Czech Republic

Security interest law in the Czech Republic

1. Can an intercompany guarantee be granted?

1.1 Upstream?	Yes, subject to financial assistance rules and customary market conditions.
1.2 Downstream?	Yes
1.3 Lateral?	Yes, subject to customary market conditions and corporate approvals.
2. Can a guarantee be given under foreign law (e.g. English law)?	Yes (conflict of law issues to be complied with).
3. Any special arrangements (e.g. to deal with transfer pricing/corporate benefit)?	Customary market conditions (on an arm’s length basis). Corporate approvals.

4. Can a security interest be granted in the following type of asset?

4.1 Real property	Yes
4.2 Shares (privately held)	Yes
4.3 Shares (marketable securities)	Yes
4.4 Receivables	Yes
4.5 Bank account	Yes
4.6 IP/Trademark	Yes
4.7 Equipment/Plant/Machinery	Yes
4.8 Inventory	Yes
4.9 Insurance	Yes
4.10 Rights under a contract	Yes
5. Can security interests be granted to a foreign lender?	Yes
6. Can multiple security interests be granted over the same asset?	Yes, but some are excluded (e.g. share pledge or security assignment – only first ranking).
7. Can a security interest be granted to secure liabilities of a holding company, a subsidiary or any other affiliate?	Yes (under the same terms as guarantee – see 1 and 3 above).

8. In order to be enforceable against third parties, must a security interest be?

8.1 Notarised?	Yes in some cases (e.g. enterprise/moveables pledge).
8.2 Registered?	Yes in some cases (typically mortgage, pledge)
8.3 Other?	Yes (e.g. notifications of security assignment).
9. Does registration in most cases protect the secured creditor against the debtor’s subsequent dealings with the secured asset?	Yes
10. Is there any stamp or similar tax or duty payable on the security document?	No (there are notary/registration fees).

11. For a security interest to be legally enforceable which items must be filed as part of the registration or notarisation process?

11.1 Entire security agreement?	Yes
11.2 Names of pledgor and pledgee?	Yes
11.3 Description of secured asset in general terms?	Yes
11.4 Description of each individual secured asset?	Yes (except for collective items e.g. enterprise).
11.5 Documents concerning ownership of secured asset?	Yes
11.6 Documents concerning debt in respect of which the asset is being secured?	Yes

12. Can a right to enforce security arise:

12.1 When the secured debt is unpaid and due?	Yes
12.2 When there is some other breach of the pledge/ security agreement?	Yes, but acceleration needed.
12.3 When the debtor becomes insolvent?	Yes, but subject to insolvency law requirements.
13. Can the creditor enforce its security interest by taking possession of the asset and selling it without court assistance?	Yes, with some exceptions
14. Is an instrument for direct enforcement necessary/ available/ market practice?	Yes
15. Are powers of attorney to the secured party used to facilitate a sale of secured assets in an enforcement situation?	No
16. If a sale is permitted without court assistance does it have to be made by public auction?	Yes
17. Can a transfer of all or part of the debt be made without affecting the security over the assets?	Yes
18. Is there anything else of which a lender should be aware as unusual or particularly difficult?	Yes, strict formal requirements for some security.