Stabilisation and restructuring law in the Czech Republic

1. Which financial (not tax or labour) short-term compensation schemes for immediate losses due to social distancing measures have been implemented? For which industries/sizes of business?

  • Direct support of self-employed persons in the amount of  500 for each day of the period from 12 March to 8 June 2020, in which the conditions are met;
  • State aid compensating the self-employed – measures against Coronavirus – care of a family member
  • Relief on social and health insurance contributions of self-employed persons – minimum advances will be paid for six (6) months (March-August 2020)

For completeness, we note that the state of emergency has been prolonged till 17 May  2020.

2. Which medium-to long-term stabilisation measures are in place in your jurisdiction?

Measures adopted by the Czech National Bank (the “CNB”)

The CNB expects that as a result of the coronavirus disease and related measures, there will be a severe recession in which the Czech economy will remain for the rest of this year. The CNB lowered the two-week repo rate to 0.25%. At the same time, it lowered the Lombard rate to 1.00%. The discount rate remained unchanged at 0.05%. The change in rates took effect on 7 May 2020. 

The CNB has decreased the countercyclical capital buffer rate for exposures located in the Czech Republic to 1.00% as of 1 April 2020. 

 “COVID II” and “COVID Praha” and COVID III measures 

The Czech Ministry of Industry and Trade (the “MIT”) has prepared the "COVID II" Loan measure (“COVID II”) together with the Czech-Moravian Guarantee and Development Bank (the “CMZRB”). It introduces aid for self-employed, small- and medium-sized entrepreneurs affected by measures against the spread of Coronavirus. 

Under the COVID II, the CMZRB will provide entrepreneurs with guarantees for operating loans from commercial banks with a minimum limit of CZK 10,000. In addition, the guarantees shall be provided together with the financial contribution for payment of the interest. 

The foreseeable scenario is that the CMZRB will guarantee loans from CZK 10,000 up to CZK 15,000,000 and such guarantee will cover up to 80% of the commercial loan to each individual borrower complying with eligibility conditions to the rogramme. Further, the applicant will be able to draw a financial contribution of up to CZK 1,000,000 for payment of the interest. The expected duration of the guarantee shall be 3 years. Such guaranteed commercial loan shall only be used to cover operating expenses such as wages, rent, energy, supplier-customer invoices, material, inventory, etc.

The first round of COVID II has been already carried out and applications received are currently under review. As COVID II is financed from EU structural funds, it is not intended for the implementation of projects in Prague. 

A similar programme called the COVID Praha Measure (“COVID Praha”), designed for self-employed, small- and medium-sized entrepreneurs active in Prague, has been already carried out as well and the received applications are currently under review.

CMZRB is preparing a follow-up COVID III  measure, which will be announced approximately in mid-May. The loans will be provided by cooperating commercial banks and CMZRB will issue the guarantees for them. The programme will be intended for self-employed persons and entrepreneurs employing up to 500 employees. More information will be published in the coming days.

COVID plus Measure 

The Ministry of Finance (“MIF”), in cooperation with the MIT and the Export Guarantee and Insurance Corporation (“EGAP”), has prepared a programme (the “COVID plus”) to provide a system of guarantees for repayment of loans by exporters and producers:

  • EGAP will now also provide guarantees for operating, working capital or investment loans
  • the aim is to strengthen the liquidity of export-oriented entrepreneurs
  • the share of exported goods and services in total sales of goods and services must be at least one fifth (1/5) made by the exporter in 2019
  • the guarantee will be valid for a maximum of three (3) years for working capital loans and a maximum of five (5) years for investment loans
  • the maximum loan limit is 25% of the total annual revenues from the sale of goods and services for 2019
  • the minimum amount of the guaranteed loan starts at CZK 5 million
  • EGAP will cover the principal of the loan up to 80%, so the minimum participation of the bank will be 20%.   

In addition to guarantees provided directly by EGAP, EGAP will insure both direct and indirect guarantees. The measure aims to support and maintain the business of companies with 250 or more employees.

For this purpose, the MIF has already increased the insurance capacity of EGAP to CZK 330 billion as part of the approved amendment to the State Budget Act for 2020. The programme is currently running and the provision of guarantees with EGAP is handled by the lending bank (i.e. not by the company) via an online form. 

EGAP continues to provide assistance to all exporters with traditional export credit insurance instruments, while reducing waiting time and handling requests for new insurance as a matter of priority.


The new legislation introducing suspension of loan repayments is effective as of 17 April 2020. The measures have been implemented by the Act on Certain Measures regarding the Repayment of Loans during the COVID-19 pandemic and an amendment to the Act on Consumer Loans (together the “New Legislation”).

The New Legislation applies to banks and financial institutions as well as non-banking loan providers, including consumer loan providers. It also applies to entities that acquired receivables from a provided loan.

The suspension of payments applies primarily to repayments of the principal. The moratorium is available for both commercial and consumer loans granted and utilised before 26 March 2020, although certain exceptions apply to loans secured by a mortgage and loans for housing purposes which do not need to be utilised before 26 March 2020. For other exclusions from the suspension’s applicability, please see section 6 below.

Interest remains payable during the moratorium. For business loans, the interest rate remains the same as agreed in the loan agreement. For consumer loans, the interest rate corresponds to the repo rate announced by the Czech National Bank increased by 8%, unless a lower interest rate is agreed in the loan agreement. Other fees and payments are not suspended, unless the borrower is an individual.

According to the New Legislation, the suspension only applies if the borrower chooses to opt in by sending a notice to the lender (the “Notice”) in which it states that it chooses to be protected by the suspension of loan repayments (moratorium) due to the negative economic impact of the COVID-19 pandemic and must choose whether the moratorium will apply to it until 31 July 2019 or 31 October 2020. The moratorium will then be effective from the first day of the month following the month in which the Notice is delivered to the lender. During the moratorium, borrowers would not be obliged to pay any instalments on the principal of the loans and the principal repayment dates and thus the maturity of the loan will be postponed.

Non-payment of rent

As of 27 April 2020, the Act No. 210/2020 Coll., on Certain Measures to Mitigate the Impacts of the SARS CoV-2 Coronavirus Epidemic on Tenants of Business Premises is effective. The act prohibits  termination of lease agreements by landlords due to non-payment of rent in a selected time period determined by the COVID-19 outbreak, with the obligation of tenants to repay the rent in the future. Please find below the key terms:

  • until 31 December 2020 the landlord cannot unilaterally terminate a lease for non-payment of rent that occurred between 12 March 2020 and 30 June 2020
  • non-payment has to be caused by restrictions resulting from extraordinary measures related to the epidemic situation that prohibited or substantially hindered the tenant’s business
  • the tenant needs to present the landlord with documents evidencing the cause of the delay within 15 days after the first delay of tenant’s payment
  • if the tenant does not repay all debts by 31 December 2020 the landlord may terminate the lease with five (5) days’ notice. The landlord may also terminate the lease with five (5) days’ notice if the tenant declares that the tenant will not be able to repay the outstanding debts on rent by 31 December 2020, and
  • the landlord may also terminate the lease after the prohibition or hindrance of the tenant’s business ceases to exist, however, not before the state of emergency is lifted, if it cannot be fairly demanded from the landlord to remain in the lease relationship. 

The MIT  is working on the subsidy programme called COVID-Rent intended for entrepreneurs affected by restrictive preventive measures of the Government, to the payment of rents for establishments. The COVID-Rent subsidy programme envisages that the state would pay tenants half of their total rent for the period from April to June 2020 in the form of a subsidy. The amount of support would be limited to a maximum of CZK 20 million. The condition is that the tenant provides a confirmation from the landlord in the form of an amendment to the lease agreement that he has provided the tenant with a discount of 30% of the rent. The tenant himself would therefore pay only 20% of his rent. More information shall be published in the coming days.

3. Which measures (Guarantees, Loans, Equity Injections, etc.) are available?

Guarantees for operating, working capital or investments loans, insurance, moratorium, non-payment of rent: please see section 2 above.

Wages allowances

  • for more details, see the schemes below: 
Scheme A
  1. Employees in compulsory quarantine: employees in quarantine receive 60% of their reduced average earnings;
  2. Inability to assign work to employees due to Government emergency measures: employees of companies that have suspended or closed operations due to Government orders receive 100% of their average earnings.

Under Scheme A 80% of the compensation paid for salary to respective employees (including other statutory payments) will be refunded to the employer by the State (up to a limit of CZK 39,000 per employee).

Scheme B
  1. (Inability to assign work to employees due to compulsory quarantine or childcare for a significant proportion of employees (more than 30%): in a company where more than 30% of employees unable to work due to compulsory quarantine or caring for a child, employees receive 100% of their average earnings;
  2. Limited availability of inputs (raw materials, products, services) necessary for the employer’s activity: employees who cannot work due to a lack of necessary resources available for their company to function receive 80% of their average earnings;
  3. Reduction in demand for services, products or another employer’s products: employees who cannot work because of reduced demand for their company’s services or products receive 60% of their average earnings.

Under Scheme B 60% of the compensation paid for salary to respective employees (including other statutory fees) will be refunded to the employer by the State (up to a limit of CZK 29,000 per employee).

The contribution is provided by the Labour Office. The respective amount and duration of support will depend on the specific type of impediment (ground). It will be necessary to distinguish the type of impediment (ground) for each employee/group of employees. The Antivirus programme was launched on 6 April 2020. It is expected that funds will be released by the respective Labour Office within a few days of a request being submitted. Requests will be accepted by electronic means. The Government approved the extension of the Antivirus programme until 31 May 2020. The employers will be able to apply for a refund of wage compensation for the month of May.

Small business reliefs

Postponement of tax return date, possibility of late VAT statement, recovering tax packages, abolition of administrative fees, etc.

Technology COVID-19

Subsidies for the production of medical devices designated for small- and medium-sized enterprises in the Czech Republic (except for NUTS 2 Prague).

Czech Rise Up programme

Smart solutions against COVID-19: the aim is to support the quick introduction of new solutions against COVID-19 by small-, medium- or large-sized enterprises.

4. Have these mid- to long-term stabilisation measures already been notified with EU or other antitrust bodies?



Measures of the CNB do not need to be notified.

The measure COVID Plus has been approved by the European Commission on 5 May 2020.  The European Commission has adopted a Temporary Framework for State aid measures to support the economy in the current COVID-19 outbreak on 19 March 2020, which provides for five types of aid (namely: (i)  Direct grants, selective tax advantages and advance payments; (ii)  State guarantees for loans taken by companies from banks; (iii)  Subsidised public loans to companies; (iv) Safeguards for banks that channel State aid to the real economy; and (v) Short-term export credit insurance), the Czech Office for the Protection of Competition is in contact with representatives of ministries (aid providers) and is ready for operational cooperation in terms of State aid in the creation of programmes and their notification to the European Commission.

On 3 April 2020, the European Commission has adopted the Temporary Framework for State aid measures by providing for additional five types of aid measures: (i) Support for coronavirus related research and development, (ii) Support for the construction and upscaling of testing facilities, (iii) Support for the production of products relevant to tackle the coronavirus outbreak, (iv) Targeted support in the form of deferral of tax payments and/or suspensions of social security contribution; and (v) Targeted support in the form of wage subsidies for employees. The amendment Temporary Framework will be in place until the end of December 2020.

Moreover, the Czech Office for the Protection of Competition, as one of the members of the European Competition Network, joined the Joint Declaration on the application of competition law during the ongoing pandemic of COVID-19.

5. Which prerequisites are necessary to qualify for a programme?


In general, the main prerequisite for any type of measure is that the COVID-19 pandemic has negative economic impact on you:

A main prerequisite for COVID II or COVID Praha (Please see section 2 above) has been a pre-approved loan from one of the commercial banks involved in the programmes.

The prerequisites for COVID Plus shall be discussed with the applying bank (Please see section 2 above).

The prerequisites for COVID III (Please see section 2 above) have not been announced yet.

Moratorium (see section 2 above)

  • a commercial or consumer loan granted and utilised before 26 March 2020, although certain exceptions apply to loans secured by a mortgage and loans for housing purposes, which do not need to be utilised before 26 March 2020, and
  • a borrower’s decision to opt in by sending a notice to the lender in which it states that it chooses to be protected by the moratorium due to the negative economic impact of the COVID-19 pandemic on it,; the borrower must choose whether the moratorium will apply to it until 31 July 2019 or 31 October 2020   

Non-payment of rent (see section 2 above)

  • non-payment of rent has to be caused by restrictions resulting from extraordinary measures related to the epidemic situation that prohibited or substantially hindered a tenant’s business
  • the tenant needs to present the landlord with documents evidencing the cause of the delay within 15 days after the first delay of the tenant’s payment.

Antivirus (see section 3 above) 

  • the employer’s economic activity must be jeopardized by the spread of COVID-19
  • the employer must prove that impediments to work are caused as a result of the spread of COVID-19
  • the employer must strictly obey all statutory rules as stated in the Czech Labour Code
  • the employer is an entrepreneur in the business sector (State support is not provided to State institutions etc.)
  • no notice of termination was given to an employee (for whom the employer requests the compensation), and the employee cannot be on notice period on the day of the request for support
  • an employee must be in employment relationship (i.e. entered into an employment agreement) with the employer (State support is NOT available for employees on temporary agreements doing work performed outside an employment relationship) and must participate in the health and pension insurance scheme
  • compensation for salary must be paid to the employee by the employer (including all statutory fees), as State support is provided retrospectively.   

6. Are there any major reasons that may inhibit an applicant from successfully applying for a stabilisation measure?




The New Legislation provides a number of exclusions from the suspension’s applicability, e.g. the suspension is not available to:

  • loans under which the borrower was, as of 26 March 2020, in a delay with payments for more than 30 days
  • loans granted for trading with financial instruments
  • financial instruments and related instruments
  • revolving/overdraft loans
  • operating lease
  • financial guarantee.

7. In an international context, are subsidiaries and branches of foreign parent/holding companies eligible to apply? For EU-States: Also for non-EU-third countries?



In relation to COVID II and COVID Praha (see section 2 above) the applicant must be authorised to do business in the Czech Republic and must have a Czech identification number.

8. Do your country’s stabilisation schemes foresee restrictions on use of cash/other restrictions?



Due to high uncertainty regarding further economic developments, the CNB expects in the current situation that banks will, with immediate effect and until both acute and longer-term consequences of the new Coronavirus epidemic fade away, refrain from any dividend payouts or other steps that might jeopardise individual banks’ resilience. 

There are no other restrictions foreseen at the moment, but we recommend that the situation is monitored as it is changing rapidly.

9. How are insolvency application deadlines handled in times of Corona?

In reaction to the anticipated enormous economic impacts of the COVID-19 pandemic, the Parliament approved the “Lex COVID-19”. The law is effective as of 24 April 2020.

Lex COVID-19 introduces suspension of the statutory duty of management to file for insolvency without delay after the management has learnt about the insolvency of the company if its insolvency is not principally related to the pandemic situation. This means that debtors and their management will not face personal repercussions for causing any damage to creditors as a result of them failing to meet this duty. However, other statutory duties of the management, such as due care, shall still apply.

Suspension of the duty to file is proposed to remain in place for the period of six (6) months following the end of emergency measures, but no later than 31 December 2020.

Lex COVID-19 further suspends the right of creditors to file for their debtor’s insolvency until 31 August 2020. Any such creditor’s filing in this period will be disregarded and will not be published in the insolvency register. The relevant creditor will need to file a new petition after 31 August 2020.

10. How far have local insolvency/restructuring laws been changed/eased which might have an impact on international businesses?

In addition to the suspension of insolvency application deadlines (please see above) and other particular rights, the following changes proposed by Lex COVID-19 may have an impact on international business:

Extraordinary Moratorium

The new law introduces an additional protective measure for business entities and individual entrepreneurs by way of an extraordinary moratorium. A petition for an extraordinary moratorium may be filed until 31 August 2020 unless the debtor was insolvent on or prior to 12 March 2020, in which case only an ordinary moratorium can be applied for. 

Unlike the ordinary moratorium under the current insolvency rules, the extraordinary moratorium does not require consent from the majority of the debtor’s creditors. The extraordinary moratorium shall be declared by the court for as long as three (3) months and may be prolonged for another three (3) months subject to the approval of the majority of creditors. 

The effects of the extraordinary moratorium are quite extensive and may have a significant impact on the debtor’s business partners, in particular suppliers and financing banks. Rights of business counterparties to terminate their contracts or to refuse to perform under such contracts will be very limited. This will also apply to loan providers, such as banks, unless the new drawdown of loans or other financial performances is refused because of a breach that has occurred before the declaration of the extraordinary moratorium.

Specific measures in reorganisations

Debtors with an approved reorganisation plan as of 12 March 2020 may ask the court to suspend the debtor’s obligation to fulfil the plan. The right of suspension may not be extended beyond the period of six (6) months following the end of emergency measures, but no later than 31 December 2020.

Specific measures in relation to the discharge of debt proceedings (oddlužení)

Lex COVID-19 introduces new rules for debtors with instalment plans approved before 31 May 2019.

Debtors may ask the court to approve lower monthly instalments if individual circumstances (such as their personal economic situation) has significantly changed. New instalments may lead to a lower satisfaction than 50% of the creditors’ claims and the opinion of creditors on the debtor’s proposal will not be ascertained by the courts. The court may issue such a decision any time until the expiration of 12 months following the end of emergency measures.

The court will not terminate the discharge of debt proceedings if the debtor fails to meet the major part of the instalment plan if such failure is predominantly the result of the pandemic situation.

Due to the expected decrease in the income of debtors, Lex COVID-19 gives debtors the right to ask the court to grant relief from remaining unpaid debts under less strict conditions. If, following the expiration of the instalment plan (a five-year period), the debtor has paid to its unsecured creditors less than 30% (or 50% in some cases) of the debt, the court may grant debt relief to the debtor if the debtor demonstrates that the above thresholds were not reached due to reasons outside the debtor’s control. This may be particularly relevant in the current pandemic situation. If this happens, the debtor would not be required to prove further conditions necessary for debt relief as applicable under current insolvency rules.
The above changes may mean that in proceedings approved by the court before 31 May 2019, unsecured creditors’ satisfaction rate may fall below the minimum of 30% (and the debtor will still have the remaining unpaid debts waived) if the debtor is able to prove that the drop in the creditors’ satisfaction is the result of the pandemic situation.



Other than the Corona-related rules described above, there are no such rules implemented at the moment, but we recommend that the situation is monitored as it is changing rapidly. We understand from discussions with our contacts that intensive discussions on further measures to mitigate adverse impacts on the economy are currently happening at Government level.

In order to overcome shorter periods of stagnation, informal restructuring measures may be more appropriate, such as negotiation with financing banks on restructuring of loans or participation in the COVID II. COVID Praha or COVID Plus (as described above). In respect of the law on the loan payments moratorium and the draft law on the lease payments moratorium, see section 2 above.

Furthermore, the Government has approved a programme for employment protection called Antivirus. Please see section 3 for more information. We understand that the Government is preparing further stimulus and protection packages.

If financial difficulties become more serious, businesses may use the new extraordinary moratorium (as introduced by Lex COVID-19, please see section 10 above) for as long as (3) months, for which no consent of creditors will be required. An extraordinary moratorium can be prolonged for another three (3) months subject to approval of the majority of creditors. In this period businesses may try to overcome difficulties, find an investor or prepare a reorganisation plan.
Another option is to go through a formal reorganisation (Chapter 11 of the USBC equivalent), i.e. a procedure within the framework of the insolvency proceeding with the oversight of the insolvency court, creditors and the insolvency trustee. Reorganisations usually take up to two (2) years and offer, at least to certain types of businesses, the opportunity to recover or find a new investor as necessary.

Pavla Kreckova
Pavla Křečková
Lukas Valusek
Lukas Valusek
Senior Associate
Hana Ricankova
Hana Řičánková