JŠK Legal Flash
Statutory rules on inadequate consideration do not apply to transactions with shares in joint-stock companies
In one of the recent decisions, the Czech Supreme Court came to a surprising conclusion that the statutory rules on inadequate consideration do not apply to transactions with shares in joint-stock companies regardless of whether these shares have been admitted to trading on the (European) regulated market or not. Thus, the court’s decision substantially deviated from a widely accepted opinion that the exemption from the inadequate consideration rules only applies to stock trading on the regulated market. The court based its argument on a technical interpretation of the Czech Capital Market Act’s definition of transferable securities and, therefore, the court’s conclusion cannot be directly applied to transactions with shares in limited liability companies because these shares are not typically issued as securities.
(27 Cdo 451/2019)
Reorganization plan’s impacts on third party security in rem
In Unicredit Bank v. Olšanská investiční, the Supreme Court rejected an expansive reading of Section 356(3) of the Insolvency Act adopted by the lower courts and held that the provision alone will not protect a third-party in rem security right against release occurring as the result of the adoption of a reorganization plan approved in respect of the primary borrower and restructuring the secured obligations. This will be the case even where, as in the insolvency matter before the court, the reorganization plan itself purports to exempt the third party security interest from its impacts. However, the Supreme Court did not deal with the whole question at hand, having remanded the case to the lower courts with instructions that the particular restructuring measures contained in the reorganization plan must be reviewed and an analysis conducted as to whether the security interest would not survive under general provisions of the Civil Code, in particular Section 1907 which provides, under certain circumstances, for the survival of third-party security interests upon a novation of the secured obligation. The case should be read as a reminded of the perils of financing structures in which the security provider is not also an obligor in respect of the primary debt. And as a warning for lenders who have accepted such third party security and are negotiating the reorganization of the underlying debt.
(Supreme Court decision no. 29 Cdo 567/2019 of 29 April 2021 in UniCredit Bank v. Olšanská investiční)
Is it discriminatory if increased severance pay is granted only to employees whose job is terminated by agreement and not by dismissal? Not according to the Supreme Court.
In the case at hand, the collective bargaining agreement granted higher severance pay if the employment ended by agreement for organisational reasons and not due to dismissal. The amount of severance pay also varied according to the employee's salary. Although the employee in question was interested in terminating his employment by agreement (to obtain increased severance pay), the employer nevertheless opted for dismissal. The employee saw this as discrimination and claimed increased severance pay in court. However, according to the Supreme Court, if an employer uses its statutory directive to terminate an employment relationship by agreement or dismissal, this cannot be considered unequal or discriminatory treatment. Nor can such treatment be seen in the fact that the amount of severance pay is differentiated according to the method of termination of employment and the salary level of individual employees.
(Decision of the Supreme Court of 18 May 2020, file no. 21 Cdo 68/2020)