Czech Republic & LEX COVID in detail & Changes to Loan Repayments

The Senate of the Czech Republic approved on 16 April 2020 two acts on loans (including consumer loans) repayment measures in connection with the ongoing COVID-19 pandemic proposed by the Czech Government.

Both acts react on the current loss of income of natural persons as well as legal entities which may result in a massive increase of unpaid consumer and business loans resulting in potential insolvency or enforcement proceedings.

Draft act on loans repayment measures in connection with the pandemic

Based on the draft act on some loans repayment measures in connection with the pandemic, a protective period will be established lasting until 31 October 2020 or a shortened protective period lasting until 31 July 2020. The debtor will be able to notify the creditor of the use of the protective period due to the economic impact of COVID-19 pandemic. The payments of debts from the loan agreement will be postponed by the length of the protective period with the simultaneous extension of the duration of the loan security. The effects of the debtor's notification will not be subject to approval or assessment of the creditor.

The creditor will be entitled to interests during the protective period; in case of:

• consumers at the repo rate announced by the Czech National Bank increased by 8 percentage points (unless lower interest rates have been agreed on) with maturity after the end of the protective period (unless payments in instalments will be agreed on); and

• entrepreneurs in the amount of the agreed interest with the maturity during the protective period at the agreed time.

The draft act was passed by the Senate of the Czech Republic and signed by the president of the Czech Republic. On 17 April 2020, the adopted act has been announced in the Collection of Laws under the number 177/2020 Coll. The adopted act becomes effective as of the date of its announcement it the Collection of Laws.