There are two main reasons for starting an insolvency proceeding in the Czech Republic. First, the enterprise has liabilities more than 30 days past due and it is not able to repay these obligations. Second, the enterprise is over-indebted, meaning that the sum of the liabilities exceeds the value of the enterprise property. The insolvency proceeding is an example of collective enforcement. Therefore, the enterprise must have at least two different creditors. Although the pre-packed insolvency is a special case, the standard conditions for the insolvency still must be met. The financial situation of these enterprises before the insolvency proposal was generally inadequate for fulfilling entrepreneurial objectives.
This paper focuses on the financial situation of pre-packed insolvencies. The sample consists of 48 insolvencies. The financial situation will be assessed by models predicting financial distress. There are plenty of these models. Some are used globally such as the Altman Z-Score or Taffler approach. Other models are applied only nationally such as the family IN indices in the Czech Republic. The data sample consists of all identified pre-packed insolvencies in the Czech Republic in the time period 2008-2017. These cases were identified in an insolvency register and the financial data were obtained from the corporate database Albertina. Different models predicting financial distress will be applied to the corporate financial data. Results gained by the various approaches will be compared. Any discrepancies among the global and national models will be detected. Mainly the results will show the real financial situation of the pre-packed insolvencies. Though their financial situation was unsatisfactory, it would not have been extremely poor. Otherwise, there would have been no reason for approving the pre-pack.