharge period from five to three years, in line with EU Directive 2019/1023. A key point of contention that delayed the amendment was whether to apply this shortened period not only to entrepreneurs but also to non-entrepreneurial individuals, extending beyond the EU’s minimum requirements.

The bankruptcy court presiding over the FTX Trading bankruptcy last month issued a memorandum opinion addressing valuation of cryptocurrency-based claims and how to “calculate a reasonable discount to be applied to the Petition Date market price” for certain cryptocurrency tokens.

Czech Republic has recently implemented the Act on Preventive Restructuring (the Act), with effect from 23 September 2023, which offers companies in financial difficulty a chance to restructure their assets, liabilities, and capital structure.

Initiation

The preventive restructuring process may be initiated by a company if it:

Who owns cryptocurrency held by a cryptocurrency exchange? Do the cryptocurrency assets belong to the customers who deposited the crypto with the exchange, or do the cryptocurrency assets belong to the exchange itself? The answer to this question will have huge significance, both in terms of creditor recoveries as well as preferential transfer liability exposure.

In this second part of our blog exploring the various issues courts need to address in applying the Bankruptcy Code to cryptocurrency, we expand upon our roadmap.

Many authorities and commentators have considered cryptocurrencies, and the blockchains that undergird them, as a potentially disruptive force in the financial industry. Now, that disruption has made its way to a different side of finance—bankruptcy, and during the past year, the United States bankruptcy courts have had to confront many unexpected challenges involved in dealing with cryptocurrency.

A proposed amendment to the Insolvency Act, has been approved by the government and is currently under discussion in the Czech Parliament. It is expected to significantly alleviate the situation for debtors seeking debt relief. The previous government had intended to introduce similar changes; however, the legislative process was halted by the end of its term.

Current position

Currently, debtors can achieve debt relief only after 5 years of "good conduct", unless they:

How close is too close? The answer to this question can have dire implications for people and companies involved in the cannabis industry who wish to seek bankruptcy protection.

A reworked Czech Republic bill on preventive restructuring could soon be implemented.

Act on preventive restructuring

Are bankruptcy doors now opening for cannabis companies? A decision last week from a California bankruptcy court indicates perhaps so, at least for cannabis companies that are no longer operating.

Factual Background