New tools for the recovery of arrears
Starting this year, the tax authorities are not limited by local jurisdiction when recovering tax arrears. At the same time, from 1 July 2025, the customs administration can use a new power in the event of an u…
Legal News [May 2024]: Statutory executive’s liability for company debts back on the table
In the May edition of Legal News, we introduce a case law that establishes the liability of a statutory executive for public debts of a company, which can be identified and enforced by the administrative authority. Additionally, other case law discussed provides answers to questions such as whether depositing money in escrow constitutes sufficient security to extinguish the lien, and how to structure an agreement for the reimbursement of expenses for employee training when the employee fails to meet their obligation to remain employed.
- In its most recent judgment, Case No. 21 Cdo 1062/2023, the Supreme Court addressed a matter not yet fully resolved in decision-making practice of how to define the types of costs in an agreement regarding the increase or broadening of qualifications for which the employee must reimburse the employer if they fail to fulfil their obligation to remain employed. The Supreme Court emphasised that the Labour Code requires clarity from the outset about which costs the employee will be obligated to pay. This reflects a fundamental principle of employment relations, which is the special legal protection of the employee’s position. According to the Supreme Court, the definition should categorise the costs related to increasing or broadening the employee’s qualifications based on their specific purpose, ensuring they are not interchangeable. In this case, the term “overheads” used in the contract was also under scrutiny. The Supreme Court found that the Court of Appeal erred by not properly interpreting the intent of the applicant and the defendant regarding the term in question. The Court of Appeal should have clarified its content according to the rules from the Civil Code and the Labour Code, which would have emphasised the determination of their actual intention at the time of the conclusion of the agreement (The Court of Appeal did not deal with relevant facts in this respect, such as the manner and circumstances in which the plaintiff and the defendant negotiated the conclusion of the agreement, the subject matter of their communication in this regard, etc.). The Court of Appeal erred in relying solely on the testimony of a witness (other than the parties to the agreement).
- In its recent judgment, Case No. 21 Cdo 2976/2023, the Supreme Court addressed whether depositing money in escrow constitutes sufficient security to extinguish the lien and whether the creditor’s consent is necessary for providing such security. According to Section 1399(d) of the Civil Code, the lien is extinguished if the debtor provides sufficient security to the creditor. While the current law does not explicitly require the creditor’s consent for the provision of security, this requirement can be inferred from the construction of security agreements. The Supreme Court held that, under certain conditions, an escrow may serve as an additional legal means for securing claims. However, the deposit of sufficient security in escrow, under an agreement between the debtor and the lawyer, will not have legal consequences for the legal relationship between the parties—specifically, it will not extinguish the lien —unless the security is accepted by the creditor.
- The Supreme Court addressed whether the Czech Republic is entitled under Section 159(3) of the Civil Code to bring an action against a member of an elected body of a legal person for their liability for the legal person’s public debt in its most recent judgment, Case No. 27 Cdo 1993/2023. This provision establishes a special liability obligation for members of elected bodies of a legal person based on objective circumstances defined by law. The Supreme Court stated that if the customs office, acting as a tax administrator, determines that a statutory executive is liable for a company’s public debt, such as tax arrears (a fine), and wishes to enforce this debt against the statutory executive under statutory liability, it must follow Section 171 of the Tax Code. This involves issuing a notice demanding payment of the arrears within a specified period, which serves as a decision and a writ of execution. The tax administrator is responsible for determining whether the legal conditions for liability have been met as a preliminary question. As this issue fell outside the jurisdiction of the courts, the Supreme Court set aside the lower courts’ judgments and dismissed the proceedings. The case was referred to the Customs Office for the Zlín Region for further handling.
- In its judgment No. 27 Cdo 3019/2023, the Supreme Court addressed the interpretation of Section 68 of the Act on Commercial Companies and Cooperatives concerning the imminent bankruptcy of a company and the assessment of due diligence. The case involved the plaintiff seeking to hold the statutory executives liable for company debts that became due after their resignation. The Supreme Court held that for determining due care, the key factor is whether the statutory executives’ tenure ended through removal by the shareholders at a general meeting. Acting with due care includes actions such as appointing a crisis manager, rather than simply resigning from the company. In this case, the plaintiff argued that the termination of a key lease agreement was attributable to due diligence. The Supreme Court rejected the defendants’ claim that the short time between the lease termination and their resignation absolved them of responsibility. The statutory executives should and must have been aware of the impending lease termination, especially given their prompt resignation in response to it. The Supreme Court emphasised that these arguments do not have merit on their own. Furthermore, the Court concluded that for defining imminent bankruptcy, it is irrelevant whether the claims arising during the statutory executives’ tenure became due only after their dismissal.
