Reasons for the Failure to Implement Financial Rehabilitation Procedures in Insolvent Reality

The study brings a new approach to the problem of the currently low use of financial rehabilitation methods in Czech economic reality. We examine several aspects of this problem, but consider the main problem to be the fact that entrepreneurial subjects enter into insolvency proceedings with a very small amount of assets compared to their liabilities. In such a situation, however, willingness on the part of creditors to enable reorganisation cannot be assumed - especially given that attempts to revive such a business are in the majority of cases clearly mistaken. Insufficient debtor property is also reflected in the fact that creditors receive satisfaction only to an insufficient degree; in comparison to OECD countries, the Czech Republic most of the time significantly behind the OECD country average when comparing insolvency proceedings. One of the possible ways of improving the prognosis for using the financial rehabilitation principle and the prognosis for investors to achieve adequate fulfilment during insolvency proceedings would be to tighten present regulations regarding the possibilities of indebting a business. This is presently done by the definition of over-indebtedness, according to which the liabilities of an entrepreneurial subject may not exceed the value of his property.

Keywords: bankruptcy, insolvency, insolvency law, debtor, creditor, reorganisation