Karel Schelle - Ilona Schelleová
The Faculty of Law of the Masaryk University,
Brno, Czech Republic
Bankruptcy and Law
Anotace: The basic legal norm amending the bankruptcy law in Czech
Republic is still the Federal Act 328/1991 about the bankruptcy, which came
into effect on 1st October 1991. It means that it has been a part of
the czech legal system for 12 years already. There were many direct and even
indirect alterations during that time, which have brought a lot of confusion
into the bankruptcy. But the basic problems which courts and administrators in
bankruptcy meet every day, remain dissolved.
Like every individual shapes with
his/her behaviour the conditions of his/her own social development, the society
influences, in various forms, the individual behaviour, regulating it to
certain extent. Conflicts of interests occurring within the framework of human
relations give rise to pressures evoking the need for formulation of generally
applicable rules of conduct to ensure a relative social stability. This function is performed especially by law
as a universally comparable, relatively equal benchmark for conduct of people
with different status.
The task of law varies a.o. depending
on the existence of additional regulators of human conduct. After November
1989, as a result of social and economic changes, the Czech and Slovak society
underwent an essential change in operation of law in objective, but also in
subjective sense. Our society has started building a state respecting the rule
of law, namely the rule of law binding on everybody without exception,
including state authorities, even parliamentary bodies either. As a result, the
view of the relation between the economy and law has changed. The law is no
more perceived as a superstructure reflecting the social and economic relations
in the society. It is more and more regarded, like in all democratic legal
systems, as a phenomenon living a relatively autonomous life, the task of which
is to balance two fundamental functions of the state respecting the rule of
law, which are, on the one hand, the representation of common interests of the
general public, the efforts to achieve integration of collective and individual
interests and, on the other hand, the guarantee of exercise and protection of
democratic rights and liberties. The law is therefore not any immediate
reflection of social and economic changes, but its absolutely autonomous nature
enables it at certain degrees of social development to move ahead of the
economic and political changes, as it was the case in the late 18th
and the early 19th century, or, on the contrary, more or less to
fall behind, which is unfortunately true at the moment.
Political and economic changes
occurred after 1989 have therefore claimed essential changes in contents of the
objective law and gradual change in approach to its authority as a result of
its rule without exceptions. Both these changes have been occurring gradually,
in fact a long-term process has started the end of which is unfortunately still
not in sight. As a result of building the market economy, commercial and trade
law has returned back to the Czech and Slovak law system. This fact triggered a
chain reaction in legislation in the form of essential changes in legal norms
in actually all significant private-law and public-law branches. In terms of
the topic hereof, the return to the Bankruptcy Code has been essential,
important have been also changes in distress law and penal law, incorporating
new qualified facts ensuring protection of creditors.
What is however much more difficult
than the change in the objective law is the change in approaches to and
exercise of subjective rights, which reflects the change of thinking. The
subjective right is a legal possibility (or a degree of the possibility) of the
particular entity to a particular conduct, i.e. the possibility expressed and
guaranteed by the objective law, and therefore enjoying a special protection
set out in legal norms. An entity can and needn´t behave in this way,
i.e. it can and needn´t exercise its subjective right, or it can exercise
it only in part. So within the limits of its subjective right, it has options
of how to behave. In this sense, the notion of the subjective right coincides with
the notion of freedom in legal sense. Subjective rights would have no sense
without the corresponding legal duties of the counterparty not to disturb the
exercise of the subjective right or to indulge, to give or to act or to abstain
from some conduct. Exercise of
subjective rights depends on performance of such duties.
The object of a subjective right and
legal duty is always a particular behaviour. This means that the subjective
right is the right of the entity to a particular conduct - its right to behave
in a particular way, as well as its right to claim from the counterparties the
corresponding conduct subject to the legal duty thereof. The exercise of the
subjective right or performance of the legal duty consists then just in the
above-mentioned conduct. This is a conduct that is in compliance with the
objective law.
The aforesaid can lead to a
conclusion that the exercise of the subjective right or performance of the
legal duty consists in the conduct that is in compliance with the objective law,
namely with the existing system of generally binding legal norms of conduct
passed by the state authorities and enacted in a special form and enforced (if
needed) by the state-force means. To accept this notion of subjective rights
and duties by particular members of a free society is and, as indicated by
experience of the recent years, will be a long-term process. Especially in the
business sector it is turning out that to accept this approach to subjective
rights and duties is in many cases beyond such businesses. This fact is
especially obvious in the approach to the adherence to the fundamental
principles on which every commercial law is based. Many of such principles,
whether the principle of fair business relations or the maxim “agreements are
to be kept” (pacta sunt servanda), are unfortunately hot air for our
businesses. The result is the efforts to break or at least to circumvent the
objective law rather than to respect and abide it. Spread of economic
criminality and tax evasions, even in the top business and financial circles,
failure to meet the duties to pay taxes and health insurance and social
security contributions, intentional insolvency etc. are unfortunately a real
evidence of this fact. Many entrepreneurs
who have appeared, either intentionally or unintentionally, in the role of
debtors, in order to avoid bankruptcy are adhering to the following
“principles”:
·
to owe to as many creditors as possible;
·
not to disclose their property to the creditors, as the
creditors themselves can hardly find it out;
·
to lose accounting books, not to reply to anybody to any
requests for information, especially not to send to the court the list of
assets and liabilities (such conduct is not subject to sanctions);
·
before being adjudicated bankrupt to persuade the jurors
about the pure temporary nature of the difficulties and about envisaged high
profits – the bankruptcy will be discharged due to overextended debts.
As a result of such approaches in
conduct of management of many businesses, the “economic miracle” as awaited by
some economists has not taken place. The change in the society having lived in
a totalitarian system for forty years and worshiping in many directions
different values will not occur in one “leap”, but in a long-term process, taking
maybe several generations.
It is no doubt that success and speed
of such process will, to considerable extent, depend on economic results.
Within this process, the relation of law and economy appears to be much closer.
Mutual influence of law and economy must be therefore much more lively. This is
what even politicians are already aware of either.
Experience especially from the
judicial practice show that distress proceedings use to be very often fruitless
due to irrecoverable nature of receivables. Much more prospects are associated
with bankruptcy proceedings, which, however, have not established themselves
very well in the Czech procedural law yet.
Nevertheless, the judicial practice shows that this type of judicial proceedings
is gradually gaining importance, which is a.o. connected also with amendments
of bankruptcy law.
The bankruptcy law returned to the
Czech and Slovak law system in 1991, after more than forty years. Dynamics of
our economy and consistent changes in the field of private and procedural law
have claimed a lot of direct and indirect amendments of this so-called
Bankruptcy Code since 1 October 1991.
Unfortunately, the topic of the
bankruptcy proceedings is still undoubtedly one of the most discussed issues,
but the business community in the Czech Republic is still waiting for a new
Bankruptcy Act for years.
It is known that for many years the
professional public has not found a basis for preparation of re-codification of
the Bankruptcy Act. But the Code to provide for bankruptcy and procedures
thereof is, at the same time, a crosscutting law associated in particular with
the fundamental Codes that are in preparation at the moment. The fundamental laws – Civil Code, Commercial
Code as well as Penal Code – must be harmonised with the Bankruptcy Code.
Together with increasing number of
bankruptcy proceedings, the number of interpretation problems resulting from
imperfections of Bankruptcy and Composition Act No. 326/1991 Coll. is rising. A
lot of these problems have been solved by the amendment (effective as of June
1, 1996) implemented by Act No. 94/1996 Coll. Neither the most extensive
amendment, as far as the contents is concerned, of the Bankruptcy and
Composition Act (effective as of May 1, 2000) implemented by Act No. 105/2000
Coll., has removed all issues of disputable interpretation of the Bankruptcy
Code or strengthened in sufficient way the creditors´ rights and their
active role in bankruptcy proceedings. Besides the problems that have already appeared
in judicial practice and are still persisting, additional interpretation
difficulties are appearing in connection with the latest amendments of the
Bankruptcy and Composition Act.
The problematic issues of the valid
legal regulation of the current bankruptcy law include a.o.:
a)
insufficient regulation of powers of creditors and
creditors´ committee in relation to the trustee in bankruptcy;
b)
insufficient regulation of appointment and removal of the
trustee, the trustee´s powers and accountabilities;
c)
insufficient powers of creditors in relation to realisation
of assets from the bankrupt´s estate;
d)
absence of legal regulation of a separate creditor´s
right to satisfaction of the receivable up to 100 % of the proceeds of the
realisation, which weakens, especially in business relations, the significance
of security institutes and entities granting loans to entrepreneurs;
e)
absence of legal regulation of the status of so-called
non-bankruptcy creditors and satisfaction of their receivables;
f)
inadequate legal regulation of the liability of the persons
mentioned in § 9d at coincidence of bankruptcy and distress;
g)
the fact that the procedural rules followed in bankruptcy
proceedings are too vague, requiring a high level of construction;
h)
inadequate length of proceedings in bankruptcy;
The imperfection consisting in
absence of unambiguous procedural instructions of how to proceed at bankruptcy,
has its origin mainly in the fact that most of the disputable procedural
situations must be solved by adequate application of the Civil Procedure Code
(as they are not regulated by the Bankruptcy and Composition Act).
It is therefore absolutely necessary
to prepare re-codification of the whole bankruptcy law as soon as possible. The
objectives of such re-codification must be especially the following:
a)
to strengthen the
position of creditors and to increase their active participation in
bankruptcy proceedings;
b)
to simplify and accelerate bankruptcy proceedings and to make
them cheaper and more effective;
c)
to increase the degree of legal certainty both of parties to
the bankruptcy proceedings and third parties, by means of introduction of
insolvency register as a public list run in an electronic form;
d)
to remove some application problems of the Bankruptcy and
Composition Act.
Despite many-year efforts, however,
these goals have not been achieved, so the business public still lives in hope
of better legal regulation of bankruptcy issues.
1. Schelleová, I.: Vybrané problémy z teorie
konkursního práva (Selected Issues from Bankruptcy Law Theory). Brno,
Masaryk University 1995
2. Schelleová, I.: Konkursní a vyrovnací
řízení (Bankruptcy and Composition Proceedings). Brno,
Iuridica Brunensia 1995
3. Schelleová, I.: Bankroty očima práva
(Bankruptcies in the Eyes of Law), Bratislava, ELITA 1997
4.
Schelleová, I.: Konkurs
a vyrovnání (Bankruptcy and Composition),, Praha, EUROUNION
1998, 2nd edition, 2000
5.
Schelleová, I. (head of authors´s collectivevu): Firma v konkurzním
řízení (Corporation in Bankruptcy Proceedings) (Jak
vyhlásit konkurz a vymáhat pohledávky – How to file
petition in bankruptcy and recover debts). Praha, Computer Press 2001
6. Schelleová, I.: Právní úprava
konkursního řízení (Legal Regulation of Bankruptcy
Proceedings) (Historie a současnost – History and Presence). Brno, Masaryk
University 1995
7. Schelleová, I.: Český civilní process
(Czech Civil Procedure), Praha, Linde 1997
8.
Schelleová, I.: Konkurs a vyrovnání (Bankruptcy and Composition). Brno,
Masaryk University 1993