A. GENERAL PREREQUISITES

Implementation of §1 of the Model Law would lead to an improvement of the position of the general body of creditors in Czech insolvency proceedings since under current Czech law, only the debtor’s legal acts (including forbearances) may be avoided, but not acts of other parties (§235(1) of the Czech Insolvency Act).

B. PREFERENCES

Implementation of §2 of the Model Law would lead to a deterioration of the position of the general body of creditors in Czech insolvency proceedings in two principal ways.

First, as opposed to a mere three months under §2(1) of the Model Law, the claw-back period under current Czech law is one year before the filing for the insolvency proceedings for unrelated preferential transactions and three years for preferential transactions with (or for the benefit of) related parties (§241(4) of the Czech Insolvency Act).

Second, unlike §2(2) of the Model Law, current Czech law does not distinguish between “congruent” and “incongruent” performance, and does not favour the former.

But implementation of §2 of the Model Law would also simplify the current Czech law of preferences. This is because §2(1) attempts to establish no benchmark against which the party having received the preference has “benefitted”. Current Czech insolvency law requires that the preferential effects of the transaction in question be assessed against what the counterparty would otherwise receive in liquidation (§241(1) of the Czech Insolvency Act), which puts the plaintiffin a very difficult procedural position as regards the burden of proof.

C. EXCEPTIONS

Implementation of the exception under §3(1) of the Model Law would be broadly neutral, because current Czech insolvency law has similar exceptions for exchanges of commensurate value (§241(5)(a) and (b) of the Czech Insolvency Act).

Implementation of the exception under §3(2) of the Model Law would lead to a deterioration of the position of the general body of creditors in Czech insolvency proceedings because current Czech insolvency law has no similar exception with respect to bills of exchange and cheques.