Approval of reorganization plan

Approval of reorganization plan

On 30. 06. 2015 the Supreme Court of the Czech Republic interpreted the provision of Sec. 348 of Law no. 182/2006 Coll., on Bankruptcy and Its Resolution (Insolvency Act), (hereinafter referred to as „the Law“), which governs the conditions for approval of the reorganization plan by the court.

The Supreme Court expressly stated that the conditions for approval of the reorganization plan enumerated in Sec. 348 paragraph 1 let. a) to e) of the Law must be assessed by courts individually and separately; as such compliance with one of the conditions cannot lead to an automatic conclusion that other conditions are met as well.. And vice versa, failure to meet one of the conditions does not necessarily imply breach of other condition. To demonstrate the interpretation the Supreme Court suggested that e.g. in case the court identifies a dishonest intent of the debtor (Sec. 348 paragraph 1 point b) of the Law), it cannot use such finding as a sole ground for conclusion the reorganization plan is unlawful.

The decision also presents us with a legal opinion of the Supreme Court that the condition set out in Sec. 348 paragraph 1 let. d) of the Law (i.e. every creditor shall receive the total amount of proceeds which is equal or higher to the amount which must be received in case of liquidation) is met if creditors receive proceeds in the „same amount“ as they would if the insolvency were resolved by bankruptcy.