Czech insolvency reform - good news for the financiers?

Substantial changes to the Czech insolvency regime took effect on 1 January 2008. Importantly, this new regime has introduced a "rescue culture" into the Czech Republic. For the first time, a reorganisation proceeding is available as a non-liquidation form of insolvency procedure. The new rules seek to improve the position of creditors in insolvency proceedings. Recovery for secured creditors should also be greater than under the previous law. The new regime is likely to bring about new challenges and risks. These include the new rules for the ineffectiveness of certain legal acts (undervalues, preferences and fraudulent transfers) undertaken by the debtor prior to the commencement of insolvency proceedings and strict penalties for creditors if they overstate the value of their claim or security.