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20. 6. 2017
An extensive amendment to the Insolvency Act

An extensive amendment to the Insolvency Act deals with conditional receivables (including bank guarantees), assessment of companies‘ payment incapacity and insolvency petitions, debt relief and other aspects of insolvency proceeding.

Act no. 64/2017 Sb.

Effectiveness: 1 July 2017

 

 

The amendment introduces a preliminary assessment of an insolvency petition and limits a possibility of filing mischievous proposals

An insolvency petition filed by a creditor will be newly, before publishing of such petition in the insolvency register, subject to a preliminary assessment. In the event of any doubt about the legitimacy of the insolvency petition, a court may decide that for a limited period of time such petition will not be published in the insolvency register. A court has to assess as to whether the insolvency petition is obviously groundless or not within seven days of filing of the insolvency petition.

In the event of the creditor’s insolvency petition, a creditor shall always be obliged to put down a deposit for cost of the insolvency proceeding in the amount of CZK 50,000 in the event of legal entity being an entrepreneur, and CZK 10,000 in the event of a petition against a legal entity which is not entrepreneur or an individual.

If the insolvency petition filed by a creditor is refused due to its obvious groundlessness, an insolvency court may impose a penalty on the petitioner for filing of such groundless petition up to the amount of CZK 500,000. Moreover, an insolvency petitioner will be entitled to file a new petition against a same debtor no sooner than after six months.

 

The amendment stipulates a different concept of a bankruptcy.

The amendment supplements current concept of the bankruptcy in a form of the payment incapacity for entrepreneurs keeping the books by introducing the “coverage gap”. The coverage gap means a difference between the amount of debtor’s due monetary obligations and debtor’s disposable incomes. Thus, the entrepreneur is not bankrupt provided that the coverage gap is lower than 10 % of the amount of the entrepreneur’s due receivables in the course of the relevant period according to the liquidity statement.

However, in the event that the coverage gap is not lower than 10 % of debtor’s due receivables, a debtor still does not have to be considered as payment incapable. This could be a case when it could be expected that the coverage gap will lower below 10 % of debtor’s due receivables prospectively.

 

A new principle is introduced in the event of the assignment of receivable

A creditor - legal entity, which has acquired a receivable within six months before the initiation of the insolvency proceeding or after such initiation, shall be obliged to provide information on its beneficial owner under the Money Laundering Act. Unless the creditor fulfils such obligation, it is not entitled to exercise its voting rights connected with respective receivable.

A creditor does not have the above-mentioned obligation in the event that the respective transaction from which the receivable arose is not subject to an inspection under the Money Laundering Act (in the event of transaction between the “obliged person” and the creditor). The creditor does not have such obligation also if the consideration from the transaction (between the creditor and other person than the obliged person), from which the receivable arose, is lower than EUR 10,000.

If the creditor is an entity without a beneficial owner in line with the Money Laundering Act, it is sufficient that the creditor provides an affidavit stating that it does not have a beneficial owner.

 

The amendment introduces innovations regarding a discharge

The amendment stipulates an obligation for a debtor that his/her petition for discharge permit has to be drafted and submitted on behalf of a debtor by attorney-at-law, notary, bailiff or insolvency administrator. Such person is entitled to a reward in the maximum amount of CZK 4,000 (CZK 6,000 in the event of a discharge of spouses respectively). The petition may also be drafted and submitted on behalf of a debtor by an accredited person, which is not entitled to any reward. Such accredited person may be only a legal entity. The accreditation is granted by Ministry of Justice upon submitting respective application to the Ministry. The applicant has to prove, inter alia, its public beneficial status and also impeccability in the course of providing services concerning a discharge.

A debtor is entitled to submit a petition on his own provided that he has a legal or economic education or passes an exam of insolvency administrator. In the event that a debtor is a legal entity, such conditions have to be fulfilled by its representative.

The amendment further stipulates an obligation to submit the petition on the prescribed form.

Moreover, the amendment introduces a new mechanism of allocation of particular cases concerning discharge so that the principle of district courts is substituted by the principle of regional courts so that such mechanism corresponds to that used with respect to bankruptcy.

As a reaction to persisting lack of interest on the part of creditors regarding attendance on the convened creditors meeting, in the event of discharge, creditors meeting shall be convened upon a proposal of majority of all creditors owning receivables representing simultaneously a majority of registered receivables or an insolvency administrator or creditors committee. Further, the amendment stipulates a right of courts to convene creditors meeting ex officio.

 

Unsuccessful discharge does not have to result in bankruptcy

In line with the current legislation a court is obliged to decide on a bankruptcy as a method for resolving debtor’s insolvency in the event that the petition for discharge permit is refused, taken into account or dismissed by a court. As of the effectiveness of the amendment a court may decide whether to undertake such step or not. A choice of a method for resolving insolvency is in the sole discretion of a court. In the event that a court does not decide on a bankruptcy as a method for resolving insolvency, a court shall strike out the proceeding.

A court is not entitled to decide on a bankruptcy as a method for resolving insolvency in the event that the insolvency petition is not submitted by a debtor (or on his behalf). Further, the bankruptcy cannot be ordered in the event that a court finds out that a debtor’s property is completely insufficient for satisfying creditors.

On the other hand, a court shall decide on a bankruptcy as a method for resolving insolvency in the event that a debtor is in default with fulfilment of his obligations arising from the approved discharge or it becomes apparent that substantial part of a payment calendar cannot be fulfilled. In such a case, a court shall simultaneously decide on a cancellation of the method of discharge originally ordered.

 

The amendment makes conditions for voting of related parties and close persons more strict

As opposed to the current wording of the insolvency Act, the amendment forbids to creditor to vote in matters of a person close to the creditor or a person which forms a concern with the creditor (unless stipulated otherwise by the law). Moreover, such ban shall also apply to a situation where the creditor is a person close to the debtor or forms a concern with the debtor. On the contrary, such ban shall not apply in the event of voting on the restructuring plan submitted by a person other than the debtor or above-mentioned creditor. In justified cases an insolvency court may allow voting of such close persons or related persons.

 

The amendment introduces an obligation to prove a claimed receivable

In the event of creditor’s insolvency petitions, the insolvency petitioner, who is keeping the books, is obliged to prove its claimed receivable against a debtor – legal entity.

Claimed receivable could be proven by acknowledgement of a debt with verified signatures, enforceable decision, notarial deed or bailiff’s deed with permission to enforceability or confirmation of auditor, judicial expert or tax advisor stating that the petitioner is keeping books regarding the respective receivable.

In the event of the insolvency petitioner being a foreign entity, either legal entity or individual, the receivable may be proven by a certificate verified or issued by a foreign state, which corresponds to the above-mentioned documents in line with the law of such state.

 

 

 

 

22. 5. 2017
The amendment to Bankruptcy and Restructuring Act

Effective from: 1 April 2017

The amendment changes the regulation of the discharge of debts (in Slovak: oddlženie) for individuals. The aim of the amendment is to make individual bankrupt more available and to motivate the debtors to earn a living for themselves.

The regulation of the discharge of debts for individuals comes from foreign legal systems. It particularly concerns the so-called Fresh Start concept, which means that all of the debtor’s assets are liquidated and his debts are discharged. This concept corresponds to discharge of debts in a bankruptcy. In practice the amendment makes the existing regulation more precise.

No Fresh Start is the other concept. It works with a restructuring of debts according to a repayment schedule ordered by a court. It is an alternative for debtors with sufficient funds to satisfy creditors. This concept corresponds to discharge of debts by a repayment schedule.

Both of the procedures can be initiated only by an individual debtor (no matter if the individual is an entrepreneur). The debtor has to be insolvent and the debt collection or similar procedure has to be conducted against them.

The amendment modifies the selection of the restructuring administrator. Newly the selection of the administrator is secured randomly by technical means (such as the selection of a judge). The restructuring of a debtor will not be conducted by an administrator chosen by a debtor, but by a restructuring administrator randomly selected by a court.        

Debtor has a right to appoint an administrator at their discretion to compile a restructuring plan. 

 

 

 

 

22. 5. 2017
Activation of electronic mailboxes of legal entities

The duty for legal entities to have an electronic mailbox activated becomes effective on 1 July 2017.

An electronic mailbox allows the legal entity to communicate with public authorities electronically, especially to receive official documents.

To access the mailbox, the statutory representative or other authorized individual (a Slovak citizen) needs a personal identification card with an electronic chip and a personal security code. A foreigner will need a residence permit card with an electronic chip.

Electronic mailboxes are established by the Government Office of the Slovak Republic and are located at the Central Government Portal on the www.slovensko.sk website. They are free of charge.

 

 

22. 5. 2017
Symbolic purchase price of a real estate and simulated legal act

(Resolution of the Constitutional Court of the SR from 21 June 2016)

The defendant bought an apartment from her and the plaintiff's parents for the purchase price of 1,00 SKK. The plaintiff asked the court to set-off the value of the apartment to the defendant’s share on heritage.

The court of first instance dismissed the action. The court did not find the purchase contract to be a simulated legal action (which was supposed to mask a donation). The court held that the symbolic purchase price is justified by the defendant’s long-time care of their parents. The plaintiff appealed.

The Constitutional Court dismissed the action, too. The Constitutional Court confirmed conclusions of the court of first instance, that the purchase contract was not a simulated legal action due to the symbolic purchase price.

Purchase contract consists of two essential elements (the object of the purchase and the purchase price), which differ a purchase contract from a donation.

Essential element of donation is a transfer of ownership rights free of charge. Moreover, the aspect of long-term care of parents is in compliance with good morals.

 

 

4. 4. 2017
Amendment of the Insolvency Act fundamentally changes a numerous aspects of the insolvency proceedings.

Amendment of the Insolvency Act fundamentally changes a numerous aspects of the insolvency proceedings, from securing of the conditional receivables (including bank guarantees), through considering of the insolvency of companies and insolvency motions, until the debt reliefs.

Among other things, the changes relate also to the system of assigning of particular cases related to debt relief where the district court principle will be replaced by the similar principle as in case of the bankruptcy proceedings, namely authorization under the regional courts principle.  In the view of the scope of changes of the Insolvency Act, we will pay more attention to this topic in the next special edition of the AK-PS Legal News.

Act no. 64/2017 Coll.

With effect from: 1.7.2017

 

 

4. 4. 2017
Regulation of the European Account Preservation Order should facilitate the cross-border debt recovery in civil and commercial matters in the EU.

Regulation of the European Account Preservation Order should facilitate the cross-border debt recovery in civil and commercial matters in the EU.

Under this regulation, the motion to impound financial means on an account has to be submitted to a court. It is possible to submit it even before the initiation of the proceedings in the very same matter (the legal action). The creditor has to establish the existence of an urgent need to be provided with the order. At the same time there would have to be a real risk of thwarting or fundamental decrease of chances for the subsequent successful receivables enforcement proceedings against the debtor in case that the order is not issued.

The important benefit for the creditors is that the debtor does not take part in the proceedings related to the issue of the order and he or she is only informed about it subsequently. Thus, the debtor has no chance to transfer the financial means, to hide them or spend.

The regulation further specifies the protective measures in favor of the debtor against possible misuse of the order by the creditor when it provides for the cases in which the creditor is obliged to provide an assurance. Apart from that, the creditor is also liable for the damage incurred to the debtor by issuance of the order due to creditor’s mistake.

Regulation (EU) of the European Parliament and of the Council a Rady no. 655/2014 from 15 May 2014

With effect from: 18 January 2017

 

 

4. 4. 2017
Lease agreement concluded for an indefinite period cannot be renewed in case of its termination by notice, the Supreme Court declared.

The lessor (plaintiff) claimed that the lessee (defendant) had to vacate a part of the land which was rented to him under the lease agreement (dated 1 March 2011). The lease agreement was terminated by a written notice as of 31 January 2015. However, the defendant didn’t vacate the premises declaring that there was a tacit renewal of the lease according to the provision of Sec. 2230 (1) of the Civil Code (the plaintiff didn’t call upon him to return the premises). The Court of the First Instance allowed the legal action and the Appeal Court upheld the judgement.

The Supreme Court confirmed the previous decisions and thus accepted the plaintiff’s view, i.e. that there was no renewal of the lease agreement in question.

According to the Supreme Court, it is possible that the lease is renewed in accordance with the provision of Sec. 2230 (1) of the Civil Code only if it is a lease concluded for a definite period of time and such lease terminates by expiration of the lease term. In case that the lease is terminated in a different way (by an agreement, by a termination notice after expiration of the time of notice), the provision of Sec. 2230 (1) of the Civil Code shall not apply. Even in case that the lessor doesn’t call upon the return of the property within a time limit specified in Sec. 2230 (1) of the Civil Code, the renewal of the lease would not occur.

(Decision of the Supreme Court from 12 December 2016, file no. 26 Cdo 4354/2016)

 

 

4. 4. 2017
According to the Supreme Court, a failure to keep one’s promise to give a property on the basis of which the other party already invested into the property, means an incurrence of liability for the damage caused by breach of the precontractual liability.

The plaintiff claimed a declaration that the defendant is obliged to pay CZK 1,823,434 as an unjust enrichment. The defendant firstly offered to the plaintiff her house as a gift in 2008 and subsequently she concluded an agreement on authorization to perform a reconstruction of this property with the plaintiff.  Then the defendant changed her mind and wrote a last will according to which the plaintiff should have inherited the property. However, she finally cancelled the last will and at the same time she also terminated the agreement on plaintiff’s authorization to perform the reconstruction.

According to the plaintiff, there occurs a breach of the precontractual liability. The Court of the First Instance allowed the legal action only in part – as to the amount of CZK 1,663,500 (difference in evaluation of the paid costs). The Appeal Court changed the judgement of the Court of the First Instance and refused the legal action as to the amount of CZK 1,012,500 and declared that the plaintiff should be paid CZK 650,000 (release of the unjust enrichment in the amount in which the plaintiff increased the property’s value in fact – not the costs the plaintiff really paid).

The Supreme Court revoked the decision of the Appeal Court and agreed with the plaintiff’s view or the Court of the First Instance respectively (there was a breach of the preventive obligation as provided by laws in which case the defendant is liable for damages).

According to the Supreme Court, the plaintiff reasonably presumed conclusion of the gift contract. Because of that, the costs invested by him on the property on the basis of the agreement on performance of the property’s reconstruction, represented a real damage (uselessly made costs) if no gift occurred. The other party changed her mind as to the gift without any justifiable reason, even though she knew that the plaintiff had performed the reconstruction of her property with her consent and having a good faith in the subsequent giving. The plaintiff thus has a right for damages in the amount of the paid costs.

(Decision of the Supreme Court from 26 October 2016, file no. 25 Cdo 337/2015)

 

 

3. 2. 2017
Act on Services for Trust in Electronic Transactions

Act no. 297/2016 Coll.
With effect from: 19 September 2016

This act was enacted as a consequence of the EU regulation no. 910/2014 (so-called eIDAS). At the same time, this Act abolishes the previous Act no. 227/2000 Coll., on Electronic Signature.

The Act represents a fundamental release of the strict requirements laid upon the electronic signing of documents in civil law relations. For the purpose of a legal act it is newly possible to use any form of electronic signature, even a plain signature. Newly, even a simple scan of one’s own signature or just a designation of the sender in a text of e-mail fulfils the definition of the electronic signature.

The Act also indirectly acknowledges the written form of the documents which were not signed by a higher form of electronic signature.

The less strict regime laid upon the electronic signing of documents will, however, not be applied in case of labour-law relations, nor in relations with the public authorities. (open the official wording).  

 

 

 

 

3. 2. 2017
The First Amendment of the Civil Code

Act no. 460/2016 Coll.

With effect from: 28 February 2017 (1 January 2018 in part)

The term linear construction is newly incorporated into the Civil Code. It is also provided that such linear construction does not form a part of the land. The owner of the land with a linear construction does not have a pre-emptive right to such construction. The other way round, neither the owner of the linear construction has a pre-emptive right to the land through which the linear construction leads.

Based on the amendment, legal pre-emptive right of the joint owners to the common property is reinstated. This particular regulation will come into effect on 1 January 2018.

The amendment further regulates the legislation of trust funds. Newly, the trust fund will be established by registration with a special trust fund register which will be newly founded. The register should be a parallel to the existing Commercial Register. The name of the beneficiary will also be filed with the register, however only to its non-public part. This regulation will come into effect on 1 January 2018, as well.

The amendment further clarifies the form of granting a power of attorney for legal actions which should be made in the form of a public deed. The Civil Code newly provides that it is sufficient that such power of attorney is granted with a certified signature (and not in the form of a pubic deed).

Last but not least, the amendment also relates to the lease of flats, in particular to the maximum amount of security which can be agreed between the tenant and the landlord. Originally this maximum amounted to six times of the monthly rent, newly it is limited to three times of the monthly rent. (open the official wording)

 

 

3. 2. 2017
Amendment of the Act on Business Corporations

Act no. 458/2016 Coll.
With effect from: 14 January 2017

The amendment changes regulation of the joint-stock companies with more than 500 employees.

In such joint-stock companies it is newly necessary to determine the number of the Supervisory Board members so that it is divisible by three. Two thirds of the Supervisory Board members should be elected by the General Meeting whereas the remaining third should be elected by the company’s employees. The Bylaws may specify a higher number of the Supervisory Board members elected by employees, however such number may not be higher than the number of members elected by the General Meeting.

The Bylaws may also state that some of the Supervisory Board members shall be elected by employees even in companies with less than 500 employees.

The joint-stock companies have two years to amend their Bylaws to fully comply with the new legislation. (open the official wording).

 

 

 

 

3. 2. 2017
The Creditor’s Right for Payment from the Guarantee with respect to the Precise Wording of the Guarantee Deed

(Decision of the Supreme Court from 31 August 2016, file no. 32 Cdo 4752/2014) 

In this case the plaintiff made a claim arising from the Bank Guarantee against the bank. The bank, however, did not proceed with the payment because of a technical error made by the plaintiff in the call for payment (in fact the plaintiff omitted to use one word as oppose to the wording of the Guarantee Deed, that is the word “due”). The case was finally settled by the Supreme Court.

The Supreme Court ruled that the bank had been right in refusing to accept the payment claim made by the plaintiff.

According to the Supreme Court, it is necessary to fulfil the requirements specified in the Guarantee Deed entirely because the bank is not obliged to examine all the aspects of the legal relations between the plaintiff and the Bank Guarantee issuer. The plaintiff’s technical declaration which should have been incorporated within the call for payment (that is the use of the word “due”) was important and its omission caused the call to be ineffective.        

 

 

3. 2. 2017
Damages and Unjust Enrichment in case of Payment of the Insured Person‘s Damages by a Third Party

(Decision of the Supreme Court from 23 August 2016, file no. 23 Cdo 4058/2015)

The subject matter of this case is the legitimacy of the insurance payment to the insured person to whom the damage has already been compensated by another person. The insurance company had provided the insurance payment to the insured person but subsequently requested a refund of the payment as it would otherwise represent unjust enrichment of the insured person. The insurance company argued that there was no damage to be compensated to the insured person by the insurance company at the moment of the insurance payment.

The Supreme Court decided that the insurance payment did not represent unjust enrichment of the insured person even if such insured person had already received compensation from another person.

According to the Supreme Court, it is not decisive whether the insured person incurred any damage. The right for insurance payment and the right for damages are two different rights. The insurance company may not refuse to provide the insurance payment due to the fact that the third party has already compensated the damage.      

 

 

3. 2. 2017
Choice of Court Agreement Concluded Between Businessmen

(Decision of the Supreme Court from 6 September 2016, file no. 23 Cdo 240/2015)

In this case, two businessmen concluded a purchase contract. They agreed on a court competent to decide their potential disputes (so-called “prorogation agreement”). However, this agreement was only made by reference to the general terms and conditions (VOP). Moreover, these general terms and conditions were not attached to the contract itself but only mentioned on the purchaser’s publicly available website.

Subsequently, there was a dispute stemming from the purchase agreement in question, and the case was referred to the court. The court authorized in accordance with the prorogation agreement decided that it had no jurisdiction over the matter. The court reasoned this decision as follows: it is not possible to validly agree on a choice of court by reference to the general terms and conditions.  

The Supreme Court ruled that the prorogation agreement was concluded validly.

According to the Supreme Court the prorogation agreement may be concluded even within the general terms and conditions which are attached to the contract or which are known to the parties (as was the case in question). The more strict rules valid for consumers shall not apply for businessmen.

 

 

 

 

3. 2. 2017
Auction Between Joint Owners

(Decision of the Supreme Court from 3 August 2016, file no. 22 Cdo 2208/2015)

In this case the court examined the legal action on termination and settlement of the joint ownership. Both parties demanded to become a sole owner of the immovable property which was the subject matter of the action. The court subsequently ordered an auction to be organized just between the joint owners. However, according to the plaintiffs the court did not consider the question to whom the immovable property should be ordered to sole ownership, at all.

The Supreme Court decided that it is not possible to order an auction between the joint owners.

According to the Supreme Court it is necessary to maintain a hierarchy specified by the law. Firstly, it has to be considered if the property can be divided or if it can be ordered to sole ownership of one of the parties. If both parties are interested to own the property as in this case, it is not possible to order an auction, even organized just between the joint owners.

 

 

12. 1. 2017
The Drugs Act Amendment
Effective from: 1 January, event. 1 April 2017
 
The amendment modifies the conditions of drugs export from the SR. The regulation of export will concern the human drugs included in the list of categorized medicines, only. The amendment cancels the authorization of State Institute for Drug Control to ban the export of the drugs in case of its lack. 
 
The amendment reflects the lack of drugs in the SR. The holders of human drugs registration are obliged to establish the drugs orders information system. The holders must deliver the drugs to the drugstores within 24 hours from the order´s registration with the system.
 
 

 

 

 

 

 

12. 1. 2017
The Value Added Tax Act Amendment
Effective from: 31 December 2016, event. 1 January 2017
 
The amendment changes the taxation of construction works supplies.
 
VAT liability is transferred to a purchaser if both the purchaser and supplier are VAT payers. Transfer of VAT liability means that the purchaser must declare and pay the VAT. At the same time the purchaser has a right of VAT deduction upon meeting the legal conditions. This transaction of VAT liability transfer is neutral for the purchaser with a right of full VAT deduction.

 

 

Newly, the taxpayer has a right for compensation for detention of excessive VAT deduction (during the tax audit). The taxpayer can require this compensation if the excessive VAT deduction is not returned within 6 months from lapse of term for its return due to tax audit.

 

Compensation is set in the amount of double the prime rate of the European Central Bank, but not less than 1.5% p.a. If the taxpayer fails to repeatedly fulfil their duties during the tax audit or the compensation would be less than EUR 5.00, the compensation will not be granted.       

 

 

12. 1. 2017
Government order of the SR on the Minimum Wages in 2017
The minimum wages in 2017 amounts to:

a) EUR 435.00 per month for a monthly remunerated employee;
b) EUR 2.50 per hour worked by an employee.
 
 
12. 1. 2017
Administrative Fees Act Amendment

The amendment changes motor vehicle registration fees.

With effect from 1 February 2017 the amendment introduces a new calculation system of registration fee. When calculating the fee, the vehicle’s age and engine power (in kW) are taken into the account.

Until 31 January 2017 the increased registration fee is paid for the vehicle´s first registration and based on the vehicle’s engine power, only.

Minimum registration fee amounts to EUR 33.00 EUR (concerns among other the electric motor vehicles and hybrid engine vehicles), maximum registration fee is EUR 3 900.00.

 

 

12. 1. 2017
The Tax Procedure Code Amendment

Effective from: 1 January 2017

The amendment introduces assessing of the tax without the tax audit, the so- called assessment order (in Slovak: vyrubovací rozkaz).

The assessment order can be issued if the taxpayer does not respond to a notice to correct the discrepancies in the tax return (which affects the amount of tax). Additional tax return cannot be filed once the assessment order is issued.

The assessment order is an enforcement title and the tax enforcement proceedings can be started on its basis.  

 

 

12. 1. 2017
The priority of minor co-owner during the settlement of co-ownership

(Decision of the Supreme Court of the SR from 31.3.2016)

The petitioner, co-owner of family house (co-ownership interest of ½), demanded the dissolution of the co-ownership and ordering the house to his ownership. The petitioner intended to use the house for his under-aged son. The petitioner was indebted and intended to borrow money from his relatives.

The court decided against the petitioner and ordered the house to one of the defendants, a minor co-owner (co-ownership interest of ¼). This minor co-owner had his own funds to compensate the other co-owners. Moreover, they intended to provide better access road to other real estate.

According to the court, the co-owner who will use the estate directly shall be favored when ordering the real estate. This precedes even the use of real estate by another co-owner´s close person (in this case the petitioner´s son). At the same time, the court takes into account real capability of the co-owner to compensate the other co-owners.

 

 

 

 

6. 12. 2016
Act on Central Register of Accounts

Act no. 300/2016 Coll.
With effect from: 6 October 2016

This Act establishes a central register of accounts maintained by the banks and foreign banks which operate in the territory of the Czech Republic though their branches, and savings banks and co-operative banks for their clients.

The Czech National Bank shall have the role of the administrator of the register. The following entries should be recorded in the register: account number, date of its establishment, name of the bank, identification of the client, inception and termination of the authorization to dispose with the account and the date of cancellation of the account.

Only the prosecuting authorities, financial and customs authorities and the intelligence service have the right to access into the register (open the official wording).  

 

 

6. 12. 2016
Act on modification of certain acts in relation to prove the source of assets

Act no. 321/2016 Coll.
With effect from: 1 December 2016

As of the day of effectivity of this Act the Financial Authority of the Czech Republic shall get the authorization of verification of the amount of assets of tax payers in connection with the tax return.

In case of suspicion that there is a difference between an increase of assets of the tax payer and his or her reported income higher than 5 million CZK, the Financial Authority is entitled to ask this tax payer to prove the source of such assets or to tax such assets, respectively.

The tax payer is obliged to establish the due sources of his or her assets as required in the formal notice sent by the Financial Authority, unless he or she proves that these incomes were made after the term for determination of tax had already passed. Such term is generally 3 years since expiration of the period for filing of the due tax return (open the official wording).

 

 

6. 12. 2016
Act on consumer loans

Act no. 257/2016 Coll.
With effect from: 1 December 2016

The new Act provides for a much more stricter rules for consumer loans providers. Newly it is necessary to be granted with an approval by the Czech National Bank (for existing providers there is a temporary period specified on 18 months since this Act becomes effective, however these providers have to file the application to the Czech National Bank until the end of February 2017) and have an equity of at least 20 million CZK.

The provider has newly an obligation to verify that the loan applicant will be able to pay the loan from his or her income duly. If the provider does not verify this condition duly and before the conclusion of the loan agreement, such agreement would be void.

The law further provides for a requirement of a written form of the loan agreement. The agreement has to meet a number of other requirements. These, among others, include specific information on type and conditions of the loan. In case of breach of these requirements, the agreement would not be void, however the interest rate would be changed automatically to the repo rate of the Czech National Bank.

The law further prohibits the possibility of incorporating of the arbitration clauses into the loan agreements. The Act’s provisions also apply to the microloans up to CZK 5 000.

The possibility to pay off the loan prematurely can be considered as an important change. The creditor has generally a right to claim the costs effectively made in connection with the premature pay off. However, the creditor does not have such right in certain cases specified by the Act (e.g. in case of housing loan if 25% of the loan should be paid off within 1 month before the day of anniversary of the conclusion of the loan agreement) (open the official wording).

 

 

6. 12. 2016
Please note

The Bill on amendment to the Act no. 253/2008 Coll., on selected measures against legitimisation of proceeds of crime which we mentioned in the previous AK-PS Bulletin, has been approved. As the Act no. 368/2016 Coll. it has been declared in the Collection of Law with effect from 1 January 2017. This amendment provided, among other things, also for obligatory register of actual owners of legal persons and trusts.

 

 

6. 12. 2016
Transfer of the employer’s operation

(Decision of the Supreme Court from 14 July 2016, file no. 21 Cdo 3712/2015) 

In this case the lessee – running a coffee shop – was served by a termination notice from the lease of the respective premises. He vacated the premises and handed them over to another coffee shop operator. Subsequently, an employee of the former lessee of the premises demanded against the former coffee shop operator a declaration that his employment relationship still lasted. However, the former coffee shop operator referred him to the new lessee of the premises claiming that the rights and obligations of the employer were transferred to the new lessee.

The Supreme Court decides that even in this case the transfer of employees according to Sec. 338 of the Labor Code was realized. The former and the new lessee were not anyhow connected in this case (personally, nor in property), nor there were any other agreement concluded between them. Still, according to the Supreme Court, in this case the termination notice served to the lessee (the former employer) and the subsequent conclusion of the new lease agreement to the very same premises with the new lessee who continuous in the similar business activity, establish together a legal act by which the transfer of the employer’s operation (role) occurs.

 

 

6. 12. 2016
Concurrence of duties

(Decision of the Constitutional Court from 13 September 2016, file no. I. ÚS 190/15)

The claimant had a position of chairman of the board of directors as well as chief executive officer in a joint-stock company. He was then recalled from both of these positions and subsequently he was dismissed from his employment because of redundancy. The claimant then demanded a compensation of salary.

The courts of first and second instances initially did not uphold the objection of concurrence of duties and they granted the compensation to the claimant. The Supreme Court, however, revoked these decisions and decided that the employment contract had been concluded invalidly because of the concurrence of duties. The courts of first and second instances, to which the case was then returned, subsequently decided that the claimant had no right for the compensation of salary.

However, the decision of the Constitutional Court thus did not support the negative stance as to the concurrence of duties held by the lower courts. The Constitutional Court rules that the interpretation of the Labour Code does not prevent a company to subordinate its relationship with a member of its statutory board to the Labour Code.       

 

 

6. 12. 2016
Adoption of statutes for association of unit owners

(Decision of the High Court from 28 June 2016, file no. 8 Cmo 202/2016 )

The association of unit owners (SVJ) established in 2002 applied for a change of registration in the public register (modification of the statues). However, the protocol from the assembly meeting was not written in a form of a notarial deed. The court maintaining the public register therefore rejected the application.

On a collective meeting of judges of the high courts, there has been reached a unified opinion. According to this opinion, the decision on change of the statutes of the association of unit owners should be made in a form of notarial deed only if these associations were established after 1 January 2014, not before.   

 

 

 

 

4. 10. 2016
Please note

In case of lease of flats it is necessary to strictly distinguish between the advance payments for services provided together with the lease of flat and the completion statement of these services (in Czech: vyúčtování služeb) made as at the end of the respective accounting period.

According to the decision of the Constitutional Court file no. I.ÚS 2708/12 from 11 September 2012, the advance payments cannot be claimed if the completion statement of services was duly provided to the lessee. Once the completion statement is made the lessee´s obligation to pay the advance payments ceases to exist. According to the Constitutional Court, after duly provided completion statement the existence of unpaid advance payments can only be reflected in the form of appurtenances to such advance payments.

Further, the Supreme Court has recently (decision file no. 25 Cdo 1977/2015 from 23 March 2016) stressed the requirement to provide only full and duly prepared completion statements. Only correct and complete completion statement can cause the maturity of the service payments arrears. In case of incorrect completion statement, the lessee cannot be in delay with payment of arrears. It can only be charged with a delay fee from due advance payments.

Please note that if the maturity date of the arrears is not agreed, it shall be determined in accordance with Sec. 7(3) of the Act no. 67/2013 Coll. as 4 months as of the delivery of the completion statement of services to the lessee.

 

 

4. 10. 2016
Legal protection of right to claim contractual penalty

(Decision of the Supreme Court from 24 May 2016, file no. 32 Cdo 1186/2016 )

In this case the Supreme Court granted a contractual penalty to the plaintiff because of a breach of contract for work on side of the defendant.

The defendant (a contractor) undertook to provide work (internet pages) for the plaintiff (an ordering party) based on the contract for work. The defendant did not fulfil its obligation in time. As a consequence of this breach the plaintiff withdrew from the contract and claimed the contractual penalty before the court.

The main point of this dispute was the fact that the plaintiff claimed the contractual penalty nearly more than 4 years as of the breach of the contractual obligation by the defendant; however, the claim had not been statute-barred at the time of filing the action.

The Supreme Court did not accept the resolution of the appellate court according to which after such a long time the contractual penalty could not perform its legal function (sanction and security) and thus its acceptance would mean misuse of justice. On the contrary, in accordance with the previous courtsꞌ decisions, the Supreme Court ruled that in order to duly claim the contractual penalty it is not necessary to urge the debtor to pay it, nor it is necessary to prove that by breach of an agreement the plaintiff has sustained damage. The claim, however, has to be made within a statutory limitation period. 

 

 

 

 

4. 10. 2016
Justifiable reason in relation to delivering

(Decision of the Supreme Court from 22 February 2016, file no. 20 Cdo 218/2016)

The Supreme Court rejected an appeal by which the plaintiff (in Czech: dovolatel) sought to declare ineffectiveness of the delivery of a debt recovery petition which had been issued against him. The plaintiff argued that due to his employment abroad he had not been present for a long time at the address which he had previously specified as his address for delivering in the information system of population evidence.

According to the Supreme Court, such reason (as well as hospitalization) would be justifiable only if the person is not present at the address of its permanent residence. However, if the plaintiff specified his address for delivering, it is then not possible to object that he was not present at this address. If such address is changed in fact, it is up to this person to change the entry in the information system accordingly.

 

 

4. 10. 2016
Representation of unit owner at assembly

(Decision of the Supreme Court from 23 May 2012, file no. 29 Cdo 3399/2010)

Members of association of unit owners (in Czech: společenství vlastníků jednotek, SVJ) removed members of the governing body of SVJ (committee), who were members of SVJ as well, and also plaintiffs in this case. This happened at the assembly of association of unit owners, when some of the members were represented based on proxy. Present members also elected new members of the committee at the same time.

In reaction to the removal, the plaintiffs filed a lawsuit in order to make the assembly’s resolution invalid. They contested the way of convening the assembly as well as the course of the assembly. Act no. 72/1994 Coll., on residential unit ownership (effective until 31 December 2013) applied to the case.

The Supreme Court dealt with question whether a member of SVJ can be represented at the assembly by other person. According to its interpretation, the right to attend the assembly needs to be considered as a personal right, not as a legal act (e.g. exercise of voting right). Thus it is not possible to use general provisions of the Civil Code on representation. The right to be represented at the assembly has to be set in the articles of association of SVJ. The articles of association can also restrict this right (e.g. it is possible to be represented only by another member of SVJ). If this right is not set in the articles of association, it is not possible to grant a proxy to be represented at the assembly.

 

 

 

 

4. 10. 2016
Amendment to the Statutory measure of Senate no. 340/2013 Coll., on real estate acquisition tax

Amendment no. 254/2016 Coll.
With effect from: 1 November 2016

The amendment changes the real estate acquisition tax payer. Newly the tax payer will always be the acquirer of the real estate. This change will affect the acquisition of ownership right realized after 1 November 2016. The tax concerning acquisitions realized before 1 November 2016 will be still payed by the transferor (in principle). With regard to the change of the tax payer, the concept of guarantee will be removed. The tax rate will remain unaffected.

The amendment also modifies the conception of exemption from the obligation to pay the tax. The exemption will relate only to the first for payment acquisition of family house or residential unit in an apartment building, which are completed or being used. It does not apply to acquisition of incomplete buildings or units. The acquisition of the ownership right shall be carried out in 5 years after the completion of the house or unit or after the commencement of their use (depends on which day occurred earlier) (open the official wording).

 

 

4. 10. 2016
Bill on amendment to the Act no. 253/2008 Coll., on selected measures against legitimisation of proceeds of crime

Status of discussion: Senate

The bill transposes the Directive of the European Parliament and of the Council (EU) no. 2015/849 (so called AML directive). Within the scope of this implementation into Czech law, the bill suggests establishing of obligatory register of actual owners of legal persons and trusts.

For these purposes, a natural person, who has factual or legal possibility to exercise decisive influence (directly or indirectly), will be considered to be an actual owner. Particular rules for each type of legal person will be set. Regarding companies a person disposing of more than 25% of voting rights or of a share in the registered capital or receiving at least 25% of the companyꞌs profit will be considered to be its actual owner.

Actual owners shall be registered in current public registers, however the register of actual owners itself shall be non-public. Name, address, date of birth or national identification number (in Czech: rodné číslo), citizenship and information proving the position of actual owner will be registered.

This information shall be preserved for the whole period during which the particular person is in the position of actual owner and after that at least for 10 following years. The register is suggested to be introduced on 1 January 2018.

At the same time, an amendment to the AML directive is being prepared within the European Union. This amendment should make the AML directive more restrictive. According to the actual bill the aforesaid criterion of 25% should be lowered to 10%.

 

 

1. 8. 2016
Guideline on the issue of comparable working and wages conditions of the agency employees

Guideline no. 2/2016

The Inspector General of the State Labour Inspection Office issued on 2 March 2016 a guideline which is intended primarily for labour inspectors, nevertheless in practice it might be used as a useful instrument also for employment agencies and employers / users.

According to the Guideline, the working conditions of an employee on secondment could not be worse than working condition of a comparable employee of a user in case that providing of such working conditions is specified by the labour laws and at the same time these are tax eligible costs in the sense of the Act on Income Taxes.

The Guideline, simultaneously, provides for an exemplary list of working and wages conditions whose providing is necessary to secure (e.g. shortening of working hours without reduction of wages). (open the official wording)

 

 

1. 8. 2016
Exclusion from entitlement to the contractual penalty as a consequence of the conflict with a good commercial practice

(Decision of the Supreme Court from 4 April 2016, file no. 23 Cdo 1749/2015)

The plaintiff as a contractor and the defendant as an ordering party concluded a contract on work where they, among other things, specified contractual penalty in case of non-compliance with the payment deadlines at the amount of 0,5 % from the invoiced amount per each day of the default. Indeed, the defendant was subsequently in default with the payments and thus the plaintiff claimed the contractual penalty.

As a consequence of the prolonged judicial dispute, the amount of contractual penalty subsequently exceeded the amount of principal of the receivable from the title of the contract on work (almost three times). Considering this, the appeal court concluded that while the contractual penalty itself is not disproportional, the plaintiff in this case exploits the provisions on the contractual penalty to the detriment of the defendant. Such action by the plaintiff is in conflict with a good commercial practice. Thus, the plaintiff´s claim should not be protected by laws.

According to the Supreme Court which overruled the previous court decisions, the contractual penalty could not be considered as disproportional only because of the duration of default by the defendant. Moreover, the contractual penalty has not only the security function but it is also used as a sanction. Claiming the contractual penalty whose amount has increased rapidly due to the debtor´s default, could not be considered as conflicting with the principle of good commercial practice.

 

 

1. 8. 2016
Specification of the scope of redundant employees in case of change in organization

(Decision of the Supreme Court from 24 March 2016, file no. 21 Cdo 2457/2015)


In this case the plaintiff was given a termination notice because of redundancy. She, however, did not agree with this termination notice. According to the plaintiff, there was no causal link between her redundancy and the change in organization which had been approved by her employer before. The respective decision of the employer did not specify the particular employee, it only mentioned the number of redundant employees and the name of the department which should be affected. The court of 1st instance as well as the appeal court uphold the plaintiff´s claim and satisfied it.

According to the Supreme Court, however, the employer did not make a mistake as the decision on change in organization COULD possibly affect more employees as well. Specification of the particular employee made in consequence of such decision is then solely upon the employer. This redundant employee may be specified only in the termination notice itself according to the Supreme Court. The Court is then not authorized to consider such decision of the employer.

 

 

1. 8. 2016
Amendment on the Act No. 418/2011 Coll., on the Criminal Liability of Legal Entities

Amendment No. 183/2016 Coll.
With effect from: 1 December 2016

 

Under this amendment legal entities might be held liable for a much larger scope of criminal activities then they were in the past. As opposed to the current exhaustive list of crimes for which legal entity could be held liable, the new regulation provides for so-called negative list. All the crimes specified in the Special Section of the Criminal Code should be applicable also on legal entities provided that these crimes are not explicitly excluded as the crimes which cannot be committed by legal entity because of their very nature (e.g. manslaughter, participation in suicide, brawl etc.).

Thus, according to the new regulation, also a medical facility might be held liable for the crimes against life and health or a publishing house for the crime of defamation.

On the other side, the amendment extends the possibilities of exculpation (if the legal entity makes all the efforts which could be reasonably required in order to prevent its employees, managers or members of statutory bodies from committing the criminal offence).

Let us remind you that for the crimes committed by legal entities, legal entity could be sentenced, as regards the seriousness of the penalty, from publishing of the judgment up to liquidation of the legal entity. (open the official wording)   

 

 

1. 8. 2016
Act No. 112/2016 Coll., on Registration of Sales

With effect from: 1 December 2016

The most important intention behind the newly established electronic registration of sales (EET) is that there should be every single payment made in cash for the sale of goods or providing of services duly registered. Such registration shall be the basis of the communication between the traders and the Financial Administration of the Czech Republic. According to the Act there should be registered every payment which is not unique (i.e. in particular one-off or totally exceptional payment from the perspective of the respective income) and which is at the same time made in cash, via cheque, bill of exchange or another forms of transactions while these all constitute a business income of the income tax payer.

The mechanism of registration is to be introduced in a number of phases according to the respective business activity with start from 1 December 2016.

The final phase shall be introduced as of 1 June 2018 and since this date all the sales from all the business activities should be registered without any exception.

During payment for the goods or services at latest the traders shall have an obligation to send to the Financial Administration data related to the sale and issue the invoice for the consumer (invoice serial number, date and time of payment and the price are the examples of data which are to be registered). The data shall then be sent via internet.

The traders shall be entitled to use a one-off discount of up to CZK 5 000 for the expenditures related to the EET introduction. In case that the trader makes intentionally the registration of sales harder or even prevent it, the Act provides for the penalty of up to CZK 500 000 (open the official wording)

 

 

1. 8. 2016
Amendment on the Act No. 141/1961 Coll., the Criminal Procedure Code, and the Act No. 40/2009 Coll., the Criminal Code

Amendment No. 163/2016 Coll.

With effect from: 1 July 2016

This amendment establishes criminality yet in the stage of preparation for the crime of curtailing a tax, fee or another mandatory payment (tax curtailment) (in Czech: krácení daně). It means that there does not have to be the crime of tax curtailment completed in order to commit the crime, it is sufficient that the perpetrator at least prepares for committing this crime.

The legislator tries to affect the practice of so-called carousel trade which is based on transactions made by purpose of avoiding the due VAT. For this kind of criminal activity a person can be sentenced for up to 10 years imprisonment. Another practical impact of the amendment should be enabling of prosecution of perpetrators while revealing an illegal facilities for production of particularly the tobacco products before they are further distributed.

The amendment should not interfere with the tax or legal counselling. Therefore the person who does not prevent someone other from committing this crime shall not be criminally responsible for this non-prevention alone. (open the official wording)

 

 

27. 4. 2016
Assignment of Work to an Employee in a Frivolous Manner (Decision of the Supreme Court from 21 January 2015, file no. 21 Cdo 815/2013)

According to the Supreme Court, an employer cannot assign work to the employee if it aims to punish the employee for exercising the employee’s rights in court; such work assignment is considered as frivolous.

This applies also in cases when the work assignment is in accordance with the employment contract and legal regulation. In the mentioned dispute the employer (high school teacher) demanded declaration of invalidity of the dismissal from employment. The employer dismissed the employee because of unexcused absences on certain lessons.

However, these lessons were assigned to the employee even though he had no corresponding qualifications. In fact, the employee was assigned with these new lessons after he had already been successful in supporting his claim against the employer with the court by invalidating another dismissal.

The Supreme Court ruled that even though the teaching of “new” lessons (mechanical engineering, mechanical components and the like) might fall under the scope of work agreed in the employment contract (high school teacher), it is necessary to consider other circumstances. Such noticeable change of work assignment as in this case (from the original teaching of English language) requires a review in order to determine if the employer’s conduct in its entirety and logical consequence cannot be perceived as hidden punishing of the employee.

The Supreme Court concluded that assignment of work for which the employee has no corresponding qualification could represent such hidden punishing of the employee for exercising the employee’s rights against the employer in the past.

26. 4. 2016
Government Order No. 276/2015 Coll., on Compensation of Pain and Social Impairment Caused by Work Injury or Occupational Disease

With effect from: 26 October 2015 In connection with the change of the Labour Code the Government has modified a point evaluation of pain and social impairment (in Czech: ztížení společenského uplatnění) caused by work injury or occupational disease.

Newly, one point corresponds to the amount of CZK 250 (in comparison with the former CZK 120). The order also increases the point evaluation itself of most of the injuries listed in the annex of the order. The number of points awarded can be further increased due to complications based on their seriousness (in case of the minor ones by 10% at maximum, the middle ones by 30% and the most serious ones by 50%) or necessity of a demanding treatment (up to 50% at maximum). The final amount of the point evaluation in particular case should be specified by the physician in the medical assessment.

The order also specifies the procedure of issuing of the medical assessment. Newly, there are uniform requirements of the medical assessments on evaluation of pain and social impairment. This aims to unify the structure of evaluation, enable its reviewability and make the medical assessment a reliable basis for determination of the amount of compensation and redress. The order further specifies in more detail what the pain and social impairment mean.

25. 4. 2016
Government Order No. 308/2015 Coll. on Definition of the Terms “Ordinary Maintenance” and “Minor Repairs” Related to the Use of a Flat

With effect from: 1 January 2016 In accordance with Sec. 2257 (2) of the Civil Code the tenant performs and pays only for ordinary maintenance and minor repairs related to the use of a flat.

This arrangement cannot be changed even by the agreement of the parties (Sec. 2235 (1) of the Civil Code). On 26 October 2015, the Government accepted the proposal of the order which substitutes the former and already cancelled Government Order no. 258/1995 Coll. which specified the terms “ordinary maintenance” and “minor repairs” related to the use of a flat until the effectiveness of the New Civil Code.

The main difference of the new legislation is the increase of the upper limit of an expense on one minor repair to CZK 1000 (from the former CZK 500) and the increase of the annual limit of the total sum of expenses on minor repairs to CZK 100 / m2 (from the former CZK 70 / m2) for a calendar year. The definition of minor repairs was modified, too. In particular, repairs connected to technologies (e.g. repairs of audio-visual devices used for opening of the entrance door to the building) were added to the list of minor repairs.

According to the new Government Order, the ordinary maintenance means “maintenance and cleaning of the flat including its furnishings and fixtures which is performed usually while using the flat” (under the order it means, in particular, wall painting, restoration of plastering, wallpapering and cleaning of floors including coverings, wall panelling and cleaning of the clogged water waste up to the vertical distribution system). The general definition of other terms is similar as in the cancelled Government Order no. 258/1995 Coll.