Kamil Blažek will replace Jan Bobek, commercial manager of the company Tebodin Czech Republic, who has held this position for the past two years. The steering committee elected Kamil Blažek to the position of AFI Chairman until the next general assembly meeting.

AFI promotes the development of the domestic business environment and the Czech Republic’s competitive advantage in the field of foreign investment. Accordingly, Kamil Blažek will be focusing on relations with CzechInvest and the entire public service sector as well as enlarging the partnership base of the association.

Kamil Blažek said in this context, "I see improving the communication with public institutions as an essential element, because we are able to provide these institutions with feedback from the private sector, and in this way, continuously improve competitiveness of the Czech Republic."

Kinstellar has retained its position as Romania’s leading mergers and acquisitions (M&A) advisor by value, with transactions worth a combined US$576.38 million during the period 1 January to 1 June 2010.

DealWatch is the M&A service belonging to ISI Emerging Markets, a Euromoney Institutional Investor Company. For more information on DealWatch please visit: http://www.securities.com/dw/

On July 06 2010 Emergency Government Ordinance 75/2010 (“EGO 75”), amending the provisions of the Competition Law 21/1996 as republished and amended, has been published in the Official Gazette no. 459. The EGO 75 will enter into force on 05 August 2010. Furthermore, an amended version of a number of secondary legislative measures (regulations and instructions) will also enter into force on the same day.

In consideration of the impact that such an amendment might have on your day to day business, we have prepared a brief article, attached herein, outlining the main modifications brought about by EGO 75.

The award is a great honour for us and recognition of Kinstellar’s consistent top quality and leadership on the local market and underscores our long term commitment to providing a seamless service to local and international clients in Romania.

Kinstellar will work closely with a group of Turkish lawyers who have established a new Turkish firm called CCAO to advise on Turkish law. CCAO is founded by two leading Turkish lawyers, Halide Cetinkaya and Gamze Cigdemtekin, who are both well known among, and highly respected by, the Turkish business community, international law firms and international businesses with interests in Turkey.

Jason Mogg, Kinstellar’s Firm Managing Partner, comments:

“We are very pleased to be launching in Istanbul. We look forward to working with Halide Cetinkaya and Gamze Cigdemtekin and their team to serve our clients’ business interests in Turkey. Turkey is an exciting market for us and plays to our core strengths. It currently has one of the world’s fastest-growing economies and our launch in Istanbul is well timed to meet the growing demand there among international investors for consistent, top-quality advice and service. Coming on the heels of our launch in Belgrade, the opening in Istanbul demonstrates Kinstellar’s underlying strength and commitment to deliver the highest quality service to clients across Emerging Europe.”

Below are some brief background notes on key people at CCAO and Kinstellar:

Halide Cetinkaya has over ten years experience advising leading international and Turkish clients on corporate, M&A and finance transactions, including over three years as head of the banking and finance practice of a leading Turkish firm, Paksoy, and prior to that as in-house legal counsel at Koc-Unicredit Financial Services and as an associate at White & Case, Istanbul. She is one of the key members and founders of CCAO. Her expertise includes banking, project finance and M&A and she has a wide array of experience in other practice areas. Halide has advised Turkish lenders such as Akbank, Yapi Kredi, Is Bank and TSKB, and international lenders, such as JP Morgan, ABN Amro and HSBC. She has acted on many landmark energy and real estate financings for sponsors, borrowers and lenders and has also advised on some of the major M&A transactions in the Turkish market, including: Koc-Unicredit Financial Services in the acquisition of Yapi Kredi Bank and subsequent merger of Yapi Kredi Bank and Kocbank; the sale of a 13:5% stake in Turkcell and the sale of Digiturk by Yapi Kredi Bank; the sale of 50% of Acıbadem Healthcare and Insurance to Abraaj; and the acquisition by Dutch insurance groups of Turkish insurance and pension companies. Halide studied law at Galatasaray University and holds an LLM degree from King’s College, University of London. She is fluent in Turkish, English and French.

Gamze Cigdemtekin has advised on a wide range of corporate and finance transactions in Turkey, including corporate and M&A, large-scale privatisations, energy and infrastructure projects, competition and anti-trust and regulatory matters. She was formerly a partner at White & Case, Istanbul, and also worked in White & Case’s offices in Ankara and Frankfurt. She is one of the key members and founders of CCAO. She has over ten years experience advising major international and Turkish clients in several sectors, including energy, banking, insurance, manufacturing, chemicals and pharmaceuticals. Gamze was listed as one of the top lawyers in FORBES Turkey’s survey by number of cases handled before the Competition Authority since its foundation in 1998. Gamze recently represented Enerjisa (Sabanci & Verbund joint venture) in the $1.2 billion privatisation and acquisition of BEDAS Electricity Distribution Co., and Kohlberg Kravis Roberts & Co, in its acquisition of Un Ro-Ro., a maritime transportation company, with a deal value of $1.2 billion. She has acted for clients such as BASF, Rabobank, Credit Agricole and Alpha Bank in respect of M&A transactions in Turkey. Gamze is fluent in Turkish and English.

Charles Dunn is the Managing Partner of the Istanbul office and a senior member of the firm’s banking and finance practice. A former partner at Linklaters in London, Bangkok and Amsterdam, he has over 20 years’ of international experience advising financial institutions and major multinationals across Europe, the Middle East and Asia.

Prague, 26 March 2010 – The international law firm Kinstellar, one of the largest law firms in the Czech Republic, has introduced Martina Březinová as the new leader of its Banking & Finance group.

Martina Březinová is an experienced finance and banking lawyer. Her experience qualifies her to lead the Banking & Finance practice group of Kinstellar’s Prague office. Before she joined Kinstellar in 2008 Martina had been heading a law department of a major global bank operating on the Czech market.

She is specialised on banking and structured finance, project finance, trade finance, acquisition finance and financial and capital market regulations. During her career at Kinstellar she has advised major international and regional clients such as Citigroup, Česká spořitelna, UniCredit Bank, Raiffeisenbank or Anglo Irish Bank.

The finance and banking law team of Kinstellar’s Prague office consists of experienced senior and junior lawyers. These specialists participated in a number of major transactions last year including the largest private equity finance transaction on the Czech market amounting to EUR 690 million when acting for CVC, the restructuring of club financing for companies of the Zetor group or the financing related to the construction of solar power plants.

The establishment of Kinstellar’s Belgrade office further strengthens the firm’s ability to meet client needs in the countries and regions of the former Yugoslavia.

Branislav Marić is a leading Serbian lawyer, who is also admitted to the New York bar, and has extensive experience handling major mergers and acquisitions, including the EBRD’s equity investment into Komercijalna banka a.d. Beograd, the largest domestically owned bank in Serbia. He has also advised clients in the securities, telecommunications, financing and restructuring & insolvency fields. Branislav joins Kinstellar as a Partner, from the Belgrade office of Wolf Theiss.

The senior team in Kinstellar’s Belgrade office now includes David Davies, the office Managing Partner, with a strong track record in the region, including advising Telenor on its acquisition of Mobi 63 (the largest transaction in Serbia to date), Lou Milicich, Executive Director, with 25 years of corporate transaction and litigation experience and Branislav Marić.

Jason Mogg, Managing Partner of Kinstellar, comments:

“We are delighted to open the Belgrade office and to welcome Branislav Marić to our team in Serbia. These two steps further reinforce our strength across Central and South Eastern Europe. These moves are part of our strategy and our ambitious growth plans which will allow us to seize the tremendous opportunities that exist in our region”.

Tomáš Čihula has joined the firm as a senior lawyer and head of the competition and EU law practice group. Tomáš graduated from the Faculty of Law of the Charles University in Prague and gained experience in leading law firms in the Czech Republic and abroad. In the recent past he worked for several years in Brussels, first at the European Commission‘s Directorate-General for Competition and then with the leading competition and EU law firm Van Bael & Bellis. Tomáš co-advised on a number of competition and antidumping cases. He speaks fluent English and German and is conversant with French. His hobbies include reading, tennis, swimming and mounting hiking.

Jan Pošvář provides significant support for the firm’s marketing and business development. He has joined the firm as a marketing & business development advisor. Jan previously worked as a  PR consultant and led and implemented independent projects in the area of energy, politics, travel industry, public relations, promotion and marketing. He graduated from the International Trade and Travel College and speaks German, English, French and basic Spanish. In addition to his other hobbies, Jan provides communication support to charity projects in his leisure time.

Jana Rybáková and Lucie Kislerová are joining the team as junior associates. Jana Rybáková studied law at the Faculty of Law and Spanish at the Faculty of Arts of the Charles University in Prague. Previously she had worked for several years in the law department of T-Mobile. Her specialisation is real estate law and M&A. Lucie Kislerová graduated from the Faculty of Law of the Masaryk University in Brno and gained experience in the International Law Department of the Czech Ministry of Foreign Affairs. Before joining Kinstellar she worked for a major law firm in Prague. Currently she provides legal advice for the real estate practice group.  

Nick Eastwell was managing partner of Linklaters’ network of offices in Central and Eastern Europe from 1999 through 2003, and between May 2003 and May 2008 was global head of Linklaters’ Capital Markets Department. He was regional managing partner for Linklaters’ Emerging Europe, Middle East and North Africa region from May 2008 to May 2009.

Nick has been a specialist in finance and capital markets for nearly 30 years. His particular area of expertise is in emerging markets. He has acted on pioneering issues throughout Europe, Asia, the Middle East and Africa, and in Central and Eastern Europe, in Croatia, the Czech Republic, Lithuania, Poland, Romania and Russia.

Nick Eastwell comments:       

"I have known the Kinstellar team for 10 years, going back to the time when, together, we established what became the market leading presence in CEE. They are a very high quality group of people who, at a time when many of the big firms are closing offices or downsizing in the region, have a great opportunity to establish themselves as the leading niche player in and focus on emerging Europe. I hope to be able to play a part in helping them reach that goal."

Nick Eastwell will join Kinstellar in January 2010, after retiring from Linklaters on October 31, 2009. He will continue to be based in London but will be focussed solely on Emerging Europe. He will spend approximately 50 per cent of his time working with Kinstellar and plans to devote the other 50 per cent of his time to educational, charitable and a number of other roles.

Jason Mogg, Managing Partner of Kinstellar comments:

“It will be a great honour and privilege to have Nick serve as a senior statesman, and as our eyes and ears in London. He will help us build on our strong market position in Emerging Europe. I can’t think of any other City lawyer in London – or anywhere for that matter - who so stands out as both a leading senior player in financial and capital markets circles in London and has deep connections and knowledge of Emerging Europe. One year after the launch of Kinstellar, this represents a major milestone in our development.  Many of the partners of Kinstellar have worked closely with Nick for many years. Not only is he a first class lawyer and experienced hand in London and Emerging Europe, he is also a close friend. We are all absolutely thrilled that we will have him on board”.

The conference held recently in Shanghai was attended by approximately 80 representatives from Chinese companies active in the fields of aviation, energetics, IT, renewable energy, the machine-building industry or environmental services.

Chinese firms showed a strong interest in connection with the change in the legislation regulating Chinese investments abroad – from this point on, they will be able to invest more substantially in the Czech Republic. Kamil Blažek, a partner at Kinstellar, says, “The main obstacle to the development of Chinese investments in our country was eliminated on the Chinese side, specifically in the Chinese general investment rules”. Blažek adds, “Decisions on potential investments are no longer subject to approval by the Chinese government and China’s central authorities but will now be made at a regional level“.

In his view, the Czech Republic can expect Chinese investors to be very active in the upcoming months. “The regulation was liberalised in phases, at first with the Chinese Ministry of Trade’s binding rules on foreign investments effective from 1 May 2009. These rules form part of a “go-out” policy designed by the Chinese government in support of Chinese investments abroad,” says Kamil Blažek. “On 18 May 2009, the Chinese Foreign Exchange Administration submitted a draft directive providing for the mode of the Chinese government’s control over foreign investments. The new, looser regulation became effective on 1 August 2009. I expect these rules to move towards further promotion of foreign investments,“ he adds.   

The international law firm Kinstellar prepared a presentation on the legal and tax conditions for Chinese investors in the Czech Republic and the CEE region. The main topics covered included the protection of investments and double taxation in the Czech Republic, investment options and incentives, including specific investment opportunities in the Czech Republic and the entire CEE region. Kamil Blažek adds, “In 1991, a bilateral investment treaty was concluded between the Czech Republic and China and a new double taxation treaty was signed by both the parties in August this year“. Furthermore, the Chinese investors in the Czech Republic can take advantage of the extensive investment incentives programme for the manufacturing industry or other forms of assistance for supporting the services sector.

What is prohibited?

Granting advance payments, loans and credits or monetary means by a company for the purpose of acquiring its shares or its parent company’s shares, and granting security by such company for these purposes.

Does the prohibition apply to all types of companies?

No.

The prohibition only applies to limited liability companies (společnost s ručením omezeným -''SRO”) and joint-stock companies (akciová společnost - “AS”).

Exceptions

SRO^[1]:

Unless the articles of association provide for other conditions^[2], SROs may provide financial assistance under the following terms:

(a) the financial assistance is provided on an arm’s-length basis^[3];

(b) the provision of financial assistance will not cause the immediate insolvency of the company;

(c) the company’s accounting records show no unpaid balance sheet loss;

AS^[6]:

An AS may provide financial assistance under the following terms:

(a) the provision of financial assistance must be allowed under the company’s articles of association;

(b) the financial assistance is provided on an arm’s-length basis^[7];

(c) the board of directors examines the financial eligibility of the person^[8] to which financial assistance is provided;

(d) a prior consent is given for the provision of financial assistance by the general meeting^[9] on the basis of the board of directors’ report referred to in (e) below;

(e) the board of directors prepares a report^[10] which contains the following:           

(g) the company creates a special reserve fund in the amount of the provided financial assistance^[12]; and

(h) the provision of financial assistance does not cause the immediate insolvency of the company.

Under certain conditions the prohibition does not apply to transactions involving the acquisition of shares by employees of the company, and banks acting in their normal course of business.

Sanctions

Loans granted in breach of the prohibition are invalid and have to be repaid on grounds of unjust enrichment.

Any security, guarantee, etc. granted in breach of the prohibition is invalid.

Potential civil liability for damage and criminal liability of the directors of the company.

Market practice

The most common method of dealing with the prohibition of financial assistance is an upstream merger of the target and an acquisition vehicle.

Another method is structuring the acquisition facility agreement to include various financing tranches with different purposes (target to secure those tranches which purpose is other than its acquisition).

Other methods such as (a) downstream merger of the target and an acquisition vehicle, (b) distribution of dividends by the Czech  target to the acquirer or (c) decrease of the capital of the Czech  target are not commonly used.

Other

The financial assistance prohibition also applies to acquisition refinancing.

Non-Czech subsidiaries of a Czech target are not caught by this prohibition, but are subject to any financial assistance restrictions in the jurisdiction of such subsidiary.

Shares in the Czech target held by the acquirer prior to the transaction may be used for securing the acquisition facility without breaching the financial assistance prohibition.

Hungary

What is prohibited?

Making a loan, providing any security or guarantee, or performing any of its financial obligations before their due dates by a company, if the transactions are for the purpose of the subscription or acquisition by a third party of the company’s shares.

Does the prohibition apply to all types of companies?

No.

The prohibition only applies to  companies limited by shares (Zrt. / Nyrt.)

Exceptions

Under certain conditions the prohibition does not apply to transactions involving the acquisition of shares by employees of the company, and banks acting in their normal course of business.

Sanctions

Loans granted in breach of the prohibition are invalid and have to be repaid on grounds of unjustified enrichment.

Any security, guarantee, etc. granted in breach of the prohibition is invalid.

Potential civil law liability for damages and criminal law liability of the directors of the company.

Market practice

The most common method of dealing with the prohibition of financial assistance is the use of an acquisition vehicle and then an upstream merger of the target into the acquisition vehicle.

Another method is the distribution of dividends by the Hungarian target to the acquirer.

A third method is structuring the acquisition facility agreement to include various financing tranches with different purposes (target to secure those tranches which purpose is other than its acquisition).

A fourth method is that a company limited by shares may be transformed into a company limited by business quotas to which the financial assistance rules do not apply.

Other

The prohibition does not apply to both Hungarian and non-Hungarian subsidiaries of the target.

Shares in the Hungarian target held by the acquirer may be used to secure the acquisition facility without breaching the financial assistance prohibition.

Romania 

What is prohibited?

A company may not grant advance payments or loans or issue any guarantee when a third party subscribes for or acquires its own shares.

Does the prohibition apply to all types of companies?

No.

The prohibition only applies to joint-stock companies and limited liability companies^[13].

Exceptions

Under certain conditions the prohibition does not apply to transactions involving the acquisition of shares by employees of the company, and banks acting in their normal course of business.

Sanctions

No sanction expressly stipulated by law.

The generally accepted view is that (a) loans granted in breach of the prohibition are invalid and have to be repaid on grounds of unjustified enrichment, and (b) any security, guarantee, etc. granted in breach of the prohibition is invalid.

Potential civil law liability for damages and criminal law liability of the directors of the company.

Market practice

The most common method of dealing with the financial assistance prohibition is the upstream merger of the target and an acquisition vehicle.

Another method is the distribution of dividends by the Romanian target to the acquirer. 

A third method is to decrease the capital of the Romanian company resulting in a distribution of funds which would be used to repay a loan incurred in connection with the acquisition of the Romanian target’s shares.

A fourth method is structuring the acquisition facility agreement to include various financing tranches with different purposes (target to secure those tranches which purpose is other than its acquisition).

Other

It is arguable whether the following falls under the scope of the prohibition:

(a) an auction sale in which a due diligence report prepared and paid for by the company is included in the data room;

(b) taxes related to the acquisition paid by the company;

(c) material support (assets) provided by the company to the buyer or subscriber; or

(d) a takeover in which the target-company wishes to agree to pay the bidder a “break fee” in the event a competing bid is successful^[14].

Slovakia

What is prohibited?

Granting advance payments, loans and credits or monetary means by a company for the purpose of acquisition of its shares or its parent company’s shares, and granting security by such company for these purposes.

Does the prohibition apply to all types of companies?

No.

The prohibition only applies to joint-stock companies (“akciová spoločnosť“).

Exceptions

Under certain conditions the prohibition does not apply to transactions involving the acquisition of shares by employees of the company, and banks acting in their normal course of business.

Sanctions

Loans granted in breach of the prohibition are invalid and have to be returned on grounds of unjust enrichment.

Any security, guarantee, etc. granted in breach of the prohibition is invalid.

Potential civil liability for damage and criminal liability of the directors of the company.

Market practice

The most common method of dealing with the prohibition of financial assistance is an upstream merger of the target and an acquisition vehicle.

Another method is the distribution of dividends by the Slovak target to the acquirer.

A third method is to decrease the capital of the Slovak target resulting in a distribution of funds which would be used to repay a loan incurred in connection with the acquisition of the Slovak target's shares.

A fourth method is structuring the acquisition facility agreement to include various financing tranches with different purposes (target to secure those tranches which purpose is other than its acquisition).

Other

The financial assistance prohibition also applies to acquisition refinancing.

Non-Slovak subsidiaries of a Slovak target are not caught by this prohibition but are subject to financial assistance restrictions in the jurisdiction of the subsidiary.

Shares in the Slovak target held by the acquirer prior to the transaction may be used for securing the acquisition facility without breaching the financial assistance prohibition.

Serbia

What is prohibited?

Granting advance payments, loans and credits, or monetary means by a company for the purpose of direct or indirect acquisition of its shares or its parent company’s shares, and granting security by such company for these purposes.

Does the prohibition apply to all types of companies?

The prohibition applies to joint-stock companies and limited liability companies.

Exceptions

Under certain conditions the prohibition does not apply to transactions involving the acquisition of shares by employees of the company, and banks acting in their normal course of business.

Sanctions

Loans granted in breach of the prohibition are invalid and have to be returned on grounds of unjust enrichment.

Any security, guarantee, etc. granted in breach of the prohibition is invalid.

Potential civil liability for damages and criminal liability of the directors of the company.

Market practice

One method of dealing with the prohibition of financial assistance is an upstream merger of the target and an acquisition vehicle.

Another method is the distribution of dividends by the Serbian target to the acquirer.

A third method is to decrease the capital of the Serbian target resulting in a distribution of funds which would be used to repay a loan incurred in connection with the acquisition of the Serbian target's shares.

A fourth method is structuring the acquisition facility agreement to include various financing tranches with different purposes (target to secure those tranches which purpose is other than its acquisition).

Other

Financial assistance prohibition also applies to acquisition refinancing.

Non-Serbian subsidiaries of a Serbian target are not caught by this prohibition, but are subject to any financial assistance restrictions in the jurisdiction of such subsidiary.

Shares in the Serbian target held by the acquirer prior to the transaction may be used for securing the acquisition facility without breaching the financial assistance prohibition.

Shares in the Serbian target acquired during a transaction may be used for securing the acquisition facility without breaching the financial assistance prohibition, from the moment of registration of the acquirer as the owner of such shar

<//span><//span><//span><//span><//span><//span>

by Csilla Andrékó (Managing Partner) and Gábor Antal (Managing Associate)

1          General changes to the provisions on bankruptcy and liquidation proceedings

With some exceptions, the new provisions of the Amending Act will enter into force on 1 September 2009 and the new provisions will apply to the proceedings launched after that date.

The Amending Act changes several deadlines in the course of the proceedings, which generally results in a shortening of the length of the proceedings. In most (but not all) instances the time limits set out in calendar days will be converted to business days. With one important exception, the intention to shorten the deadlines is actually not expected to result in any significant reduction of the actual period (e.g., the time limit of 8 business days in practice will be 2-3 days shorter than the currently used time limit of 15 calendar days). The exception, where the reduction will be significant, is the reduction of the deadline available in liquidation proceedings for the lodgement of creditors’ claims from one year to 180 days.

2          Changes to bankruptcy proceedings

2.1         Moratorium

The Amending Act introduces “real” bankruptcy protection, on the basis of which an immediate moratorium may be granted to the debtor and the proceedings may also be launched without the consent of the creditors. The suspension and limitation of creditors’ rights regarding set-off and execution have been clarified.

The most important objective of the recent amendment to the Bankruptcy Act was to harmonise the law with the demands of proceedings in practice and increase its ability to provide “real” bankruptcy protection for companies in distressed situations. The overhaul of the moratorium rules is the most significant tool and probably the most important change introduced by the Amending Act. As of 1 September 2009, the court can order the immediate (and temporary) moratorium in its decree within one working day on the basis of the application of the debtor. By way of the immediate nature of the moratorium, its protective nature is ensured.

Following the ordering of the immediate and temporary moratorium, the court assesses the application. If the application is complete (or in the case of incomplete applications the missing documents have been supplemented), the court orders the “normal” moratorium. In principle, this moratorium ceases on the 0th hour of the business day following the 90th day from the publication of the respective court decree.

In the course of the negotiations with creditors, upon the request of the debtor the moratorium may be extended, but only with the consent of the creditors. With a view to protect the interests of the creditors, the aggregate duration of the moratorium (including any extension) may not exceed 365 days from the commencement date of the bankruptcy proceedings.

In principle, no set-off may be applied vis-a-vis debtors during the moratorium. From the perspective of banks and financial institutions, there is a significant new rule which provides that the bank accounts of debtors prompt collection orders cannot be submitted and/or enforced. Furthermore, money claims cannot be executed by the bank from the date when the debtor notifies the bank that it has submitted an application for bankruptcy proceedings.

The Amending Act introduces an important new provision whereby the contracts of the debtor cannot be rescinded or terminated by claiming that the debtor does not meet its payment obligations due to the moratorium.

The debtor may only assume new obligations with the consent of the administrator and payments from the assets of the debtor may only be made with the countersignature of the administrator.

2.2         Creditors’ committee

The rules of the formation and operation of creditors’ committees will become more precise, and new provisions are introduced regarding the calculation of the votes of the creditors.

The creditors may establish creditors’ committees in the course of both bankruptcy and liquidation proceedings. Compared to the current situation, the Amending Act retains the basic tasks and legal status of creditors’ committees but introduces more detailed regulations.

The rules of formation will differ in the event of bankruptcy and liquidation proceedings. However, the participation of one-third of all creditors (measured by the number of creditors) is required in both proceedings. In the context of bankruptcy proceedings, the creditors’ committee may only be established if the creditors represented in the committee also hold at least half of the total votes that can be cast. Pursuant to new provisions introduced by the Amending Act, creditors have one vote for each HUF 100,000 of debt registered as acknowledged or undisputed. By contrast, in the event of liquidation proceedings, the creditors’ committee may only be established if its members represent one-third of the claims of those creditors that are entitled to enter into a settlement agreement.

The Amending Act also makes it possible for the committees to be comprised of at least three but not more than seven members. Pursuant to a newly introduced conflict of interests rule, the debtor or any person personally or organisationally linked to the owners or executives of the debtor, as well as any person whose claim arose within 180 days prior to the launch of the bankruptcy proceedings may not be a member of the creditors’ committee.

2.3         Enforceability of the security deposit

The enforceability of security deposits during the moratorium is limited.

During the moratorium, no security interest may be enforced over the assets of the debtor, including claims secured by security deposit. In order to ensure that the debtors’ assets are under protection during the negotiations with creditors, the Amending Act sets out only limited cases in which  security deposits will be enforceable and those exceptions correspond to the minimal requirements set out in directive 2002/47/EC of the European Parliament and of the Council on financial collateral arrangements. For example, if both the depositor and the depositee are qualified as investment undertakings or credit institutions domiciled in an EEA Member State, the enforcement of the security deposit is possible during the moratorium.

2.4         Role of the administrator

The Amending Act extends and clarifies the role and legal status of the administrator acting in the bankruptcy proceedings and introduces more detailed rules pertaining to the liability and remuneration of administrators.

The most important new task of the administrator is to register and classify the creditors’ claims.

The Amending Act clarifies that the administrator is required to approve the new commitments of the debtor (i.e. commitments made subsequently to the launch of the bankruptcy proceedings). In that context, the administrator may only approve commitments aiming to maintain the day-to-day operation of the debtor, reduce its losses or those that are made in preparation for the settlement agreement. The approval of the administrator to the granting of any additional security is also subject to the consent of the majority of the creditors with voting right.

2.5         Settlement in bankruptcy proceedings

In order to clarify the legal nature of the settlement, new safeguards are incorporated in the Bankruptcy Act.

The purpose of the bankruptcy proceedings is to reach settlement between the debtor and its creditors and the Amending Act has not changed this concept. In the framework of the settlement, the debtor enters into an agreement with its creditors on the conditions of the settlement of its debts. In addition, depending on the circumstances of the case, a settlement agreement may provide for the forgiveness of debt, restructuring, the granting of new securities or the conversion of debt to equity.

A settlement agreement may be agreed if the debtor receives the majority of the votes of the creditors with voting rights both in the secured and unsecured classes of creditors.

The agreed settlement agreement also applies to those creditors entitled to make an agreement who have not given their consent to entering into the agreement, or despite their notification, they did not participate in the negotiation or execution of the agreement. In addition, the settlement agreement also applies to creditors whose claims are disputed and, in the case of disputed claims, the court may order that a provision be established in order to cover the claims once the disputes have been resolved. It is important to ensure that the settlement agreement does not differentiate within a particular class of creditors on the basis of whether a particular creditor approved or rejected the settlement.

2.6         Conversion of bankruptcy proceedings to liquidation proceedings

Under the new rules, liquidation proceedings may only have priority over bankruptcy proceedings if the liquidation has already been ordered by a court decree of the first instance when the application for bankruptcy proceedings is received. In the absence of a court decree of the first instance ordering liquidation, the applications for liquidation do not prevent the launch and conduct of the bankruptcy proceedings. This is because the applications for liquidation are suspended by the court until the ordering of the bankruptcy proceedings (i.e. the “normal” moratorium) or such applications may be rejected or terminated by the court, as the case may be.

If no settlement is reached in the course of the bankruptcy proceedings or the settlement does not meet the requirements set out in the Bankruptcy Act, the court automatically turns the proceedings into liquidation proceedings without considering the existence or appropriateness of any applications for liquidation proceedings.

3          Changes to liquidation proceedings

3.1         Lodgement of creditors’ claims

The deadlines for the lodgement of creditors’ claims are significantly reduced. As a consequence, after 1 September 2009, primarily creditors with pledges have to act quickly following the launch of the proceedings in order to preserve their priority in the order of satisfaction.

In addition to the significant reduction of the period available for the lodgement of creditors’ claims from one year to 180 days, the Amending Act introduces several changes to the procedural rules of the management of the claims, as well.

The date of the lodgement of the creditors’ claims affects the satisfaction of the claims, even if the lodgement has been made within the new limitation period of 180 days. Pursuant to the Amending Act, the pledgee may only enforce its claim prior to other creditors, under the terms of the pledge, if the pledgee lodged its claim within the notification period of 40 days and paid up the registration fee. Importantly, while the pledged asset may also be sold if the pledgee lodged its claim after the expiry of the period of 40 days (but, obviously, within the limitation period of 180 days), in such circumstances the proceeds from the sale of the asset must be held separately and the claim of the pledgee may only be satisfied under the general provisions. In other words, pledgees that miss the 40 days lodgement period will only be satisfied if there is sufficient coverage following the satisfaction of the statutorily defined preferred claims.

3.2         Liability of the executive officers, disqualification

The Amending Act introduces the disqualification as a new legal instrument. In the interests of creditors and other stakeholders, the company register will provide information on the executives who acted fraudulently during liquidation proceedings.

In comparison to the current legislation, the rules pertaining to the liability of executives of companies subject to liquidation will become stricter. The amount of the fine that can be imposed on executives increases to HUF 2 million when the executive fails to meet its obligations, meets its obligations late, gives incorrect information or does not cooperate with the liquidator. The Amending Act extends the scope of the rule on the basis of which the court may oblige the executive to bear the costs incurred due to the failure to comply with his or her obligations, including the cost of involving an expert. In the future, the debtor’s member with majority control will be liable as a guarantor in relation to the payment of the fine and the costs.

Under the new sanction of disqualification, which is incorporated in the Companies Act, a former executive whose liability is established by the court on the basis of the above rule but who failed to comply with his or her payment obligation may not be an executive of any business association. The disqualification will cease after five years following the unsuccessful execution proceedings vis-a-vis the executive. The related amendments of the Companies Act enable the company register to indicate whether the respective executive has been disqualified, including the commencement and termination date of the sanction. As of 1 September 2009, in the course of the establishment of companies, executives will have to declare whether they have been disqualified under the above  sanction.

3.3         Duties of the liquidator

The Amending Act introduces several new duties of the liquidator but these changes do not affect the overall mechanics of the proceedings.

In the future, the liquidator will have to notify its appointment to the financial institutions holding the accounts of the debtor without delay. The liquidator will register and classify the claims already lodged in the bankruptcy proceedings immediately before the commencement of the liquidation proceedings. In addition, the Amending Act provides a more clear description of, inter alia, the accounting and taxation-related duties of the liquidator in connection with settlements during liquidation proceedings.

by Martina Březinová (Associate) and Petr Měštánek (Professional Support Lawyer)

Important amendment to Act of the Czech Republic No. 256/2004, Capital Markets Act, as subsequently amended (the “CMA”) which among other changes implements the EU Transparency Directive^[2] (“TD”) became effective on 1 August 2009 (the “Amendment”)^[3].

This newsletter summarizes the provisions of the Amendment that implement the TD. These provisions deal with (i) periodic financial reporting and other obligations of an issuer, (ii) major shareholding disclosures, and (iii) the provision of information to investors.

The TD and the Amendment only apply to securities which are listed on Regulated Markets and so do not apply to the multilateral trading facility markets. Issuers who list exclusively on the multilateral trading  facility markets will still have to comply with the current continuing obligations regime of such markets^[4].

1. Periodic Financial Reporting and Other Obligations of Issuers

The Amendment sets out new periodic financial reporting requirements for companies admitted to trading on a Regulated Market^[5] if the Czech Republic is the company’s “Home Member State”.