Vol 19 (2022) - Issue 3

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Landmark Ruling Regarding One of the Largest Insolvencies in the Czech Republic in the Past Twenty Years

Synopsis
Arca Investments, a.s. (the 'Debtor') is a Slovak holding company encompassing the Arca Group's activities mainly in the Czech Republic and Slovakia. The Debtor, as an investment company, invests mainly in energy, financial services and real estate sectors. Apart from more common ways of financing, the Debtor used to finance most of its business through a largescale issuance of promissory notes that were mainly sold to retail investors. According to its insolvency petition, due to suffering limitations in its business caused by the COVID-19 pandemic and the following restrictions, the Debtor became insolvent.
The Debtor filed for insolvency at the Municipal Court in Prague (the 'Municipal Court') in January 2021 due to its inability to meet its liabilities amounting to more than CZK 18.6 billion (equivalent to approx. EUR 765.4 million) to at least 1,889 creditors.
The number of creditors and the extent of the debts caused the Debtor's insolvency to be called 'the biggest insolvency in the past 20 years' by some. While the Debtor has its registered office in Slovakia, the majority of its activities are carried out in the Czech Republic. With the submission of the insolvency petition to the Municipal Court, the Debtor made a request to open main insolvency proceedings in the Czech Republic, setting out its position regarding the abovementioned international jurisdiction.