Authors: Jan Koval, Petra Sochorová
Updated on December 7 2021.
As of 30 November 2021, the Government has again approved the “Antivirus” employment promotion program, the essence of which is the partial compensation of employee wage costs during the period of obstacles caused by the quarantine and emergency or crisis measures related to the spread of the COVID-19 disease. The Antivirus program was extended/activated in regime A and regime B.
| REGIME | STATE BENEFIT |
| Regime A Imposed quarantine and isolation | The benefit will be provided in the amount of 80% of paid wage and insurance compensation, up to a maximum of CZK 39,000 per employee. |
| Regime B Related economic difficulties associated with COVID-19 | The benefit will be provided in the amount of 60% of paid wage and insurance compensation, up to a maximum of CZK 29,000 per employee. |
The program is intended for all employers, including employment agencies, whose wage funds are not covered by public budgets.
The state benefit is provided exclusively for employees being in an employment relationship who are still the employees of the employer when it submits a summary of paid wage compensation and have not been served a termination notice nor are they in the notice period (except for termination notice pursuant to Section 52(g) and (h) of the LC).
The state benefit is provided only if the employer has paid wages or wage compensation to employees and has duly paid compulsory public health insurance and social security contributions, and the contribution to the state employment policy.
The program can cover benefits for paid wage compensation occurred between 1 November 2021 and 28 February 2022, with the possibility of extension if necessary.
Acts related to submitting an application for granting a state benefit are still to be performed through a web application, data boxes, or by e-mail with a recognized electronic signature. The administration process can be simply divided into: (1) submitting the application, (2) concluding an agreement, (3) submitting the statement of paid wage compensation, and (4) providing a state benefit, while the employer must also submit the required documents.
Compliance with labour laws and conditions for the payment of the state benefit will be subject to comprehensive inspections by the competent authorities.
Misuse of the state benefit may also be classified as a criminal offense.
Our labour law experts are available for you to consult on any issues related to this program.
The current crisis caused by the SARS CoV-2 virus can be seen as a very abnormal situation. Measures adopted to prevent acceleration of the infection spreading may even have a devastating impact on a number of companies that are healthy in normal circumstances. The main problem to be faced by many entrepreneurs within a relatively short period of time is the lack of free liquidity for the payment of due liabilities.
Inability to satisfy due liabilities due to a sudden massive loss of income may cause financial difficulties to many businesses that are healthy in normal circumstances. A halt to manufacturing or to business activities of the affected undertakings that are otherwise functioning well is undesirable from the perspective of the national economy as it could cause a rise in unemployment and further a spiral of economic decline.
A draft of the bill called Lex Covid responds, among other things, to a number of significant changes relating to insolvency proceedings. Please find below a general overview of new rules presented mainly from the perspective of entrepreneurs.
We regard as crucial the regulation of an extraordinary moratorium in the drafting of which we participated along with other insolvency law experts. The main objective of the extraordinary moratorium is to provide temporary protection to undertakings that are competitive in normal circumstances in the time of crisis and to help them overcome the loss of available funds by temporarily restricting realisation of collaterals or the commencement of enforcement proceedings or execution. It should create a breathing space and provide debtors with a higher level of comfort for reaching an agreement with creditors. This is crucial mainly after the entry into effect of the Civil Code, which substantially simplified the procedure for the realisation of collaterals. Nevertheless, unlike in the case of a standard moratorium, set-offs are not prohibited. Thus, the regulation also provides a certain degree of protection to creditors, as now more than ever everyone is a debtor and creditor at the same time.
To ensure a higher level of flexibility the regulation of an extraordinary moratorium does not anticipate a requirement for preliminary consensus by absolute majority of a debtor’s creditors; to declare an extraordinary moratorium the insolvency court should mainly check the formal aspects of the filed application. A debtor wishing to further extend an extraordinary moratorium will have to obtain consent by absolute majority of their creditors. Thus, to extend the effects of an extraordinary moratorium, consent is required from an absolute majority of the debtor’s creditors counted by the value of their claims.
The extraordinary moratorium is preventive by natureand therefore, its declaration is not conditional on filing an insolvency petition, which may have fatal consequences for a business that is healthy in normal circumstances. At the same time, the possibility to file a petition for an extraordinary moratorium will be maintained even after insolvency proceedings commenced upon the motion of a person other than the debtor. On the other hand, the extraordinary moratorium is intended only for those debtors who face problems – even temporarily – in connection with the COVID-19 pandemic and had not been bankrupt before the state of emergency was imposed.
However, a declaration of a moratorium also entails restrictions. Temporarily, debtors are obligated to refrain from such kind of acting which could lead to a substantial change in the composition, use or purpose of their assets or to their reduction to an extent greater than minor; nevertheless, these restrictions do not prevent debtors from using state aid in connection with the SARS CoV-2 pandemic. Declaration of an extraordinary moratorium does not even prevent a debtor’s creditor from filing an action with a general court; nevertheless, the time limits for exercising rights against the debtor during the effective period of an extraordinary moratorium will not start or continue.
During an extraordinary moratorium the insolvency court may also appoint a preliminary insolvency receiver and decide by a preliminary injunction, where appropriate, on imposing restrictions on debtors’ dealing with their assets. As soon as the extraordinary moratorium comes to an end without any insolvency proceedings being commenced, the debtor should be automatically deleted from the insolvency register so that such entry does not affect their future business after the crisis.
The Lex Covid draft bill brings a substantial change to the debtor’s obligation to file an insolvency petition due to bankruptcy. Many clients currently approach us with questions regarding the situation in which their partners stopped paying them while their overdue claims are mounting. In this time of uncertainty it is not desirable for viable businesses to prematurely file insolvency petitions against each other. Although the obligation to file an insolvency petition is not enforced in our country as draconically as in Germany, there is a real risk of which a large group of prudent and honest managers are afraid.
According to the draft bill, this obligation will be suspended from the effective date of the Lex Covid until the lapse of 6 months from the termination or cancellation of the pandemic emergency measure. However, this exemption is not applicable where bankruptcy had occurred before the extraordinary measure was adopted or where bankruptcy was not caused in connection with the pandemic.
Lex Covid introduces a substantial limitation to creditors’ rights: without any exceptions a creditor’s insolvency petition cannot be filed until 31 August 2020 from the effective date of Lex Covid. A postponement of time-limits for opposable acts can be regarded as a sort of compensation for creditors as the draft bill proposes inclusion of the period for which the debtor’s obligation to file an insolvency petition is suspended in the time-limits prescribed for opposable acts.
Apart from the above, Lex Covid lays down further exemptions for debt discharge and reorganisations relating as a rule to mitigation of the consequences of a failure to adhere to a payment schedule or an adopted reorganisation plan due to the emergency measure adopted in connection with the pandemic .
This text introduced a draft bill which has been only approved by the government so far, and therefore it is possible that the exact wording of the individual measures will be further changed. But more substantial changes to the concept are rather unlikely to be made. Thus, without exaggeration, Lex Covid can be regarded as a revolutionary change in insolvency law despite its temporary nature.
These days are full of news negative in tone. Therefore, these extraordinary amendments to the insolvency act aim at relaxing the mood a bit of those affected by the pandemic and at putting the economy in motion again.
On this occasion, we would like to thank the members of the working committee for a great job and the experts from the Ministry of Justice who worked with us so hard, intensely and flexibly, nights and weekends.
We will be happy to answer any questions you may have relating to this or other subjects. We wish you good health and strength in this uneasy time.
Authors: David Krch, Martin Bureš, Lucie Čirková
Dear Clients, Dear Business Friends,
We bring you updated information regarding the measures adopted by the Government of the Czech Republic (the “Government”) in connection with the COVID-19 pandemic.
Please note that in addition to “Liberation Tax Package 1” the Government has adopted a list of measures referred to as “Liberation Tax Package 2”. In addition, amended regulations concerning the insurance of self-employed persons (“sole proprietors”) and concerning the (electronic) sales records (“EET”) were published in the Collection of Laws on 27 March 2020. All these measures have introduced further relief for tax-payers.
Below please find details regarding those measures:
In addition to the foregoing, below please find a brief summary of several practical impacts of “Liberation Tax Package 1” based on the Q&A published by the Revenue Administration Authority on their website (available here).
If you have any further questions in this respect, please feel free to contact us.
Dear Clients and Business Friends,
Should you, your clients or business partners have any commercial interests in the Czech Republic, whether in the form of subsidiaries or individual investments, we would like to inform you of the imminent launch of a major subsidies program, that the state owned Czech-Moravian Guarantee and Development Bank (CMGDB) is to announce today to aid businesses affected by the COVID-19 crisis.
Nearly one billion EUR will be made available in a guarantee program to small and medium enterprises (businesses with less than 250 employees, 50 million EUR annual turnover and an annual balance sheet below 43 million EUR) to enable Czech banks to provide interest free loans to suffering companies.
Such businesses may apply for a guarantee:
CMGDB will also provide a contribution of EUR 35,000 for the payment of any interest on such loan.
There will undoubtedly be massive demand for these guarantees and we expect the program to be exhausted within a number of days from its launch!
Being by far the largest law firm in the Czech Republic with over 500 associates, including not only lawyers, but also tax and accounting professionals and expert economists, we have allocated a unique task force of over 100 professionals to assisting our clients in the application for the guarantee and obtaining the subsidized loan.
Due to our excellent relations with CMGDB and all the participating banks, we are in daily contact to ensure that we have the most up to date information and are able to provide significant added value to clients that seek our assistance in this matter.
As part our own COVID-19 supporting package, we offer these services to our clients for a rather symbolic flat fee of EUR 1,000. Should you or your clients have an interest in the subsidies program, please do not hesitate to contact us anytime at krizove.financovani@havelpartners.cz.
Jaroslav Havel, Managing Partner
Filip Čabart, Partner
Authors: Adéla Havlová, Kateřina Staňková
In connection with the declaration of the state of emergency, the issue of administrative procedural time limits in the current situation also arose[1]. The Administrative Procedure Code[2] does not generally regulate the issue of time limits during a state of emergency, but at the same time the situation affects the public addressees so much that they may have considerable difficulties in meeting procedural time limits. For this reason, the Ministry of the Interior issued an opinion on the assessment of time limits in the public administration during the state of emergency[3]. Here is its summary in our Public Flash.
To put it simply, there are two basic types of procedural time limits – time limits set by law (for example time limits for filing regular remedies) and time limits set directly by an administrative body (for example time limits for correction of administrative filing).
In the course of statutory deadlines, the state of emergency may be a reason for waiving a lapsed time limit since emergency measures ordered in the context of an emergency may be deemed as serious reasons occurring through no fault of the participant, thus one of the conditions for waiving a statutory time limits pursuant to section 41 of the Administrative Procedure Code may have been met.
However, it cannot be said that the administrative bodies will waive lapsed statutory time limits automatically. The opinion of the Ministry of the Interior itself states that administrative bodies must carry out an individual assessment of such cases. As an example of the reason for waiving a missed act is that the ability to carry out such act through postal services may be more difficult. On the other hand, if a party to the proceedings has a data box and the act may have been carried out within the set time limit, the declared state of emergency will not be a sole reason for waiving the failure to act and so the application must be sufficiently further substantiated.
The deadline for the application for the waiver is 15 days from the date on which the obstacle giving the reason for missing the time limit passed. After the end of the emergency, a time limit of 15 days for requesting the waiver of the participant’s failure to act will start to run. Together with this application, the applicant must also attach the lapsed act (for example an appeal).
However, it should be noted that even if the participant fulfils all the conditions for waiving the lapsed time limit, the administrative body will not comply with the application, if it is apparent that the harm which would be caused by prejudice to rights acquired in good faith or to the public interest exceeded the threat thereof. In the current situation, this will mainly involve actions necessary for the protection of health.
In addition to the issues addressed by the opinion of the Ministry of the Interior, we consider that in the case of time limits set directly by administrative bodies, it is appropriate to request an extension of the time limits pursuant to section 39 of the Administrative Procedure Code.
The administrative bodies themselves are also bound by time limits for carrying out certain acts. However, since most of these time limits are of a procedural nature, no sanction is imposed for non-compliance. Since the administrative bodies concentrate their resources on the emergency agenda based on Government Resolution No. 207 of 15 March 2020, the Ministry of the Interior recommended that higher authorities take this situation into account when assessing inactivity. At the same time, the Ministry of the Interior recommended postponing or at least limiting the imposition of remedial measures against inactivity since in the current situation they cannot fulfil their purpose and this would be an unnecessary administrative burden.
The foregoing cannot be applied to time limits with which the law connects certain consequences, for example fiction of decision. In such case, it depends on the specific law whether it provides for exceptions justifying an extension of the time limit which could be applied to acts at the time of the declared emergency.
The above conclusions can also be applied to public procurement pursuant to Act No. 134/2016 Sb., On Public Procurement since the Administrative Procedure Code will be applied as an alternative in these proceedings.
Suppliers that are on the list of qualified suppliers are legally obliged to report by 31 March 2020 that there has been no change in the entries on this list and submit the required documents. This obligation is not affected in any way by the current situation and suppliers have a general obligation to notify. If the Supplier is unable to make a notification for reasons related to the declaration of the state of emergency, they may request a waiver of this time limit together with all required documents. This application will then be assessed individually by the Ministry for Regional Development. Also in this case, the application for a waiver of lapsed time and the related documents must be filed within 15 days of the end of the state of emergency.
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If you need more detailed consultation or legal analysis on these topics, please feel free to contact our team. You can also contact us if you have any other questions or requests for legal analysis for your situation.
Looking forward to working with you.
[1] Declared by Government Resolution No. 194 of 12 March 2020, in accordance with Articles 5 and 6 of Constitutional Act No. 110/1998 Sb., On the Security of the Czech Republic, for the territory of the Czech Republic due to health threat in connection with the occurrence of coronavirus in the Czech Republic
[2] Act no. 500/2004 Sb., Administrative Procedure Code, as amended
[3] Opinion of the Ministry of the Interior of 23 March 2020 can be found here: https://www.mvcr.cz/clanek/stanovisko-ministerstva-vnitra-k-posuzovani-behu-lhut-v-oblasti-verejne-spravy-v-dobe-trvani-nouzoveho-stavu.aspx
Authors: Lukáš Syrový, Josef Adam, Veronika Ždánská
On 12 March 2020 the Czech government declared a state of emergency in response to the spreading of the SARS-CoV-2 coronavirus. The disease itself and the crisis measures substantially change the assumptions underlying public budgets and financial plans of businesses for 2020, as well as the everyday functioning of our society this year.
The current situation is described by law as a change in circumstances. Although every contract is in general characterised by its binding nature and the impossibility to be changed without the consent of the other party, a change in circumstances may be an exception from the rule. Consequences of a change in circumstances include excusable delay, a change of the content of a contract and, in some cases, even its termination.
The Civil Code contains a number of provisions which reflect a change in circumstances. On the other hand, it depends on the actual content of a contract and/or exclusion of the application of the statutory regime whether or not a change in circumstances will affect a given legal relationship.
Both the prohibition of retail sale and services in establishments and the restriction of free movement may have a significant impact on the relationship between landlords and tenants. In connection with such a change in circumstances questions arise as to who will consequently bear the risk of income losses resulting from this extraordinary event.
Not every agreement forms a full agreement between parties that excludes the application of the general regulations contained in the Civil Code. Thus, the relationship may be governed not only by the content of the agreement but also by the statutory regulations that permit renewing negotiations on the content of an agreement on the grounds of a substantial change in circumstances, demanding a rent reductiont or even terminating the lease agreement. The ability to reach reasonable compromises will be crucial for landlords and tenants as well.
Attention also needs to be paid to loan agreements under which purchases of commercial premises are financed. A potential loss of income from leases may influence landlord’s ability to comply with financial and other criteria set out in the loan agreement.
The risk of a breach of the terms and conditions of loans is a reason to analyse loan agreements and to actively deal with the risk of a failure to pay the rent. Therefore, it is likely that binding criteria of a loan agreement will influence negotiations between the tenants and the landlord.
The coronavirus pandemic also affects the construction sector. Due performance of contractual obligations is dependent on the availability of labour and affected by delays in the supply of construction materials caused by the closure of borders and restrictions on the cross-border movement of persons.
The consequent delay gives rise to questions as to who is responsible for it and how any damage incurred can be excluded or reduced. In some cases extraordinary circumstances may be a reason for starting negotiations on a change of the price for work.
The key question is whether the coronavirus pandemic along with the governmental crisis measures constitute force majeure. The purpose of the concept of force majeure under Czech law is to protect the obligated party against the duty to compensate the other party for damage in a situation where the other party cannot fulfil its contractual obligation due to an unforeseeable obstacle that was created beyond its will and control.
The current extraordinary circumstances may constitute force majeure for some, whereas for others not. In a particular situation the assessment of whether criteria for the application of force majeure have been fulfilled will always depend on the content of a given contractual relationship and the obligation affected by force majeure.
Although force majeure may be defined more broadly in the agreement, the fulfilment of the criteria for its application may not affect the obligation to pay contractual penalties or the potential right of the other party to terminate the agreement. The foregoing suggests that force majeure currently requires special attention in terms of prevention, as well as the resolution of the consequences of breaches.
A change in circumstances may also affect concluded agreements on future purchase agreements and future lease or other agreements. Where an agreement does not explicitly exclude the application of the Civil Code there is a risk that the obligation to conclude a future agreement will cease to exist due to a substantial change in circumstances.
HAVEL & PARTNERS has been actively dealing with the mitigation of the adverse effects of the coronavirus crisis on legal relationships relating to real estate since its very onset. As the largest law firm on the Czech and Slovak markets with the highest number top rankings over the last ten years, we are prepared to support you in this uneasy time.
Should you need any assistance in connection with the issues discussed above or with any other matters, our team is always fully at your disposal.
Authors: Robert Nešpůrek, Richard Otevřel, Jitka Soukupová Ivančíková
You might have read our newsletters regarding the declared state of emergency or summarising the impacts of the COVID-19 pandemic on employers. One of its many effects is the mass transfer of the population capable of work to home office – or work-from-home mode. However natural this may sound to some of us, and however unimaginable this may be in some operations, we are experiencing unparalleled use of this mode of work. Plenty of you are now dealing not only with the technical equipment but also the legal issues related to working from home, the provision of information on the employees’ health in order to organise their work, data storage in the cloud and the creation of a virtual workplace. In addition, a lot of IT companies have responded to the new situation by offering videoconference software solutions free of charge.
However, when – often hastily – organising work (which is entirely natural given the similar fashion of introducing emergency measures on the government level), companies are forgetting aspects of personal data protection, which have not ceased to apply as the pandemic unfolds. Even such an extraordinary situation requires compliance with laws, including the GDPR, if we do not wish to wake up after the crisis with even greater concerns than with those directly or indirectly caused by the SARS-CoV-2 virus wreaking havoc. This is a fact also confirmed by the European Data Protection Board in its statement.[1]
Let us take a look at nine practical recommendations for secure work from home.
Issue no. 1: Lists of employees in quarantine or a list of infected employees
The processing of information on an employee’s health constitutes the processing of a special category of personal data under Article 9 of the GDPR. The employer may process such information for the purpose of carrying out obligations under employment and social security law [Art. 9(2)(b) GDPR]. In addition, under Section 101 of the Labour Code, the employer must ensure its employees’ health and safety. That is why the employer may keep records of employees with coronavirus symptoms or those quarantined after returning from risk areas. However, the employer may not disclose lists of these employees but may only inform about the total number of employees in quarantine.
Issue no. 2: Demo versions and software for videoconferences, shared workplaces and cloud solutions free of charge
Before accepting an offer from IT firms, a company should weigh up several aspects: (i) what the overall design of the offered solution is: where the servers are, where the data are stored, who has access to the data and from which places the IT firms provide technical support. The storage space is often in the cloud and the servers are located around the world, with access secured by entities outside the EU. A company using such a solution is responsible for ensuring the lawfulness of the transfer of personal data to a third country, often without knowing that such transfer takes place; (ii) employees should only be able to connect to a videoconference via VPN (Virtual Private Network), in particular, if confidential information is to be discussed, a VPN ensures that the transfer of data shared during the session will be secure; (iii) uploading files to a videoconference programme, which is used on a temporary basis, should be disabled if you do not check where exactly the data are stored and who has access to them; (iv) the same applies to potential videoconference recordings.
Issue no. 3: Recording videoconferences
One of the key principles laid down in Article 5 of the GDPR is transparency. Under this principle, teleconference participants must be informed in advance, ideally already in the invitation to the teleconference, that the calls will be recorded. Participants who do not wish to be recorded while asking a question should be allowed to ask it in advance in the form of an e-mail or chat. All participants need to be informed about the recording at the beginning of the videoconference. Besides that, specific rules need to be set as to (i) which teleconferences may be recorded and for what purpose, (ii) where the recordings will be stored, (iii) who will have access to the recordings, and (iv) how long they will be retained.
Issue no. 4: How to share documents and folders
Employees often need to share large sets of data. To ensure that not only personal but also confidential business data are secured, companies need to set a method for sharing sets of data while avoiding their sharing through free repositories that are not sufficiently secured. Recommended solutions include shared discs or cloud solutions with restricted access (accessed using login and password). Sending instructions to employees via e-mail would be sufficient, provided there is a 100% certainty that employees will follow them, which is not always the case. The only way to prevent unauthorised sharing of data is to prevent employees from accessing the repository websites, i.e. selected websites will be blacklisted.
Issue no. 5: Moving folders
Certain work may entail work with hard copies of documents. Employees should minimise the need to move paper documents. If they need to take some documents home with them, employees must be cautious in handling the documents containing personal data to prevent their loss while using public transport, or prevent their children from playing with them. Employees should always consider whether it is not safer to finish their work quickly at the workplace than to risk losing the documents, and thus possibly violating Article 32 of the GDPR.
Issue no. 6: Checking employees working from home
Employers have legitimate reasons to check their employees or allocated agency employees working from home. They may check their employees via phone, various software applications that monitor time spent at the computer, or chats monitoring inactivity of the users. In order to fulfil the transparency principle, employers must notify their employees of these checks. It is not possible to install software monitoring the time spent at the computer on employee computers without their being aware of it. On the contrary, it must be clear to employees how their working hours are recorded when their standard arrival to/departure from the workplace is not possible. At the same time, it is necessary to avoid making premature conclusions when using these automated methods – where the employee does not permanently work with the computer, given the nature of the work, but instead can for example study paper documents, then inactive chat or a switched-off laptop cannot serve as the grounds for an automatic complaint that the employee is not working (unlike, for example, a call centre employee where such a link is obvious). It is also recommended to determine who will be authorised to check on employees (authorised employee) and what measures he / she can adopt vis-à-vis other employees. Unless employees are sufficiently informed, the information on non-performance of work tasks cannot be used as the reason for taking corrective action against the employee (e.g. complaint).
Issue no. 7: Phishing
Unfortunately, the number of phishing attacks has not dropped even during the emergency situation. Quite the contrary, with the decline in economic activity and the potential decrease in the number of business e-mails, employees tend to click on alluring links in an e-mail or log in to fake websites. Companies are also urged to be cautious by the Office for Personal Data Protection[2]. Employers should appeal to employees for increased caution and increase firewall protection to reduce the amount of phishing e-mails reaching employees. If the company has an e-learning system in place, this period of lower activity can be used for employee education, including that on computer security.
Issue no. 8: Security incidents
The loss of a folder or unauthorised access to personal data under a successful phishing attack may fulfil the definition of a data breach pursuant to Article 33 of the GDPR. In that case, the employer is obliged to inform the Office for Personal Data Protection within 72 hours from the moment the employer learnt about the incident or the moment the incident occurred. It is worth reminding all employees of the rules regarding secure handling of (not only personal) data because work scattered outside the employer’s premises and the usual area of the secured server increases both the risk of an incident itself and its later detection. At the same time, employees should not be afraid to inform their employer of a possible incident and the employer should then consult their data protection officer or lawyer.
Issue no. 9: Sanctions
Setting rules without sanctions is often ineffective. It is recommended to set rules for working from home in an internal regulation pursuant to the provisions of Section 305 or Section 306 of the Labour Code, which also provides for possible sanctions in the event of non-compliance. The policy must be tailored to your organisation and your employees, e.g. in the case of operators, remember to lay down that when answering calls they should be in a separate room without their family members present, and that they should take printed documents back to the company for secure destruction as soon as it is possible; locking one’s computer screen should also be a matter of course when working from home.
[2] On 19 March 2020, the Office for Personal Data Protection shared the following article: https://www.novinky.cz/komercni-clanky/clanek/podvodne-e-maily-zneuzivaji-aktualni-kauzy-cilem-jsou-vase-data-40316964
Authors: Petr Kadlec, Jakub Kocmánek
On 19 March 2020, the EU Commission published the communication “Temporary Framework for State aid measures to support the economy in the current COVID-19 outbreak” (the “Temporary Framework”).[1] The Commission acknowledged that the current situation in the EU Member States constituted a serious disturbance in the economy of a Member State within the meaning of Article 107(3)(b) of the Treaty on the Functioning of the EU, and provided for conditions under which it will be ready, upon a Member State’s request,to promptly approve State aid programmes (as it has done so within 24 hours in the case of Denmark[2]) as well as any possible individual public aid provided until the end of 2020. These aid measures may be only provided to undertakings that were per definition not in difficulty[3] as at the end of 2019.
Under the Temporary Framework, the following types of aid may be mutually cumulated to compensate for a sudden shortage of liquidity:
1) Direct grants, selective tax advantages and repayable advances:
The Member States may establish programmes enabling the provision of aid not exceeding EUR 800,000 (i.e. some CZK 21.6 million) per one undertaking. Specific conditions and caps of EUR 100,000-120,000 apply for agricultural undertakings.
2) State guarantees on loans with maturity of up to 6 years:
A State guarantee must be provided at least for minimum consideration graduated from 0.25% for one-year maturity loans for SMEs to 2% for up to 6-year loans for large enterprises. For loans with a maturity beyond 2020, the amount of the loan principal may not exceed (i) the double of the annual wage bill of the beneficiary including social charges (and including the cost of subcontractors’ personnel working on the undertakings site), or (ii) 25% of the total turnover of the beneficiary in 2019. Higher amounts may be provided to cover liquidity needs (working capital and investment costs) for a limited period of 18 months for SMEs and 12 months for large enterprises. A State guarantee may be provided for up to 90% of the loan principal if losses are sustained proportionally, or 35% of the loan principal, where losses are first attributed to the State.
3) Subsidised interest rates for loans with maturity of up to 6 years:
The minimum interest is also graduated in the form of margins (from 0.25% for one-year maturity loans for SMEs to 2% for six-year maturity loans for large enterprises) added to the basic rate published by the Commission for individual Member States (2.25% is currently applicable to the Czech Republic). Subsidised loan principal amounts are set with similar limitations as the State guarantees under 2) above.
4) State guarantees and subsidised loans channelled through banks and other financial institutions:
Under the Temporary Framework, State guarantees for loans as specified in 2) and subsidised loans as specified in 3) above will be provided directly or through banks and other financial institutions. In the latter case, the financial institutions must ensure that advantages are passed on to the final beneficiaries to the largest extent possible and that they do not constitute an advantage to the financial institutions.
5) Short-term export credit insurance:
Under usual circumstances, marketable risks cannot be covered by export-credit insurance with the support of Member States (in the Czech Republic under Act No. 58/1995 Sb.). If the Commission is given evidence that otherwise marketable risks cannot be currently insured due to the COVID-19 pandemic, such risks may be covered with State aid.
The
aforementioned conditions do not apply to non-selective
aid provided to all undertakings, e.g. deferral of payment for taxes and
other mandatory levies, State contributions for compensation in lieu of
salaries and wages, as this is not public aid. The Member States may naturally also
avoid the duty to notify State aid to the EU Commission if they provide public
aid in compliance with the General Block
Exemption Regulation (GBER).
Should you have any other questions regarding
this topic, do not hesitate to contact our legal team.
[1] Communication from the Commission dated 19/03/2020, C(2020) 1863 final https://ec.europa.eu/competition/state_aid/what_is_new/sa_covid19_temporary-framework.pdf.
[2] Commission SA.56685 (2020/N) – DK – Compensation scheme for cancellation of events related to COVID-19 https://ec.europa.eu/competition/state_aid/cases1/202011/285054_2139535_70_2.pdf
[3] According to the definition set forth in Article 2(18) of Commission Regulation No. 651/2014 on general block exemptions (GBER). This includes, in particular, an undertaking which filed for insolvency and an undertaking with accumulated losses that qualify as having exceeded its capital. Member States may compensate under Article 107(2)(b) TFEU the damage caused in relation to COVID-19 to undertakings that received aid as undertakings in difficulty earlier.
Czech competition law experts Robert Neruda, Martin Nedelka and Pavel Dejl have written an open letter to the management of the Office for the Protection of Competition (the “Office”). The purpose of the letter is to offer a constructive discussion and propose measures that could be implemented in competition policy to help resolve the complicated and unprecedented situation faced by the society and the economy in connection with the COVID-19 pandemic.
Government measures introduced in connection with the pandemic have a severe impact on the functioning of individual institutions, businesses and the entire economy of the Czech Republic. “The economy urgently needs for businesses to continue to operate to the largest extent possible. Entrepreneurs are already now facing major difficulties and may be forced to look for new business solutions, restructure their business models or combine with other businesses to survive. It is absolutely necessary that such solutions be implemented as soon as possible”, states the open letter, which can also be joined by other lawyers.
In connection with the current situation, the authors of the letter propose that a more lenient policy should be applied in respect of the standstill obligation. The obligation prohibits undertakings concerned from implementing a transaction before its clearance by the Office. If implemented, the proposal would significantly alleviate the pressure faced by parties to transactions, thus facilitating fast restructuring without disrupting the essence of concentration control. If the Office is indeed more lenient in granting exemptions to the prohibition for an interim period, the authors believe that this would bring considerable relief to parties to transactions, and expedite concentrations of undertakings without distorting the very substance of concentration control.
“My colleagues and I highly appreciate the Office’s determination to ensure smooth control of concentrations, although its work has now become immensely complicated, and we acknowledge its constructive approach. For this reason, we present the Office with proposals for discussion so that competition law could make a more substantial contribution to managing this unprecedented situation,” adds Robert Neruda, a partner at HAVEL & PARTNERS who worked at the Office for eight years, two of those as a vice-chairman.
The original version of the open letter to the Office is available here:
Authors: Filip Čabart, Jan Topinka
Over the last few days and hours, we have been intensely advising and helping our clients process applications for the COVID interest-free loan offered by the Bohemian-Moravian Guarantee and Development Bank (Českomoravská záruční a rozvojová banka, “CMZRB”) to small- and medium-sized enterprises affected by the coronavirus situation for their operational financing.
The loan is provided:
The overall current cap for these loans was CZK 1.6 billion. However, the number of prospective applicants has naturally been many times higher as this is one of the very few immediately accessible instruments of state aid to the businesses affected by the pandemic. With over 3,200 submitted applications so far, new applications have been suspended. However, CMZRB is currently preparing COVID II scheme, which is expected to increase the amount of aid up to CZK 30 billion. We strive to help our clients write their applications in such a way that enables the CMZRB to process them as swiftly as possible and with the greatest chance of success. As part of our long-term cooperation with the CMZRB, we are in close contact on a daily basis, communicating collectively our clients’ inquiries and assisting in wording answers to facilitate and speed up cooperation between both parties as the enormous interest makes the formally flawless processing crucial for the assessment of applications. Within two weeks, businesses will be able to apply for a loan with similar parameters under the COVID II scheme also via commercial banks, with CMZRB guaranteeing the loan and subsidizing its zero-interest rate. Even though negotiations with banks over such a scheme have just started, we are ready to guide our clients through the application process of the commercial banks, which is likely to be different and subject to more stringent rules. In addition, it will be necessary to simultaneously prepare an application for a loan with a commercial bank and an application for guarantee with CMZRB.
In relation to coronavirus, we assume that there will be an extraordinary spike in applicants for and utilization of these instruments as well as other schemes subsidized by the state or the EU – for instance, the European Investment Bank (EIB) announced to have mobilized EUR 40 billion for supportive measures. Businesses and mid-caps with up to 3,000 employees will also be able to apply for such beneficial loans with a significantly higher individual cap via local banks which have entered into a framework agreement with the EIB and are already offering subsidized projects. In these cases, we may expect quite soon that the conditions will be adjusted to the current situation and the support made available by the EIB will be raised. We of course very closely discuss the developments with stakeholder banks and assist in the preparations.
Having the expected economic impacts of the current situation in mind, we have created a specialized COVID Task Force for finance services personally coordinated by Jaroslav Havel as the law firm’s managing partner bringing together our greatest experts who are partners for the key practice areas relevant for debt financing, financial regulation, litigation, debt restructuring and realization, insolvency and legislation. As such, we are most likely the only law firm accepted for the panel of legal service providers at each of the ten largest banks on the Czech market. Moreover, we cooperate on a long-term and extensive basis with numerous key financial institutions such as the Czech National Bank, the Czech Banking Association, the Finance Ministry, the Industry and Trade Ministry and the Bohemian-Moravian Guarantee and Development Bank. This unique position of our law firm makes us exceptionally well-equipped to handle any crisis situation in the field of finance given our expertise, close personal ties and relevant experience gained in hundreds of financial transactions which were implemented by one of the most active financial teams in the Czech Republic. Not only do we provide comprehensive legal and technical assistance to our clients but we are also perfectly versed in the area of financial regulation and, if need be, crisis-related legislation.
We highly appreciate the proactive approach of the financial sector including Czech banks, the Czech Banking Association, the CMZRB, the EIB and, of course, the Czech National Bank, and in particular their coordinated effort to help clients solve these problems that are often very severe and difficult to predict. We share this approach and endeavours, and strive to provide assistance in all possible ways. Please do not hesitate to contact us at any time. We very well know that in these situations, operational and any other financing issues need addressing immediately, and that is why we are ready to assist you at any time you need.
Authors: Adéla Havlová, Romana Derková
The Czech government has declared a state of emergency due to the health threat caused by the spread of coronavirus. [1] The contracting authorities are obliged to introduce strict measures and award certain essential contracts, such as for the supply of disinfectants, medical material, contactless equipment and related services as soon as possible. The need has arisen for other contracts that cannot be processed in a standard manner. Below, we offer a brief summary of how to award those contracts quickly, simply and in accordance with Act no. 134/2016 Sb., Act on Public Procurement, as amended (“the Act“).
Whatever approach the contracting authorities choose to implement, the important thing is to remember the basic principle of due managerial care in compliance with the Act, while observing other formal requirements. We recommend recording the reasons for indispensability of the contracts, the reasoning regarding their economy from the point of view of price, scope and conditions, and the reasons for selecting each particular contractor. The emergency situation may naturally restrict the activities of the contracting authorities and the suppliers, but it is still worth the effort to carry out a basic “desk survey” and to record the results.
1) General exception from special security measures
The government declared a state of emergency under Act no. 240/2000 Sb., Act on Emergency Management and Amendment to Some Acts (Emergency Act), as amended (“Emergency Act“). One of the exceptions under section 29 (c) of the Act, where the contracting authority is not obliged to implement the tender procedure, is the exception applicable to purchases in relation to special security measures, which exception expressly refers to the Emergency Act. The exception is applicable if the measures cannot be implemented in the form of a tender procedure, and in our opinion that means an open tender procedure in compliance with the statutory time limits. The application of the exception is thus an alternative to the application of negotiated procurement without publication (see below), while the choice is up to the contracting authority.[2] The current crisis where each day plays a crucial role (and the government measures are getting stricter), justifies the application of the exception to purchases that are essential and in connection with the security measures (in particular face masks, disinfectants etc.).
2) Negotiated procurement without publication due to extreme urgency
Another possibility is the application of negotiated procurement without publication (“NPWP“) under section 63 (5) of the Act as the least formal type of procurement procedure under the Act. NPWP may be applied to a broader range of contracts than those permitted under section 29 (c) of the Act. In NPWP the contractor does not have to comply with any obligations regarding the publication of tenders or time limits for submitting the bids. It can be implemented informally and the conditions may be adapted by the contracting authority according to its needs. The competition is thus legitimately restricted even to a single contractor or to a small group of contractors, in view of the state of extreme urgency. According to the decision of the Office for the Protection of Competition (“the Office“), contracting authorities should apply the procedure only in the case of indispensable purchases.[3] The level of detail in proving the compliance with the conditions of the NPWP must be gauged by the extent of the crisis and the necessity to act quickly.
Conditions for the application of NPWP
In our opinion, there is no doubt that the first two conditions for the application of NPWP under section 63 (5) of the Act have been met. The current situation displays a sufficiently intensive state of extreme urgency and the current situation, i.e. the speed and intensity of spreading of the virus, as well as the security measures that have been adopted, are unparalleled both in the Czech Republic and in the EU. The third condition for the application of the NPWP is the impossibility to comply with the time limits for a more transparent tender procedure. In particular, this concerns the time limit for the submission of bids and the blocking period for raising objections.[4] The minimum time limit for an open procedure will be between 5 and 6 weeks (without any objections or other remedies). In the case of necessary supplies and services that cannot be delayed, we consider the conditions for the NPWP to have been met.
Obligations of the contracting authority under NPWP
Even in the NPWP, the contracting authority is obliged to assess the qualification and to verify the registration of shares and the information regarding the actual owner. Even though the Act does not specify it, we are of the opinion that if the contract is awarded directly under NPWP, the fulfilment of those requirements does not have to be upheld. In the current situation, a contracting authority may be in a situation where it is unable to verify all the requirements and from the point of view of the market situation and due managerial care, the interest in acquiring the supply from such a contractor may prevail. A failure to comply with the requirements of the Act in such a direct way of awarding the contract will probably not influence the selection of the contractor. If the Office carries out a review at a later stage, it should not find any infraction and impose sanctions because “influencing the selection” is one of the essential characteristics of an infraction.[5] However, the contracting authority should not neglect the obligation to publish the announcement about awarding the contract, and the contract itself, in the register of contracts. In the case of over-limit public tenders by central public authorities, the duty to inform the government without undue delay after the contract is awarded still applies.[6]
3) Dividing public tenders?
In purchasing disinfectants for everyday use the contracting authorities may currently be asking whether they are at risk of what is called dividing public tenders. We believe that the crucial argument is that the need to purchase disinfectants in such quantities has arisen in an unpredictable manner. The consumption is also dependent on the duration and the scope of the special measures, as well as the impact on the behaviour of the entities involved, so the extent may not be determined reliably. In our opinion, the contracting authority may (for the time being) rely on the current wording of section 19(3) of the Act and make individual contracts with specific suppliers, according to their current needs or according to the availability of the goods on the market and the current quotation.
The current situation raises numerous unusual issues and questions in all areas of law, and public procurement is no exception. We keep monitoring the topical issues, and are intensively involved in looking for solutions. Whether you are a public contracting authority, contractor, or a supervisory authority, please feel free to approach us with any question or concern you may have. Our public sector practice group, comprising 25 legal practitioners, combines expertise and know-how derived from a large number of successfully completed projects. We will be happy to share our know-how with you and to assist you in efficiently addressing any issue.
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[1] Resolution no. 194 of the Czech government dated 12 March 2020 for the period of 30 days.
[2] Cf. judgment of the Supreme Administrative Court ref. no. 5 Afs 48/2013 dated 30 May 2014.
[3] Cf. e.g. decision of the Office ref. no. R0305/2016/VZ-07889/2017/323/ZSř dated 3 March 2017.
[4] Cf. section 246 of the Act.
[5] Cf. section 263 (2) of the Act and section 268 (1) (a) of the Act. [6] Cf. resolution of the Czech government no. 208 dated 22 March 2017.
Headed by partner Jan Diblík, the experts at HAVEL & PARTNERS, the largest Czech-Slovak law firm, provided comprehensive advisory with significant IT aspects on the sale of a company that develops time tracking add-ons, also known as Prime Timesheet. In the course of the acquisition process that lasted several months, Tempo Ehf, an Icelandic IT company with an international ownership structure, acquired the Czech SPV which owns Prime Timesheet.
Several specialised teams at HAVEL & PARTNERS participated in the closing of the transaction. Beside partner Jan Diblík, associate Pavel Zahradníček advised on the sale of Prime Timesheet. Partner Pavel Němeček was responsible for M&A advisory, while associate Monika Čermáková and counsel Josef Žaloudek handled the corporate and tax aspects of the transaction, respectively. Leveraging our extensive know-how in the area of technology law and M&A, we ensured the smooth and efficient completion of this comprehensive transaction to the satisfaction of both parties.
Developed primarily by an independent programmer, Prime Timesheet contains one of the most successful add-ons enabling time tracking in the well-known Jira application, which are sold online on the Atlassian Marketplace. All activities of Tempo Ehf., with Diversis Capital, a US investment fund, as its majority owner, focus on creating and licensing software for the Jira application. In acquiring the SPV that owns Prime Timesheet, Tempo Ehf. has picked up its biggest competitor and gained a new business partner, as the founder of the company is to further participate in developing Prime Timesheet after the completion of the transaction.
