1.1 Amicable Phase
Accounts Receivable Czech Republic operates a professional agency that seeks to maintain a healthy relationship between our client and the debtor we are pursuing. This is an important part of the amicable collection process, and is a key way to avoid legal proceedings against any debtor in order to accomplish a full recovery. Our collection operation is based entirely in-house, ensuring high quality and control over the amicable phase of collections. Debtors will be contacted via telephone and via written correspondence to their main business address or residence. It is the policy of Accounts Receivable Czech Republic to adhere to all state and federal laws during the entire process.
In the event of a dispute, Accounts Receivable Czech Republic works to achieve an amicable resolution between the creditor and the debtor. This is done by analyzing all of the contractual documents that exist between the parties, including contracts, orders, invoices, delivery notices, confirmations, and other standard documents. Any investigations into these documents, or the financial situation of the debtor, will be conducted by our own in-house team of legal professionals.
1.1.2 Local agent
Accounts Receivable Czech Republic pursues direct collection activity by using a managed network of local field agents. Those agents actually visit debtors at their primary residence of main business address, largely in an effort to investigate the debtor’s financial standing and business activities. Sole traders, shop owners, and small companies, are the primary debtors targeted by this service. Our field agents are also able to help locate debtors that cannot be found or traced via traditional means. Accounts Receivable Czech Republic will always consult with clients before pursuing this method of collection.
Typically, Accounts Receivable Czech Republic collects interest only when the amount of interest charged on a late payment has been specified in the contract that exists between the debtor and the creditor. If no such interest rate is specified, an alternate rate may be attached to the debt’s outstanding balance by local laws in the Czech Republic. This interest rate is determined by the country’s code of civil law, and is a single, flat rate, for all debts owed to any creditor.
The rate owed by debtors during the amicable phase of debt collection is calculated rather simply. It is comprised of the “repo rate” set by the Czech National Bank, plus an additional 7 percentage points. This interest rate is charged to debtors by Accounts Receivable Czech Republic in both the amicable and legal phases, should any legal activity be required to recover the balance. The standard interest rate permitted by Czech law will be used in judicial settings unless the contract between the parties specifies a different rate. If no interest rate is specified between the parties, the court will additionally award backdated interest based on the standard rate defined in the civil code.
Culturally, debtors are not used to paying interest on debt collections and late payments. In many cases, any interest rate charged to debtors is viewed as a tool for payment negotiation, rather than as a way for the creditor to levy an additional fee on debtors. Such negotiation of an interest rate will cease to be possible during the legal phase, should the collection proceed to that point.
1.1.4 Debt collection costs
Local laws in the Czech Republic are unclear when specifying permissible debt collection costs that can be charged to the debtor. For this reason, Accounts Receivable Czech Republic does not charge these costs to the debtor at all.
The statute of limitations in the Czech Republic lasts four years from the date of the first late payment made by the debtor in business-to-business claims. In business-to-consumer claims, this period lasts just three years. The statute of limitations can be interrupted by legal proceedings or an acknowledgement of the debt.
1.1.6 Accepted and most common payment methods
Most debt payments are made via bank transfer. The use of traditional cheques is uncommon in the Czech Republic.
1.1.7 Types of companies
The owner of this company has unlimited liability for debts, but can only be pursued if Accounts Receivable Czech Republic knows the full first and last name of the owner.
Public company (verejna obchodni spolecnost, v.o.s.):
No minimum capital requirement, with unlimited liability of the company as well as the partners.
Limited partnership (komanditni spolecnost, k.s.):
At least one partner of the company is liable, up to the amount of capital specified in the partnership contract.
Limited company (spolenost s rucenim omezenym, s.r.o.):
This limited liability company has a minimum capital requirement of 8,000.00 EUR. Liability is limited to the company’s amount of capital.
Joint-stock company (akciova spolecnost, a.s.):
Company has limited liability, extending to its amount of capital. A minimum of 80,000.00 EUR in capital must be maintained.
1.1.8 Sources of information
Accounts Receivable Czech Republic uses credit reporting agencies to determine the financial situation of debtors being pursued on behalf of our clients. This information is used to determine the best course of action for our clients in the event that the amicable phase has failed. Information provided by credit reporting products includes the names of company partners and officers, as well as the company’s amount of capital. Such information is available via the Internet for no charge.
Companies are required to register with the Trade Register, while sole traders are required to register with the Sole Trader Register. This requirement is loosely followed, however. If the company has registered, Accounts Receivable Czech Republic can use any information found when in pursuit of a debtor. These registries are available for free via the Internet.
If we cannot contact the debtor directly, we will invoke the use of our local agent network to make contact and determine the company’s position. This will be used to understand company actions, photos, contacts, and other information, from business associates and relevant neighbors.
1.2 Retention of Title
Any Retention of Title provisions must be agreed upon prior to the delivery goods. This agreement must be written.
1.3 Safeguarding measures
If a debtor cannot quickly satisfy a debt or make the appropriate payment arrangements, Accounts Receivable Czech Republic can request securitization of the debt in our clients’ favor. This also provides an acknowledgment of the debt; any acknowledgment or security is notarized. Costs for this process must be paid by the debtor as part of the overall balance of the debt.
1.4 Legal Procedures
Payment reminders do not need to be sent before legal proceedings to begin, but they’re generally sent as a gesture of common courtesy and goodwill. These notices are also an effective way of collecting the debt owed in a more amicable fashion. Both parties are permitted to negotiate an arbitration clause, as well, further preventing the possibility of legal action. Legal proceedings are handled by the district court nearest the debtor’s main business address or residence.
1.4.2 Legal System
The most efficient way to enforce a debt and pursue legal action is to ask the court for a payment order to be lodged against the debtor. This payment order can be issued without a hearing, making it quick and highly affordable. The debtor has the right to file a complaint in response, causing future proceedings to take the form of remedial action. This means the petitioner must ask the court to issue a formal judgment against the debtor. To do this, the court typically calls for a hearing and requires both parties to attend. Such a hearing will cause the proceedings to take quite a bit longer than merely requesting a payment order. Appeals are possible as part of this process.
1.4.3 Required documents
To begin legal action against a debtor, Accounts Receivable Czech Republic must be in possession of the following documentation:
– Original Power of Attorney, notarized
– Export from the Trade Register
– Copies of unpaid invoices
– Copies of account statements and transport documents, signed by the debtor
Additionally, further documentation may be required in some cases. We reserve the right to request the following from our clients:
– Copies of delivery notices, confirmations, and orders
– Copies of the contract between the parties
An acknowledgement of the debt will help to boost the case’s chances of success. Accounts Receivable Czech Republic will try to get such an acknowledgement as part of the amicable collection phase and the securitization process.
1.4.4 Legal dunning procedure
Legal dunning applies only when a monetary debtor can be traced and a judgment can be served to them via Czech courts. The debtor has 15 days to appeal the judgment as served, which will initiate a traditional lawsuit procedure.
A lawsuit is issued as soon as the amicable collection process has failed. Alternatively, a lawsuit can begin if the debtor has filed a dispute against the creditor. A lawsuit will begin if the debtor applies any notice served to them during legal dunning, as well.
A judgment must be appealed within 15 days of being served on the debtor.
Court fees incurred during a lawsuit will be calculated as 5 percent of the disputed debt, or at least 600.00 CZK. These fees will reach a maximum of roughly 1,000,000.00 CZK, or 35,000.00 EUR. The fee is based o the basic claim, but does not include any interest paid on the debt’s amount as imposed by the contract between the parties. Arbitration fees are calculated separately.
Fees for a lawyer in the Czech Republic typically vary from 2 percent to 6 percent of the outstanding debt’s principal amount. Other costs may be incurred if documents need to be translated into the local language.
1.4.8 Expected timeframe
Legal dunning typically lasts between 8 and 12 weeks, while a lawsuit can take at least 212 months. This period of time will lengthen for more complex cases.
1.4.9 Interests and costs in the legal phase
Courts always award interest as stipulated in the contract between the parties if the basic claim is accepted. The losing party must pay all court fees and lawyer fees. Collection fees are not charged to the debtor, as Czech law prohibits this.
1.5.1 Enforcement in debt
Judgments issued by the court that go unpaid by the debtor can be executed by the court itself, or by a private executor in an execution hearing. This execution hearing consists of two parts, the first of which takes place in a courtroom setting and nominates the executor who will be overseeing the matter. The second part of this process sees the appointed executor actually enforce the motion against the debtor and recover any assets or property needed to cover the debt’s outstanding balance.
An execution order can only be granted to those parties who are entitled to the judgment, or those parties to whom responsibility for the judgment has been transferred. Execution may involve the seizure of movable or immovable goods, business or private assets or tax refund payments due to the debtor by the state or federal Czech government. Execution proceedings end when the entire balance of the debt has been recovered for the creditor.
1.5.2 Enforcement in movable goods
Enforcement via movable goods is typically done by attaching wages, salaries, or other debtor income. It can also be completed by using compulsory bank debits or the liquidation and sale of movable assets owned by the debtor. These execution proceedings are carried out by a private executor in most cases. Strict regulations govern this process and regulate how it is carried out in both secured and unsecured scenarios.
1.5.3 Enforcement in immovable goods
Enforcement via movable goods is carried out via a liquidation of immovable assets.
1.5.4 Expected timeframe
The enforcement process typically takes several weeks. For movable goods, however, this can take several months. Real estate enforcement can take even longer, and depends on the way the case proceeds.
1.6 Insolvency Proceedings
Insolvency can only begin after the debtor has filed a proposal with the court. In the Czech Republic, insolvency is always based on a court decision. Debtors are classified as insolvent when they owe past due balances to more than one creditor, and those payments are more than 30 days past their due dates. Insolvency can also be declared when the amount of debt exceeds the value of the debtor’s assets. A court will decide whether to pursue bankruptcy, reorganization, or a discharge. Insolvency proceedings last several years.
After filing for insolvency, a court will investigate the debtor’s financial position and either approve or deny the request. If approved, the court will decide between bankruptcy, reorganization, or discharge. This decision is published in the Insolvency Register, which is accessible via the Internet for public perusal. At this time, all enforcement and collection procedures must be suspended. The court will appoint a liquidator or trustee to oversee the process of lodging claims, and that appointee will be able to accept or reject any claims filed by creditors within the deadline period. Typically, this period lasts between 30 and 60 days. Claims filed after the deadline will not be considered.
Clients will potentially receive a dividend at the conclusion of this process, but only if the company’s assets permit such a payment to creditors whose claim has been accepted.
1.6.3 Required documents
To file a claim against a debtor during insolvency, we will require the following documentation:
– Original Power of Attorney
– Copies of delivery notices
– Copies of invoices
– Account statements
– Export of trade register
– Copies of contractual documents
– Copies of conditions of sales, if relevant
– Copies of delivery notices, confirmations, and orders
– Copies of correspondence regarding the debt
1.6.4 Expected timeframe and outcome
The deadline for filing claims is announced to creditors via mail and the Internet. The creditors must check these sources to be able to file a claim. These announcements are official, and begin a deadline period lasting between 30 and 60 days. Insolvency proceedings typically last for more than a year.
1.6.5 Limited companies
Limited companies are required to file for insolvency when the company’s debts are higher than the total value of its assets. This usually means the management knows that the company will be unable to pay its debts within a certain period of time.
1.6.6 Non-limited companies/individuals
Insolvency law is applied the same way to both limited and non-limited companies and individuals.
1.6.7 Pool of creditors
In the event that a debtor has more than 50 creditors, then a pool is established. The pool is responsible for protecting the rights of the creditors alongside the appointed trustee.
The appointed trustee or liquidator can dispute any legal actions taken by the debtor and carried out within three years prior to the court declaring the debtor bankrupt.
1.7 Arbitration and Mediation
While mediation is uncommon in the Czech Republic, arbitration is often used to avoid the high costs and long waiting periods of legal proceedings. All arbitration cases are settled by an independent third party, as regulated by Czech law.To get started today, call us at321-710-3530 to speak with an associate