Czech Republic
Answer ... A security interest can be enforced if a debtor fails to fulfil secured debts in a due and timely manner.
Under the general provisions of Czech law, a pledge can be enforced either by:
- a secured party in a manner agreed in writing with the security provider (pledgor) (private method of enforcement); or
- sale of the pledged asset in a manner prescribed by statutory law (official method of enforcement).
For private methods of enforcement, the secured party need not obtain an enforcement title, as the agreement between the security provider and the secured party governs the enforcement. The methods of enforcement are agreed in the respective security agreement and vary depending on the type of collateral. It could be a direct sale of the collateral or the transfer of collateral to the secured party under the terms and conditions agreed in the relevant security agreement.
However, for judicial forms of enforcement, a secured party must first obtain enforcement title – typically, an enforceable court judgment. As court proceedings against a borrower can last several months (or even longer if the borrower uses all procedural law instruments and defences), a secured party can request that one of the conditions precedent for use is an agreement with consent to direct enforcement of the underlying obligation. A direct enforcement agreement must be executed in the form of a notarial deed and can be used as an original enforcement title, based on which immediate enforcement can be commenced. Therefore, direct enforcement agreements are becoming more popular in institutional lending.
Once enforcement title has been obtained, the secured party can opt for the following methods of enforcement:
- compulsory public auction, administered by a licensed public auctioneer;
- judicial sale of the security, administered by a court; or
- execution sale of the security, administered by a court-appointed bailiff. This alternative is more popular than judicial sale, as execution by a bailiff affords benefits to the secured party. The bailiff can carry out the execution through a single proceeding and can issue several execution orders at the same time.
In the case of a private method of enforcement (there are doubts as to whether this also applies to judicial methods of enforcement), the secured party must deliver to the borrower (ie, the owner of the collateral) prior written notice of the intended method of enforcement. If the pledge is registered, the secured party must also record that enforcement has commenced in the respective public register. Notice must be served on the pledgor and registered in the respective public register for at least 30 days prior to the sale of the collateral. Under the law, the pledgee must proceed with due care and sell the collateral at the price for which comparable collateral can usually be sold.
The same principles apply to the enforcement of a receivable under a guarantee.
Czech Republic
Answer ... The duration of the enforcement process will vary depending on numerous factors – for example:
- whether it is a private method of enforcement or a judicial method of enforcement;
- the respective manner of enforcement; and
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whether the secured party must obtain enforcement title in case of a judicial method of enforcement.
Czech Republic
Answer ... Private methods of enforcement are less time consuming and usually more effective.
Czech Republic
Answer ... Direct agreements establish a direct contractual relationship between the lender and the borrower’s counterparties for the purpose of enabling the lender to gain control over the borrower’s contracts. Direct agreements are not very common under Czech law, as they are usually replaced by a pledge of receivables arising from contracts with the borrower’s counterparties.
Czech Republic
Answer ... It is recommended to register a pledge in the Pledge Register. The Pledge Register ensures that lenders, when securing their claim, can be certain that if several liens on the same thing exist, the rights of creditors which are registered in the Pledge Register will be satisfied in order of priority (with regard to the order of registration).