Category: Czech Republic

The Czech Republic has been a key global entertainment industry player for decades – whether through the quality of its local film production services, or the country’s use as a filming location, or with respect to developing world-famous video games. Now, in order to respond to the constantly evolving entertainment industry, to strengthen the competitiveness of the Czech audiovisual market, and to ensure the country remains a priority destination for major players developing film, series and video game projects, the Czech incentive scheme has been overhauled by lawmakers.

Specifically, Czech lawmakers have just passed the most extensive amendment to the Czech Audiovisual Act in recent years (the “Amendment”). The Amendment passed the Senate today, will soon be signed by the President and is expected to come into effect on 1 January 2025. The changes related to the production incentive system are set to take effect a year later.

Specific changes introduced by the Amendment are highlighted below.

Changes to film incentive scheme

The Amendment introduces significant changes to the Czech film incentive scheme, with the goal of increasing state support for audiovisual production in the country.

Support is set to increase from 20% to 25% refund of eligible costs incurred at least partly in the Czech Republic for feature films, feature series and documentary films. The introduction of the 25% rate for eligible costs will also newly apply to documentary series.

For animated films and series and for digital production / post-production work, the amount of state support is set to increase from 20% to 35% refund of eligible costs.

Moreover, in order to satisfy the demands of certain large-scale production projects by foreign producers, and at the same time prevent the outflow of such projects to other countries, the maximum possible incentive amount per project will increase from current CZK 150 million (approx. EUR 6 million) to CZK 450 million (approx. EUR 18 million).

Furthermore, the Amendment reduces the minimum required runtime for feature films, feature series, animated films, animated series and documentary films to qualify for an incentive. Here we can see how Amendment is responding to new trends and tries to make series production more eligible for the Czech incentives. This reflects changes in content consumption, with younger viewers used to watching shorter formats, with VOD services and TV adapting to such habits.

The Amendment also establishes new categories of animated works (both film and series) with a lower limit of minimum Czech expenditures, allowing more animated projects to qualify for incentives.

A fundamental change from the current incentive system is the transition from a three-phase decision making incentive process (registration, allocation of funds, payment of the incentive) to a more simplified two-step process (project registration, payment of the incentive) where the first and second phases merge and are now called “project registration”. The initial project registration phase is initiated by the application for registration of the incentive project, which must be submitted before the start of production of an audiovisual work in the Czech Republic.

The amendment also introduces a new category of eligible costs, namely pre-production preparation costs, which can include costs incurred up to six months prior to the submission of the project registration.

New support for video games and small-screen projects

A ground-breaking change in the incentive system is its extension to support video games and small screen works.

The Czech video game industry is strongly geared towards exports. According to the Explanatory Memorandum to the Amendment, more than 95% of Czech game production is for the global market. In 2021, the turnover of Czech video game companies reached a record CZK 7.11 billion (approx. EUR 283 mil.), and in the same year video game companies paid CZK 395 million on the income tax alone.

Video game developers will now be able to apply for financial support for their projects similarly to film and television production companies. According to the Amendment, state support will be provided via grants, with the state receiving a share of profits. In other words, video game companies receiving grants will be required to pay a percentage of their revenues back to the Czech Audiovisual Fund.

In addition, the Amendment also sets forth support for small-screen productions, made available through television broadcasting or streaming platforms.

The Fund will specify the detailed criteria for granting support for video games and small-screen productions via its Statute, which is currently being drafted by experts and should be issued in spring 2025.

New fees for VOD providers

The Amendment makes use of an option authorised via the European Audiovisual Media Services Directive (“AVMS Directive”) and also imposes an obligation to pay a fee from on-demand audiovisual media services to those VOD providers that are not established in the Czech Republic but nonetheless still target end-users in the Czech Republic. Many EU Member States have already implemented these fees in accordance with AVMS Directive and the Czech Republic is following this trend.

The above-described fee concerns revenue from (i) on-demand audiovisual media services in the Czech Republic and from (ii) audiovisual commercial communications displayed to end-users in the Czech Republic, which are associated with the provision of on-demand audiovisual media services there. The fee calculated from these revenues (i.e. from both the provision of service in the Czech Republic and commercial communications) is 2%.

The Amendment enables providers to reduce such fees by up to 50% through direct investments. These investments can be, for instance, in the form of funding Czech production. If no direct investments are made, VOD providers must pay an additional fee of 1.5% of their total revenues in the Czech Republic (this additional fee is proportionally reduced based on the extent of direct investments undertaken).

Conclusion

The Amendment represents significant news for the entertainment industry, offering a much more attractive incentive scheme for those that want to realize their production projects in the Czech Republic. Foreign producers and video game companies in particular should take note.

Our dedicated entertainment law team will continue to keep you updated on the latest developments and is standing by to offer guidance and counsel.

By Petr Bratsky, Managing Associate, and Anna Marciano, Junior Associate, Kinstellar

Former Rowan Legal Lawyers Lucie Kacerova and Jan Mekota have joined forces to establish Kacerova Mekota Advokati in Prague.

Kacerova specializes in litigation, insolvency law, and contractual relations. Before setting up Kacerova Mekota Advokati, she was with Rowan Legal as an Associate between 2019 and 2021 and Senior Associate between 2021 and 2024. Earlier, she was with Kocian, Solc, Balastik as a Paralegal between 2013 and 2014, Junior Associate between 2014 and 2018, and Associate between 2018 and 2019.

Mekota focuses primarily on competition law and public procurement. Before joining Kacerova to set up their office, he was with Rowan Legal as a Junior Associate between 2013 and 2017, Associate between 2017 and 2022, and Partner between 2022 and 2024.

“The decision to establish our own law firm was a logical step for us,” commented Kacerova. “We want to devote ourselves fully to our clients, and to be able to do things in our own way.”

Filing a claim in insolvency proceedings may be the only way for creditors to recover at least part of the amount they are owed. In the Czech legal system, however, creditors face an understated but significant risk: if they overstate the amount of their claim, not only do they risk having it disregarded but they may also be required to pay a penalty to the debtor’s estate. This provision, embedded in the Czech Insolvency Act, acts as a double-edged sword: while it aims to prevent unfounded claims and speculation in insolvency proceedings, it often deters legitimate creditors from fully asserting their claims. This financial penalty has no equivalent in other European countries. So, how can creditors avoid penalties, and what should they know before submitting a claim in insolvency proceedings?

Historical Context: Why is the law so strict?

Czech insolvency law, specifically Sections 178 and 179 of the Insolvency Act, was introduced to counter certain practices by various creditors or even groups of creditors during insolvency proceedings, especially in creditors’ meetings. Some creditors deliberately inflated their claims to gain a larger share of voting rights and thereby influence the course of the insolvency proceedings in their favour, whether by securing participation in a creditors’ committee or deciding on the method of resolving the insolvency through reorganization or bankruptcy.

The legislature responded by introducing stricter rules and sanctions for creditors who submit overstated claims. While the primary aim of this legislation was to limit abusive and purpose‑driven behaviour by creditors, it also brought new risks for honest creditors. These rules not only affect those who manipulate the amount of their claims but also creditors whose claims are legitimate but whose exact valuation is difficult or disputed. This creates room for unpredictable consequences even in cases where creditors act in good faith. 

How do courts approach overstated claims today?

In response to the practices described above, the legislature established significant penalties for creditors whose claims are overstated and ultimately verified to be less than 50% of the submitted value.

This 50% threshold is considered by the Supreme Court to be sufficiently high enough to allow reasonably prudent creditors to estimate the chances of their claim’s success without risking conflict with the sanctions provided for in insolvency law. While today’s law gives courts some discretion in considering the circumstances of a case when evaluating overstated claims, practice has been leaning increasingly towards a strict interpretation. For creditors, the 50% threshold is not just a number—it represents a real risk that influences their decision-making, since submitting an overstated claim poses not just a reputational risk; it comes with strict penalties that can have severe consequences, including criminal law implications. 

What penalties are imposed for overstated claims?

a. Automatic Disregard of the Claim: If a claim is found to be valid for less than 50% of its submitted amount, the insolvency court will automatically disregard the entire claim, even the part that was recognized. The claim is effectively rejected, and the creditor’s participation in the insolvency proceedings, at least concerning the disputed claim, is thus terminated.

This penalty applies automatically, regardless of the circumstances. Even if the creditor submitted the claim in good faith, without intending to dominate the insolvency proceedings or harm other creditors, this sanction cannot be avoided. The rejection of the claim is a penalty of extraordinary severity, which is unparalleled in Czech civil law.

b. Financial Penalty – a serious financial risk at the court’s discretion: The second sanction for creditors with overstated claims comes in the form of a financial penalty imposed by the insolvency court, requiring payment into the debtor’s estate of an amount up to the difference between the submitted and verified amounts of the claim. The Supreme Court has repeatedly ruled that insolvency courts should only avoid imposing such penalties in exceptional cases.

When deciding on the amount of the financial penalty, the court considers the circumstances under which the claim was submitted and reviewed. It emphasizes whether the overstatement was due to error or was intentional, the reasons for reducing the claim during verification, and the extent to which the creditor’s actions jeopardized protected interests, such as the integrity of the insolvency process or the rights of other creditors. However, clerical errors or negligence in filling out claims are not excusable, as the Supreme Court has noted. 

The fact that courts indeed impose penalties is evidenced by a ruling of the Regional Court in České Budějovice, which ordered a creditor with an overstated claim to pay CZK 180,000,000 (approx. EUR 7,165,000). The risk of being subjected to a financial penalty is therefore more than real.

Can sanctions be avoided?

Creditors have several options during insolvency proceedings to minimize the risk of sanctions. A key strategy is to actively correct submitted claims. If a creditor finds that its claim is overstated, it can withdraw part of the claim. Another option is to try and reach a settlement with the disputing party and having it approved by the insolvency court, which is only possible in an incidental dispute. However, it is essential to note that a mere out-of-court agreement between the parties does not have the same effect of avoiding sanctions.

Another critical strategy to avoid financial penalties is to refrain from exercising procedural rights related to an unverified claim. However, according to the Supreme Court, any action taken by a creditor that impacts the insolvency process based on the submitted claim can lead to sanctions. This includes active voting in creditors’ meetings, passive attendance if it influences the outcome of a vote, participation in a creditors’ committee or as a creditors’ representative, or filing objections to the valuation of the assets in the debtor’s estate. It is irrelevant whether the creditor acted in good faith or how significant the impact of its exercise of rights was on the insolvency proceedings. These circumstances are only taken into account when determining the amount that the court orders the creditor to pay into the debtor’s estate.

It is important to note that these measures can only prevent financial penalties; they cannot reverse the automatic disregard of the claim. Correcting submitted claims or refraining from exercising rights during proceedings is effective mainly against financial penalties, not against the sanction that the recognized portion of a claim is disregarded. This distinction is crucial for creditors to consider when planning their strategy in insolvency proceedings.

Recommendations for Creditors

In the Czech insolvency environment, where the rules for submitting claims are strict and the consequences of errors can be severe, it is essential to approach claim submissions with maximum diligence. Submitted claims are initially assessed solely based on written evidence, so any inaccuracy or omission can have far-reaching consequences.

Accurately valuing claims, supported by a thorough legal analysis and sufficient evidence, is not just a formality. Incorrectly submitted claims can easily be challenged, exposing creditors to the risk of losing their rights or facing financial penalties. Penalties for overstated claims do not depend solely on intent but also affect unintentional errors or administrative oversights.

The key to success is thorough preparation, careful processing, and detailed documentation of all claims. This approach not only minimizes the risk of the claim not being recognized in full but also secures the creditor’s position during the proceedings. Attention to accuracy and caution when submitting claims pays off in the Czech insolvency environment—both literally and figuratively.

By Pavla Veselkova, Lawyer, Kocian Solc Balastik

PRK Partners has advised J&T Banka on a EUR 68 million loan granted to the Julius Meinl Living Group. Glatzova & Co reportedly advised the Julius Meinl Living Group.

Julius Meinl Living Group is the owner of The Julius Prague hotel.

According to PRK Partners, the financing helped refinance existing external and intra-group debts and enabled the repayment of a maturing Luxembourg bond issue. 

The PRK Partners team included Partner Daniel Rosicky, Associate Partner Tomas Bures, and Attorney at Law Vaclav Sara.

Editor’s Note: After this article was published, Glatzova & Co confirmed it advised the Julius Meinl Living Group. The firm’s team included Counsel Jarmila Tornova, Attorney at Law Radek Sendera, and Legal Assistant Tomas Farnik.

CEE Attorneys has advised on the sale of Data Force to Geetoo Group.

Data Force specializes in IT infrastructure.

Geetoo Group is a multi-cloud solution company.

The CEE Attorneys team included Partner Lukas Petr and Senior Associate Veronika Knezinkova.

CEE Attorneys did not respond to our inquiry on the matter.

Former CTP Acting Group Head of Legal and Group Head of M&A Legal Kveta Vojtova and Head of M&A Michal Felcman have joined CPI Property Group as Group Head of M&A and Transaction Legal and Deputy COO and Group Head of M&A, respectively.

Before the move, Vojtova spent more than seven years with CTP between 2017 and 2024. Earlier, she was a Partner with Vilimkova, Dudak & Partners between 2014 and 2017. Earlier still, she was a Senior Lawyer with CMS between 1997 and 2014.

Before joining CTP, Felcman was with CTP for nine years, first as a Finance Manager between 2015 and 2021 and then as the Head of M&A between 2021 and 2024. Earlier, he was with PwC as a Consultant between 2008 and 2010, Senior Consultant between 2010 and 2014, and Assistant Manager between 2014 and 2015. Earlier still, he was with Deloitte between 2007 and 2008.

Originally reported by CEE In-House Matters.

Havel & Partners has advised Rohlik Group on the formation of the EUR 120 million Rohlik Growth SICAV investment fund with the majority investor being Tomas Cupr and the remaining shares being held by JTFG Fund I SICAV from the J&T Group. Kocian Solc Balastik advised J&T Group.

Rohlik Group was founded by entrepreneur Tomas Cupr. According to Havel & Partners, the new Rohlik Growth SICAV investment fund is expected to exceed EUR 120 million in value. It will focus exclusively on Rohlik Group shares and is intended for qualified investors, allowing the general investing public to participate in the project’s development.

The Havel & Partners team included Partners Jaroslav Baier and Jan Topinka, Counsel Roman Svetnicky, Managing Associate Josef Bouchal, and Senior Associate Martin Rott.

The KSB team included Partner Vlastimil Pihera, Attorney at Law Jana Guricova, and Lawyer Josef Kriz.

The Czech Republic is struggling to implement the European SEVESO Directive into its legislation. Preventing the consequences of accidents in potentially hazardous companies, such as chemical plants, is thus in a state of emergency. After previous half-hearted solutions, however, the amendment that is being prepared by the Ministry of the Environment offers new hope.

A few definitions upfront. Prevention refers to a set of measures designed to prevent the occurrence of an undesirable phenomenon and reduce the likelihood of occurrence. An accident is an extraordinary, usually man-made, incident that results in fatal or bodily injury and damage to property and the environment. Implementation of EU law is the process of transposing EU legislation into the national legislation of EU Member States. A problem in the implementation of EU law is a situation where a particular European legal regulation is implemented “imperfectly” or even not at all.

EU Legislation vs. Czech Legislation I.

In the field of major accident prevention, Directive 2012/18/EU on the control of major accident hazards exists at the EU level. In simple terms, the purpose of the Directive is to establish a comprehensive system of preventative measures for the development and, in particular, the operation of potentially hazardous facilities, such as chemical plants. These measures limit the impact of potential accidents on human life and health and on the environment. The Directive is called the SEVESO Directive, after the notorious accident at an herbicide and pesticide factory in the Italian town of Seveso.

In the Czech legal system, this issue is currently regulated by Act No. 224/2015 Coll., the Major Accident Prevention Act. The Act is not very well known among the general public, and if it is, it is mainly with regard to the so-called emergency planning zones that are established under the Act in the vicinity of the largest companies where hazardous chemicals or mixtures are handled. For the sake of simplicity, let us call these facilities, which the Czech law refers to as “objkekty” (facilities), SEVESOs. The Major Accident Prevention Act is the implementing act that transposes the SEVESO Directive into Czech law.

Both the SEVESO Directive and the Major Accident Prevention Act regulate the obligations of SEVESO operators very strictly. In addition, Article 13 of the SEVESO Directive sets forth that to duly implement the Directive’s objectives it is important to cover the development and operation of various construction projects which are not carried out by SEVESO operators and which are not related to the operation of SEVESOs, but are located (for various strategic or economic reasons) in the vicinity of SEVESOs. These projects can fundamentally change the situation in the area, whether it concerns the number of people present, the logistical situation of the area, and other relationships that logically translate into the scope and complexity of dealing with the issue of major accident prevention.

If you ask where and how this important part of the SEVESO Directive has been incorporated into the Major Accident Prevention Act, the answer is simple – nowhere and in no way for some time. The Major Accident Prevention Act did indeed address how to locate new facilities and how to maintain mutual distances between facilities and residential areas; however, the regulation of the placement of “non-facilities” in the vicinity of SEVESOs was somehow left out of the legislative solution.

In practice, it was common for the construction of a logistics centre or a kindergarten to be planned in the immediate vicinity of a SEVESO (for example, within sight of ammonia tanks), even though it was obvious that the location was more than inappropriate (to put it bluntly) from the point of view of safety. Moreover, the Czech authorities repeated with Austro-Hungarian pedantry that they had no competence to deal with such situations and that it was therefore up to the SEVESO operators to adapt their emergency and safety plans to the new situation themselves and at their own expense. Construction plans for “non-facilities” in the area of the emergency zones were thus often permitted without giving the SEVESO operators concerned, who were usually not even parties to the proceedings question, the opportunity to influence their development in any relevant way.

EU Legislation vs. Czech Legislation II.

The unfortunate situation described above was the reason why the Major Accident Prevention Act was amended simultaneously with the adoption of the new Construction Act, which, as of 1 July 2024 (and as of 1 January 2024 in the case of so-called reserved buildings) provides for the following:

The regional authority shall issue a binding opinion which will serve as a basis for issuing decisions in project permit proceedings and in building demolition proceedings under the Construction Act, if the implementation of a new development project that is situated within the reach of the emergency events specified in the relevant risk assessment of a major accident of a building classified in Group A or Group B may cause or increase the risk of a major accident or worsen the consequences thereof and it is not a simple construction under the Construction Act; in its binding opinion, the regional authority shall lay down the conditions for the location and execution of the new construction project, as well as for putting it into trial operation or use in the event that trial operation is not carried out.

Theoretically, the amendment to the Major Accident Prevention Act provided the regional authorities with the missing power to assess (from the point of view of serious accidents prevention) construction projects that were located in the vicinity of SEVESOs; however, the wording opened up a number of interpretative ambiguities. For example, it was not entirely clear how to interpret the phrase “the reach of emergency events” and whether it was synonymous with the phrase “the reach of the selected limit values of the effects of the identified major accident scenarios” contained in implementing Decree No. 227/2015 Coll. It was not even clear how the reach of emergency events/the reach of limits chosen should be determined in real life.

Methodological Guideline of the Ministry of the Environment vs. Another Amendment?

Even before the amendment to the Major Accident Prevention Act came into force, the Ministry of the Environment began to prepare a methodological guideline that would solve the interpretation problems and set out recommendations that the regional authorities could follow.

The concept was based on the premise that the developers of projects located in the vicinity of SEVESOs should enter into negotiations with the operators of the affected SEVESOs when preparing their projects and that they should have change analyses (risk assessments) prepared together, which would show whether and how the safety situation will change with the development of the new project in the vicinity. The existence of a subsequent agreement between the operator of the affected SEVESO and the new developer on how to address the new project’s impact on the prevention of major accidents in the area should then be one of the determining factors for obtaining a consent opinion from the competent regional authority, which would form one of the necessary bases for obtaining the permit for the project.

Although a draft of the methodological guideline was completed, in the end it was not issued, as it turned out that the implementation of the SEVESO Directive was weak in a number of other points that could not be solved through the methodological guideline. Currently, the Ministry of the Environment is preparing an amending legal text that should resolve these shortcomings.

There is a good chance that the new legislation will address all the topics that have long been discussed among SEVESO operators and the professional public in this area. These include not only the clarification of the powers of the regional authorities in issuing the binding opinions in question, but also the enshrinement of the statutory participation of SEVESOs in the construction proceedings relating to projects located in the vicinity of SEVESOs and the reflection of the existence of emergency planning zones in the relevant zoning-planning documentation.

We can only hope that the new legislation will be prepared and adopted as quickly as possible, ideally during this parliamentary term, as the current situation, where the permitting of development projects in the vicinity of SEVESOs is not duly assessed from the point of view of major accident prevention, can be described – without any exaggeration – as an emergency.

By Tomas Sequens, Partner, Kocian Solc Balastik

White & Case has advised Energo-Pro Green Finance on its CZK 3.5 billion retail domestic offering of green notes due 2029 with J&T IB and Capital Markets as the arranger and J&T Banka and UniCredit Bank Czech Republic and Slovakia as the managers. A&O Shearman advised the joint lead managers.

The DK Holding Investments group includes the Energo-Pro group and operates a portfolio of 49 hydropower plants in Bulgaria, Georgia, Turkiye, Spain, and the Czech Republic. Additionally, it is developing hydropower plants in Colombia and owns and operates electricity distribution networks in Bulgaria and Georgia.

According to White & Case, the notes are guaranteed by its holding company DK Holding Investments, and secured over shares in Energo-Pro and certain other assets of DK Holding Investments. The notes have been admitted to trading on the regulated market of the Prague Stock Exchange. 

“We are pleased with the strong demand for our green bonds, indicating that renewable power generation, infrastructure, and storage assets appeal to domestic investors,” said General Counsel and Chairman of the Supervisory Board at Energo-Pro Christian Blatchford.

In 2023, White & Case advised on Energo-Pro’s EUR 300 million bond issuance (as reported by CEE Legal Matters on August 2, 2023).

The White & Case team in Prague included Partner Petr Hudec, Counsel Petr Smerkl, Associates Jan Vacula and Jakub Kopacek, and Legal Intern Josef Levy.

The A&O Shearman team included Partner Petr Vybiral and Associates Josef Pavlicek and Jan Mourek.

Kocian Solc Balastik has advised Avant Loan Sicav on its first EU growth prospectus.

According to KSB, “with over a quarter of a billion in fund capital, the investment fund focuses on mezzanine financing within the group and is managed by Avant, a leading Czech investment company. The fund’s investment strategy is to provide short to medium-term secured loans to investment funds and their subsidiaries within the Avant ecosystem.”

In 2023, KSB advised Avant Financial Group on its EU growth prospects (as reported by CEE Legal Matters on May 17, 2023).

The KSB team included Partner Vlastimil Pihera and Lawyer Josef Kriz.

KSB did not respond to our inquiry on the matter.