Category: Czech Republic

Dentons has advised Czech airline Smartwings on its out-of-court restructuring and CZK 2 billion financing from UniCredit Bank, Komercni Banka, Ceskoslovenska Obchodni Banka, and Ceska Sporitelna, which will allow it to continue operating in the wake of the COVID-19 pandemic. White & Case advised the lenders, and Allen & Overy, Holland & Knight, and Norton Rose advised selected lessors on the deal. AK Zizlavsky advised Smartwings on insolvency law aspects.

The Export Guarantee and Insurance Company secured the loan as part of the Czech government’s COVID Plus program to mitigate the effects of the pandemic.

According to Dentons, “prior to the pandemic, Smartwings Group was a profitable airline and one of the fastest-growing in Central Europe. However, due to COVID-19 related travel restrictions, it recorded an unprecedented drop in revenue and had to implement a number of restructuring measures, including the layoff of 600 people and the implementation of a creditor-supported moratorium. The financing deal, which concluded the moratorium, will allow Smartwings to finance its operations for the coming financial period. The airline will operate flights not only from the Czech Republic, but also from Poland, France, Hungary, Slovakia, and the Canary Islands.”

Dentons’ team included, in Prague, Partner Jiri Tomola, Counsel Vaclav Zalud, Senior Associate Martin Mandulak, Associates Katerina Pracna, Diana Herdzinova, Sona Baranova, Ondrej Vales, Eva Klimova, and David Sutko, and Paralegal Bohdan Chrenovsky; in Budapest, Partner Gergely Horvath and Associates Kinga Kovacs, Gabriella Pataki, Bence Boszormenyi, and Nora Nagy; in Warsaw, Partners Tomasz Trocki, Mateusz Toczyski, and Bartosz Nojek and Associate Magda Kulesza; in Bratislava, Partners Stanislava Valientova and Peter Kubina, Counsel Patricia Gossanyiova, and Associates Richard Marcincin, Petra Strbova, and Bianca Bohmova; in Munich, Counsels Surbhi Malhotra-Trenkel and Carl Bjarnram; in London, Partners Stephen Temple and Ian Fox and Counsel Luci Mitchell-Fry; and in Dublin, Partner Gareth Steen.

Zizlavsky’s team included Partners Michal Zizlavsky and Adam Sigmund and Counsel Roman Machacek.

Allen & Overy’s Prague-based team included Counsels Petra Mysakova and Petr Sprinz, Senior Associates Robert Pavlu, and Associates Martin Bytcanek and Jiri Rahm.

Editor’s Note: After this article was published, the Prague office of Clifford Chance announced that it advised selected lessors and other creditors on the restructuring. The firm’s team consisted of Partner Milos Felgr, Associate Tereza Rehorova, and Senior Associates Dominik Vojta and Vladimir Rylich.

White & Case has advised European online grocery business Rohlik Group on its receipt of EUR 190 million in an investment round led by Partech and Index Ventures that included the EBRD, J&T Banka, Quadrille Capital, R2G, and existing investor Enern.

According to the Rohlik Group, the funds will fuel the company’s expansion in its existing markets and its launch in Germany and other international markets.

CEE Attorneys’ Prague office has advised the sellers on the acquisition of SIT by the J&T Thein Sicav investment fund. Solo practitioner Veronika Ordnungova reportedly advised the buyer on the deal.

SIT is a supplier of ICT infrastructure with a focus on data center computing. The J&T Thein Sicay fund reports that it focuses on investing “in projects and companies that drive the digital economy forward.”

CEE Attorneys’ team working consisted of Partner Lukas Petr and Managing Associate Denisa Novakova.

The Supreme Court confirmed in a recent decision that the court can appoint an insolvency trustee as a liquidator of a legal entity that is being dissolved even without his consent. Under what conditions can the court do so and which insolvency trustee can it appoint?

In general, liquidators, like the members of elected bodies, must give consent to their appointment and can in fact resign from their office at any time. Furthermore, according to Section 191 Par. 3 of the Civil Code, if there is no person that is willing to perform the office of liquidator, the court can appoint a member of the statutory body as a liquidator even without his consent. This should ensure that the liquidation of a legal entity that is being dissolved goes ahead even if no one wants to assume the office voluntarily. Only provided that the court is not even able to appoint any of the members of the statutory body as liquidator (e.g. because there are none or because such member cannot be fairly requested to perform the duties of liquidator), according to Section 191 Par. 4 of the Civil Code the court may assign any person listed in the register of insolvency trustees as liquidator.

Despite the fact that the wording of Section 191 Par. 3 of the Civil Code is different from the wording of Section 191 Par. 4, and although Par. 4 does not expressly stipulate that an insolvency trustee can be appointed as liquidator even without his consent, the Supreme Court concluded in its decision Ref. N. 27 Cdo 2916/2018 of 15.4.2020 that the purpose of these Sections is the same, and therefore it is possible to appoint a person listed in the register of insolvency trustees as a liquidator, without the need for that person to give ad hoc consent.

At the same time, according to the above-stated decision, the liquidator appointed from the list of insolvency trustees cannot resign from his office and the only option for leaving his office is an exemption from the office granted by the court on condition that the insolvency trustee proves that he cannot fairly be required to perform this duty.

Another interesting question relates to the conditions for choosing a particular insolvency trustee that the court can appoint as liquidator. Considering the fact that the legal regulations do not specify any criteria in this respect (in contrast to the Insolvency Act), according to the conclusions expressed by the Supreme Court in this decision, the only way to make the choice is to consider the circumstances of the given case, particularly the distance between the offices of the insolvency trustee and the dissolved legal entity, the alleged complexity of the liquidation, the availability of the insolvency trustee, etc.

By Martin Subrt, Partner, Ondrej Krizek, Managing Associate, Lucie Kacerova, Associate, and Tereza Majerova, Junior Lawyer, Rowan Legal

Schoenherr has advised APS on the refinancing of existing indebtedness under CZK 620 million public bonds traded on the Prague Stock Exchange, by way of a loan facility from UniCredit Bank Czech Republic and Slovakia, a.s. Dentons advised the banks on the transaction, with Nauta Dutilh acting as local counsel on Luxembourg legal matters. BDK Advokati acted as local legal advisor to UniCredit Bank in Bosnia and Herzegovina and Montenegro and Savoric & Partners acted as local legal advisor to UniCredit Bank in Croatia.

APS is a Czech Republic-based alternative asset management firm with assets under advisement exceeding EUR 9.4 billion that is present in 15 jurisdictions in CEE. The APS group provides services to institutional investors in NPL portfolios as well as to banks, leasing providers, and telecommunications and utility companies, investment advisory with respect to distressed debt and assets and identification, and investments into and asset management of real estate assets.

Schoenherr’s team was led by Partner Vladimir Cizek and Attorney Michal Jendzelovsky.

Dentons’s team included Prague-based Partner Jiri Tomola, Senior Associate Martin Mandulak, and Associates Ondrej Vales and Eva Klimova, Budapest-based Partner Gergely Horvath and Associates Bence Boszormenyi and Nora Nagy, Bucharest-based Partner Simona Marin and Counsel Maria Tomescu, and Luxembourg-based Partner Stephan Hadet and Senior Associate Christophe Renaudin.

BDK Advokati’s team included Managing Partner Tijana Kojovic, Partner Luka Popovic, Counsel Dragoljub Sretenovic, Senior Associate Dijana Pejic Sinik, and associate Jelena Brajkovic.

Savoric & Partners’ team included Partner Mia Lazic and Senior Associate Andrea Ruba.

Kocian Solc Balastik has advised Heureka Group on the acquisition of a 100% stake in Dataweps, a Brno-based technology company engaged in product data analytics and e-shop automation. Dataweps’ sellers were reportedly advised by Tarpan Legal.

The Heureka Group, which operates the Heureka price comparator, is active in nine CEE countries.

KSB’s team was led by Partner Petr Kasik and Lawyer Jakub Porod.

Dentons has advised Heimstaden Bostad, the third-largest provider of rental housing in Europe, on its EUR 23 million acquisition of Czech real estate development company Daramis’s residential-apartments-for-rent portfolio in the Unicity complex in Plzen.

The portfolio consists of 226 flats and 5 commercial units.

According to Dentons, the transaction also includes an agreement that until the end of 2022, Daramis will provide property management services. Heimstaden will manage the flats starting in January, 2023.

Dentons’ Prague-based team was led by Partners Evan Lazar and Marketa Tvrda and included Senior Associate Jakub Nosek and Associate Jan Sedlak.

Dentons did not reply to our inquiry on the matter.

On the 30th of July 2020, or more precisely the 1st of January 2021, a long-awaited amendment to the Labor Code will come into force. Its aim is among others to facilitate the enforcement of employees’ rights, to facilitate communication between the employer and employee, to increase the flexibility of working processes or, for instance, to reduce the administrative burden of some obligations placed on the employer. The Labor Code amendment reflects a wide range of practical problems and regulates a wide range of important institutions. In this short summary, we will discuss the most significant changes that will be brought about by the amendment.

A change in the method of calculating leave

A key change implemented by the Labor Code amendment is legislation on leave, or more precisely on how leave should be determined. The calculation and taking of leave itself as of 01.01.2021 will be derived from the hourly regime of weekly working hours. The amendment cancels leave based on the number of days work is done, so that the length of leave can be determined in a fairer way.

From this point on the Labor Code will distinguish only between annual leave, its proportional part and supplementary leave. Therefore, the aforementioned types of leave that remain unchanged should be expressed in hours that correspond with the employee’s weekly working hours. The amendment also newly introduces the conditions for extending leave if an employee has worked more than 52 times the stated weekly working hours. In this case, leave will always be 1/52 times longer for each extra weekly working hours worked.

If the length of weekly working hours of an employee changes during the year, then the length of their leave is calculated as a ratio corresponding to the length of separate periods of time with different lengths of weekly working hours.

Furthermore, the list of particularly hard jobs (jobs at which employees are entitled to supplementary leave) will be expanded and the list will now include work during which employees come into contact with biological wastewater and waste. For that purpose, the period of performance of work does not include the periods stated in Section 216 par. 2 and Section 348 par. 1 of the Labor Code. Only the actual performance of work under the specified particularly hard conditions will remain relevant.

For leave purposes obstacles to work will be counted within the total limit, i.e. twenty times the given working hours in the relevant calendar year.

What the Labor Code amendment does not affect is the conditions for entitlement to leave, which should remain virtually unchanged.

A shared work position will allow employees higher flexibility

A substantial change introduced by the Labor Code amendment and integrated into the new Section 317a by the legislator is legislation on the novel institution of a shared work position. This amendment will enable employees to partly schedule working hours according to their availability and thus to balance personal life with working life.

The amendment considers a shared work position a situation in which two or more employees that perform the same type of work agree in written form to alternate with each other in performing one job in such a way that on the basis of their shared work schedule, they collectively fulfill the set weekly working hours (40 hours per week in most cases). The employees must fulfill the weekly working hours within no longer than a 4-week settlement period. The amendment also regulates the form and conditions for terminating an agreement on a shared work position.

New rules for the delivery of documents

Due to practical problems, the regulation of document delivery is also expected to change significantly. Primarily, the amendment specifies the delivery of documents into the employee’s hands at the workplace as the preferred form of delivery. Only if delivery at the workplace fails can the employer deliver the document to any place where the employee can be reached or proceed to delivery through the operator of postal services, the internet or an electronic communications service or data box.

In connection with this, the amendment explicitly enshrines the option of delivery via data box for both the employer and employee, if the other party expresses their written consent to this method of delivery. Nonetheless, considering the fact that most employees do not have data boxes, this method is expected to be less popular in practice.

At the same time, the employer’s obligation to deliver documents to the last known address of the employee falls away. Thus, the obligation is transferred to the employee, because now it will be the address that the employee informs the employer about in written form that should be considered relevant. The time for sending a document through the operator of postal services if the employee cannot be reached is extended to 15 days (as opposed to the previous 10 working days). If the employee does not collect the document within this time limit, the document is considered to be delivered on the last day of this period.

Transfer of rights and obligations arising from labour relations

Furthermore, the Labor Code amendment concerns the highly criticized regulation of the transfer of rights and obligations arising from labor relations. As opposed to the existing regulation that lacks clear limitations on application, the Labor Code amendment, following the example of the Directive, newly conditions the transfer of rights and obligations upon the cumulative fulfillment of the following requirements:

• After the transfer, work is done in the same or similar way and to the same extent,
• The work does not completely or predominantly consist in the supply of goods,
• Prior to the transfer, there existed a group of employees that the employer intentionally established in order to solely or predominantly perform such work,
• The work is not intended as short-term and should not consist of a one-time task, and
• Property, or the right to use or enjoy it is transferred (if such property is essential for performance of the work, given the nature of the work), or a substantial part of the employees that the previous employer has used for the performance of such work is taken charge of (if that work to a great extent depends not on the property, but on the employees).

The transfer of rights and obligations to the next employer will not happen unless all of these conditions are fulfilled. The rule in question does not apply only when a special act stipulates that a certain commercial transaction involves a transfer of rights and obligations (typically a merger). Therefore, now in many situations involving outsourcing, insourcing, or upon a change of provider, the rights and obligations will not be transferred automatically.

In connection with a transfer, the Labor Code further implements a change in Section 51a of the Labor Code, which regulates the employee’s option to give notice to their existing employer so that the employee is not obliged to perform work. The new wording of the provision reflects two situations: first, when an employee is duly informed of the transfer of rights and obligations (i.e. pursuant to Section 339, no later than 30 days before the transfer). In this case, the employee is given only 15 days to give notice, which starts on the day when the employee is directly informed of the transfer, in which case their employment terminates at the latest on the day that precedes the day the transfer comes into effect.

In the second situation that is regulated in the new wording of Section 51a of the Labor Code, an employee is not informed of the transfer in time or is not informed of it at all. In this case, if an employee gives notice to the employer the day before the transfer comes into effect, the employment terminates already on the day that precedes the day of the transfer coming into effect. However, if an employee gives notice to the employer on the day when the transfer comes into effect or later, but no later than two months after the transfer comes into effect, the employment terminates after a 15-day notice period expires, which starts on the day when notice is delivered to the employer.

Conclusion

 The Labor Code amendment will bring about many significant changes, which particularly concern the new obligations of an employer when delivering documents, establishing the length of leave, the transfer of rights and obligations arising from labor relations and the posting of employees to provide services. The new legislation also introduces the institution of a shared work position, the aim of which is to support employees in balancing their work and personal lives. You can find out more about the Labor Code amendment in the recordings or our webinars at the following link: Novela zakoniku prace I. and Novela zakoniku prace II.

By Martin Murad, Senior Associate, and Adela Uhrinova, Junior Lawyer, Rowan Legal

According to Richard Bacek, General Counsel at Siemens Czechia, there are three significant legislative changes underway in the Czech Republic, specifically in the areas of public procurement, construction, and whistleblowing. Meanwhile, Bacek reports that business in the Czech Republic is still burdened by the dearth of what he calls “reasonable regulation” of the home office concept.

“New public procurement regulation is in parliament at the moment,” Bacek says, explaining that the law will introduce a sustainability criterion into the public procurement process. “It is not generally understood what that criterion really means and how it should be evaluated during the selection process,” he says, and he reports that there are doubts among experts about how it will be implemented in practice.

The new Law on Construction is another significant development. Even though Bacek applauds the new law, which is designed to speed up the construction process, he fears that its short-term effect could be quite the opposite. “The new law might affect our clients by slowing down their ability to complete their construction projects,” he says, noting that every significant legal change causes delays, until the system adapts.

Finally, Bacek reports that the Czech Republic is going to adopt a new Whistleblowing law, which, in his opinion, might present a logistical inconvenience. “Although we understand that the intention is to better protect people claiming that actions by others contravene the law, the current proposal would create an unreasonable administrative burden for companies that are part of groups, including international holdings,” Bacek says. According to him, every company will have to hire a designated officer who will handle potential whistleblowing cases and keep its own whistleblowing processes and systems, instead of sharing the same one within the group.

In terms of the move towards telecommuting (or “home office”), Basek says, there are still many unresolved questions related to the concept. “There are two main questions,” he explains: “The first is how an employer can ensure that the home office complies with all health and safety regulations. The second is of a financial nature – should the employee be compensated for expenses incurred working from home?”

Bacek concludes by pointing out that the legal sector is still learning how to use new technologies and how to apply them in everyday work, while, of course, maintaining positive relationships within teams and helping people grow. “We use every opportunity for education and personal development,” he notes. “To that end, through the effort of the Siemens group globally and the Union of In-house Lawyers in Czechia locally, we participate as much as possible in webinars to keep contacts and to share knowledge and experience.” 

Originally reported by CEE In-House Matters.

“The Czech Republic is currently among the worst-hit countries when it comes to Covid,” says Rowan Legal Partner Michal Nulicek. “We have more than ten thousand new cases every day – which is a lot, considering that the entire country has about ten million people living in it.”

The Czech Republic is under a heavy lockdown, with travel limited, schools closed, and a many businesses forced to test their workers twice a week, Nulicek reports. “Vaccination efforts are continuing,” he says, “but we have to wait for an increase in vaccine supply before we are able to roll it out to the general population.” In the meantime, he says, Covid-related measures are “changing all the time, so it’s not very transparent and predictable as to what will happen next.” 

All of these efforts to combat Covid have slowed the government’s ability to make progress on other legislation, Nulicek says. “A lot of legislative activity has been postponed or placed on hold – even that which is related to implementing EU laws and directives.” As a result, he says, it appears those implementation efforts – despite rapidly approaching deadlines – will be delayed. The Czech Republic will have parliamentary elections in October, and Nulicek says that the overall situation is building momentum for the opposition. “It will be interesting to see what happens, come October.”

In the meantime, Nulicek says, the economy is not doing great. “The overall situation has started to take its toll,” he says. “Recently, a number of companies have declared their income for the past year and there has been a sizable decrease, especially in automotive industry companies like Skoda.” In addition, he says, “offline retail is heavily impacted, as are, of course, restaurants and hotels. We’ve also seen first major insolvencies with three Czech clothing companies – Pietro Filipi, Kara, and Blazek – all filing for bankruptcy.” 

Nulicek reports that the price of residential housings is “constantly increasing as well.” Still, he says, “there are not many new developments when it comes to real estate transactions. There is a steady demand, but not a lot of supply, when it comes to residential units.” Nonetheless, he reports at least one major development project going on in Prague, with the Sekyra group seeking to “revitalize huge parts of the city, including the former railway station, the Smichov district, and other plots of land, primarily brownfield.”

Nulicek says that the Czech government has lowered taxes in the hope that people will start spending after the Covid-19 crisis ends. He says this may not last, however. “With all the subsidies towards businesses, the strain on the budget grows, and it is likely that the new government will have to increase taxes following the elections later on in the year.”

Finally, Nulicek describes a major effort to introduce a digital identity in the Czech Republic. “The government, in cooperation with the banking sector, is developing a project that should enable citizens to use their Internet banking details as a means of proving their identity and gain access to government and banking services online – all in one place.” The first things to get connected will be state services and state offices, but private companies are expected to join the project soon. “New legislation on the digital service that provides the framework for this has already passed,” he says. “Hopefully we’ll see the first state services exist online by the back half of 2021.”