Results from researching insolvency processes in the Czech Republic

Similarly to the majority of countries in the OECD, not even in the Czech Republic is there any data available as to how successfully and at what cost insolvency processes proceed when entrepreneurial subjects go bankrupt.  Yet insolvency proceedings are one of the fundamental parts of the economic environment as a whole, as their results show how effective towards creditors is the system of settling debtor defaults in various countries.

Our team conducted empirical research within the scope of the project TACR TD020190. While this was underway, trained persons viewed samples of over 950 insolvency cases and completed a standardized interactive form with basic information on the course of proceedings and especially on their real financial results. The above-mentioned sample of cases represented approx. 11.1 per cent of all cases that were commenced after 1 January 2008 and which had already been closed at the time of the statistical survey (the turn of 2013 and 2014).

Thanks to this procedure, it was possible to gather information of a representative quality, from which it is possible to draw conclusions as to both the duration of insolvency proceedings, the costs of insolvency proceedings and to a range of other questions; i.e. it is possible to quantify the usual yields for secured and unsecured creditors and ascertain satisfaction also in other types of receivables. By recalculation into the aggregate of insolvency proceedings, it is then possible to draw conclusions on the general volume of property which undergoes insolvency proceedings within the scope of the Czech economy.

The basic results of the survey find that, while insolvency proceedings in the Czech Republic proceed fairly quickly and are not in any way disproportionately prolonged, expenses for proceedings are relatively significant and creditor satisfaction especially is very low. This applies to unsecured creditors, but surprisingly also to secured creditors. The yield for secured creditors is in the vicinity of slightly lower that 25 per cent of the enforced sum, the yield for unsecured creditors, however, borders on roughly three per cent.

In the closing part of the work, the results from the research realized in the Czech Republic are, within the scope of possibility, compared with data from scientific studies which give data on insolvency proceedings in certain OECD countries.