Amendment of the Insolvency Act could take effect on 1st of July 2016

Amendment of the Insolvency Act could take effect on 1st of July 2016

In May the Ministry of Justice sent an amendment of Insolvency Act for interdepartmental commentary procedure. This in words of the Minister of Justice, Robert Pelikán, "ambitious amendment to the Insolvency Law" proposes a number of fundamental changes related mainly to personal bankruptcies. The aim of this amendment is mainly the consistent protection of rights of participants in insolvency proceedings, strengthening supervision over insolvency administrators, reducing administrative burdens of insolvency courts, regulation of so-called deleveraging companies and strengthening the protective features to avoid so-called chicanery insolvency petitions.

The amendment focuses on reducing administrative burdens of insolvency courts and also on increasing transparency of insolvency proceedings through eg. the introduction of machine readable filing of insolvency administrators and preference of filing through data boxes. On the other hand, the amendment allows for eliminating the negative impacts of the chicanery insolvency petition through a preliminary hearing of an insolvency petition – whereas currently the insolvency proceedings are initiated automatically at the moment when the insolvency petition is filed to the court, in the future insolvency courts shall preliminarily judge whether a insolvency petition is justified, which however will increase the administrative burden of the courts.

The amendment also aims to strengthen the supervision of the Ministry of Justice over insolvency administrators and their office holding and also will help to eliminate the business of the companies which "abuse the difficult situation of the debtor and for worthless advice they charge ten thousands reward", as the Minster of Justice said. The deleveraging companies which would in addition to lawyers, notaries and insolvency administrators provide advice to people in bankruptcy will operate only on the basis licence of the Ministry of Justice. Changes shall also apply to the method for assigning insolvency cases which is currently mainly benefited by large companies with many branches which may be to the detriment of quality of their work.

The government should deal with the proposal of the amendment in June 2015, while the changes of the Insolvency Law are expected to come into effect on 1st of July 2016, as proposed by the Ministry of Justice.