Common labour law issues and misconceptions in the state of emergency

If the company’s sales have fallen due to the crisis caused by the coronavirus, can employees’ salaries be reduced or even employed in other jobs?

The employer may not unilaterally reduce the wages of employees or change their jobs. According to the Labour Code, the parties to the employment contract must agree on the employee’s basic salary and position. That is why wages and positions can only be changed by mutual agreement of the parties. Thus, a salary reduction or a change of job can be made by amending the employment contract, which requires the consent of the parties.

If the salary cannot be reduced and the job cannot be changed unilaterally, then how can the employer get rid of the overstaffing situation?

The employment may be terminated by the employer by notice, which is a unilateral act, i.e. it does not require the agreement of the parties. If the parties can agree on the termination of the employment, they may settle the matter of parting ways by mutual agreement. Thus, the rules for termination of employment have not been changed with regard to the coronavirus, employment can still be terminated by mutual agreement or termination if the employee cannot be provided with work.

Could the coronavirus be the reason for the termination?

The employer is required to give the reasons for the termination and the Labour Code requires the reasons for the termination be clearly stated. This requirement is not met if the justification for the termination is merely that „the termination is due to the coronavirus”.

The reason for the termination in this case will be a reason related to the operation of the employer, i.e. the loss of income due to the coronavirus and the resulting redundancies and/or reorganisations. However, these must be apparent from the statement of reasons, which must be clear, real and reasonable.

Of course, in an eventual labour lawsuit, the employer has to prove the fact that the income has decreased and as a result the number of employees has actually been reduced and the work processes have been reorganized. Thus, termination will be unlawful if, after the termination, another employee is hired for the same job instead of the employee who was terminated with reference to redundancies.

If the rules for terminating employment have not changed, what has changed because of the coronavirus? Although the Labour Code has not changed since January 1, 2020, the government has allowed deviations from certain rules of the law for a period lasting until thirtieth day following the end of the state of emergency. Thus, for example, the employer may unilaterally order the employee to work from home and telework, but the government decree also gives the opportunity for the parties of the employment to deviate from the rules of the Labour Code in a separate agreement.

Amendments to public procurement law in view of draft “Anti-Crisis Shield 4.0”

A draft version of the so-called “Anti-Crisis Shield 4.0” has just reached the parliament (the “Draft Bill”). It introduces further amendments to the existing special purpose act, including ones that concern the public procurement law (“PPL”).

The Draft Bill amends the Act of March 02, 2020 on Special Solutions Related to Prevention and Combating of COVID-19, Other Infectious Diseases and Crisis Situations Arising from them (the “Act”).

Below you will find a summary of the suggested changes.

INITIATION OF PUBLIC PROCUREMENT PROCEDURE

Article 40 section 1 of PPL is about to change – when commencing an unlimited public procurement procedure, the contracting authority will no longer be obliged to place a relevant notice at a publicly available location within its registered office. It will be enough to publish it at the website. Other announcement-related obligations (the requirement to send a notice to the Public Procurement Bulletin and the European Union’s Publication Office) will remain unchanged.

EMPLOYEE CAPITAL PLANS

Article 7 of the Employee Capital Plans Act of October 04, 2018 has been modified, so that employee capital plan management/maintenance agreements will not be governed by the Public Procurement Law Act of September 11, 2019 (the “New PPL”) if the contract value is lower than the EU thresholds. The amended article 7 will become effective as of January 01, 2021.

AMENDMENTS TO AGREEMENTS

1. The Draft Bill entails automatic amendments to the agreement in case – after determining that circumstances related to COVID-19 affect proper performance of the agreement – the contracting authority (in cooperation with the contractor) introduces the amendment referred to in article 144 section 1 item 3 of PPL.

2. Voluntary nature of amendments
In case it is found that circumstances related to COVID-19 may affect proper performance of the agreement, the contracting authority may (in cooperation with the contractor) amend the agreement in accordance with article 15r section 4 of the Act, i.e. (i) change the completion date for the contract or its part, or temporarily suspend the performance of the agreement or its part; (ii) change the manner of performance of deliveries, services or construction works; (iii) change the scope of the contractor’s services, and introduce a corresponding modification of the contractor’s fee or the manner of its settlement – as long as the increase in the fee, caused by any subsequent change, does not exceed 50% of the initial value of the agreement.

CONTRACTUAL PENALTIES

1. Contractual penalties.
During the state of epidemic threat or the state of epidemic, and for 90 days after its end, the contracting authority cannot set off the contractual penalty related to non-performance or improper performance of the agreement against the contractor’s fee or other claims, and cannot seek satisfaction from the performance bond – as long as the event in relation to which the contractual penalty has been stipulated took place during the state of epidemic threat or the state of epidemic.

2. Period of prescription.
During the state of epidemic threat or the state of epidemic, and for 90 days after the end of the later state, the period of prescription for the contracting authority’s claims (for payment of a contractual penalty) and the validity term of a performance bond do not start to run; if a given time limit has already started running, it becomes suspended. The expiration of the time limits discussed above can occur no earlier than 120 days after the end of the later of the aforesaid states.

ADVANCE PAYMENTS AND PARTIAL PAYMENTS

The contracting authority will be paying the fee in instalments – after performance of a specific part of a public contract, or may pay advances towards the contract performance – in case of public contracts executed for a term of over 12 months. In such case, the contracting authority:

1. shall specify (in the agreement) the percentage of the total fee, due for the completion of specific parts. The final part of the fee can be no higher than 50% of the total fee due to the contractor;

2. shall specify that the advance payment can be no lower than 5% of the fee due to the contractor;

3. shall specify that in case of construction works agreements covering a term of over 12 months, with respect to which the contracting authority intends to make payments in instalments, the contracting authority may indicate (in the terms of reference) the value of the final part of the payment, which can be no higher than 50% of the fee due to the contractor.

BID SECURITY

The requirement to provide a bid security will be voluntary in nature, irrespective of the contract value.

PERFORMANCE BOND

1. In general, the contracting authority may require a performance bond: (i) corresponding to 5% of the total price specified in the bid or the maximum nominal value of the contracting authority’s obligation resulting from the agreement; or (ii) corresponding to 10% of the above – if justified by the scope of the order, or by the risk related to the contract performance, as detailed by the contracting authority in the terms of reference.

2. The contracting authority can make a partial return of the performance bond after the contract has been partially performed, as long as such possibility is covered by the terms of reference.

It is also worth noting that the National Appeals Chamber resumed its operations.

At https://www.uzp.gov.pl/strona-glowna/slider-aktualnosci/zasady-bezpieczenstwa-w-krajowej-izbie-odwolawczej/zasady-bezpieczenstwa-w-krajowej-izbie-odwolawczej you can check the applicable safety rules. The key ones are as follows:

  • no more than 10 people at a time are allowed in the main hall, next to the Chancellery of the Public Procurement Office and the National Appeals Chamber;
  • no more than 6 people at a time are allowed in the corridors leading to the courtrooms;
  • no more than 1 person at a time is allowed in the toilets;
  • anyone visiting the National Appeals Chamber will be obliged: (i) to disinfect their hands upon entering the building (before getting into an elevator) and before entering a courtroom (disinfectants and soap are provided by the National Appeals Chamber); (ii) to have their temperature taken before entering a courtroom; (iii) to observe the social distancing principles, i.e. to keep a distance of at least 2 meters from others; (iv) to have and properly use personal protective equipment that allows one to cover their mouth and nose; (v) to wear disposable protective gloves.

We are ready to assist you in evaluating your particular situation. Please feel free to contact us any time by email or telephone.

Employers will be able to gefer contributions to their social insurance at reduced penalties

On May 20, 2020, the Czech Senate passed a law allowing employers to defer payments for their social security insurance premiums for the months of May – July 2020 at reduced penalties. The law can be expected to become effective in the coming days.

The purpose of this law is to strengthen the liquidity of employers in the current difficult situation and to provide them with relief regarding their mandatory payments for the social security insurance premiums (hereinafter referred to as the „insurance premiums„). In order for employers to be able to defer payments for their insurance premiums for the above-mentioned months, they must continue to pay insurance premiums on behalf of their employees for the said months.

Please note that deferring payments of insurance premiums does not release employers from the obligation to pay a penalty for not paying the insurance premiums on time. The adopted law only allows for deferral of insurance premiums payments for employers paid for the months of May – July 2020 until October 20, 2020 with a reduction of the late payment penalty by 80%. The amount of the penalty is now 0.01% of the amount owed for each day, instead of the usual 0.05%. Deferment of payments will be assumed automatically, i.e. it will suffice if the employer does not pay its insurance premiums for the month of May 2020 by June 20, 2020 (the procedure will be analogous for the months of June and July 2020). However, if the employer fails to pay the amount due by October 20, 2020, the Social Security Administration will impose regular penalty instead of the more favorable penalty of 0.01%, i.e. a penalty of 0.05% of the amount owed for each day.

Another benefit of this law is undoubtedly the fact that in the case of using the option to defer payments for insurance premiums in accordance with the above, the „debt” incurred will not be considered to equal unpaid insurance premiums for the purpose of confirming the employer’s lack of indebtedness.

Please note that the deferral of insurance premiums payments cannot be used at the same time as the state contribution from the Antivirus program for the wages compensations. A prerequisite for obtaining the contribution from the Antivirus program is the due payment of insurance premiums, both for the employer and on behalf of its employees. Currently, the Antivirus program is valid until the end of May, but its further extension can be expected. Employers will therefore have to choose whether they want to draw contributions from the Antivirus program or use the deferral option for their insurance premiums.

In case of any questions related to the state compensation measures taken in the field of employment which an employer can use in the current difficult situation, please contact attorney-at-law Mgr. Lenka Droscová, our labor law specialist.

Anti-Crisis Shield 3.0 – suspension of court and procedural deadlines lifted

May 16, 2020 was the effective date for most provisions of the so-called “Anti-Crisis Shield 3.0.” The Act lifts the suspension of court and procedural deadlines. When will time limits start to run and how to count them?

Until now, during the coronavirus epidemic, time limits in court proceedings (incl. civil, criminal and administrative ones) have been suspended. This resulted from article 15zzs section 1 of the so-called Anti-Crisis Shield 1.0 to the Act of March 02, 2020 on Special Solutions Related to Prevention and Combating of COVID-19, Other Infectious Diseases and Crisis Situations Arising from them. Anti-Crisis Shield 3.0 revokes the aforesaid provision. Pursuant to article 68 sections 1 and 2 of the amended Act, time limits will start running after 7 days of the Act’s effective date, i.e. on May 24.

Anti-Crisis Shield 3.0 has some legislative deficiencies. The revocation of the suspending provision becomes effective on the day following the Act publication date (i.e. May 16). As a result, there is no legal basis for suspension of time limits between May 16 and 23, 2020. Nevertheless, the lawmaker’s intentions are clear. We believe there is no doubt that time limits will start running on May 24.

It needs to be noted that the terms which have not begun to run at all will start anew. Those which began to run before Anti-Crisis Shield 1.0, and were subsequently suspended, will continue (rather than start once again).

Example 1:
The act suspending time limits came into force as of March 31, 2020. The court delivered a payment order to the defendant on April 15, 2020. The two-week deadline for submission of an objection to the payment order did not start running at all. The new Act came into effect as of May 16, 2020. The term starts running after 7 days of the Act’s effective date. Consequently, May 24, 2020 is the first day of the term. We need to bear in mind that the time limit cannot end on a Saturday or Sunday. In this case, it expires on June 08, 2020.

Example 2:
The court delivered a payment order to the defendant on March 18, 2020. The act suspending time limits came into force as of March 31, 2020. The deadline for submission of an objection is suspended. However, 12 days out of that 2-week term have already passed (March 19-30). Only 2 days are left. The new Act came into effect as of May 16, 2020. The term continues running after 7 days of the Act’s effective date. Consequently, May 24, 2020 is the thirteenth day of the term. It expires on May 25.

Please feel free to contact us for any questions you might have.

Anti-Crisis Shield 3.0 – remote hearings and closed-door sessions in civil cases

May 16, 2020 was the effective date for most provisions of the Act of May 14, 2020, amending specific acts in terms of protective actions related to the spread of SARS-CoV2 (Dz. U. / Journal of Laws of 2020, item 875), commonly referred to as “Anti-Crisis Shield 3.0.” Civil procedure has been amended to extend the possibility to conduct remote hearings (videoconferencing) and issue rulings at closed-door sessions.

Pursuant to the newly-adopted Act, the following will apply to cases examined under the Code of Civil Procedure during the state of epidemic or epidemic threat, and for a year of the end of the later of them:

• videoconferencing will be used for court proceedings. In order to have a remote hearing, the parties to the procedure needed to be in court buildings, e.g. in their city/town of residence. Now they will be able to participate without leaving their home. Traditional hearings can be held under exceptional circumstances, as long as they do not pose a major threat to the participants’ health. The lawmaker left ample room for interpretation as regards the criteria to adopt for evaluation whether the hearing will not expose participants to excessive hazard. It seems that such criteria could include the age of participants, their total number, the stage of epidemic, etc.;

• if the court is unable to conduct a remote hearing, while a traditional one might pose a threat to the participants’ health, the court will be entitled to examine the case at a closed-door session, unless any party objects. An objection can be filed within 7 days of the delivery of a notice about a closed-door session. Only individuals that are not represented by a professional legal advisor will be notified about such right to object;

• if so decided by the president of the court, the judging panel (apart from the presiding judge and clerk) may participate in the hearing through means of electronic communication (i.e. they will be able to participate from home), except for the hearing at which the case gets closed;

• in cases where the evidentiary procedure has already been completed, the court may close the case and issue a ruling at a closed-door session, after receiving the parties’ (or participants’) written positions;

• the period of application of article 374 of the Code of Civil Procedure has been extended, making it possible to examine appeals brought before November 07, 2019 at closed-door hearings (unless a party applies for a standard hearing or for evidence involving testimony of witnesses/parties). A request for a standard hearing can be filed within 7 days of the delivery of a notice about a closed-door session. In same of withdrawal of a lawsuit or appeal, or with respect to invalidation of proceedings, the court examines the case at a closed-door hearing.

Please feel free to contact us for any questions you might have.

Abolition of real estate acquisition tax and statutory pre-emptive right

We would like to inform you that the Government of the Czech Republic (the “Government”) has decided, not only in connection with the COVID-19 pandemic, to abolish certain legal institutes related to the real estate transfer.

It particularly concerns an abolition of:
(i) Real estate acquisition tax; and
(ii) Statutory pre-emptive right between co-owners.

While the Government has decided to abolish the real estate acquisition tax mainly in order to stimulate the real estate market, the reason for abolishing the statutory pre-emptive right is not so clearly detectable.

Abolition of real estate acquisition tax
As of 30 April 2020, the Government approved a draft law to abolish the real estate acquisition tax. The draft law is obliged to go through the standard legislative process. However, regarding the fact that it is a government law proposal, its relatively fast approval and adoption can be expected.

The abolition of this tax shall be effective retrospectively and shall apply (i) to all real estate acquisition for which registration in cadastre of real estate (completion of the registration proceedings) was made in December 2019 and later, and (ii) to all real estate not registered in the real estate cadastre if the agreement on their transfer entered into force in December 2019 and later. The tax due date has been already postponed by government measures. Those, who have already paid the tax, shall be entitled to claim a refund.

The related tax deductions of interest on housing loans shall be abolished with the effect from the beginning of January 2022. Thus, persons who acquire ownership of real estate in the meantime (from December 2019 to the end of the year 2021) shall not be obliged to pay the acquisition tax, but at the same time the possibility to reduce the tax base through respective deductions shall be maintained for them.

Abolition of the legal pre-emptive right between co-owners
The statutory pre-emptive right in case of a transfer of co-ownership share on the real estate has been returned into Czech legal order in 2018. However, with the effect from 1 July 2020, the current form of this institute will be abolished and the respective provisions of the Civil Code will be restored to their original form.

In practice it above all entails that the statutory pre-emptive right applies only in situations where the so-called undivided co-ownership has been established by a disposition mortis causa (typically testament, inheritance contract) or by another legal fact in a way that made it impossible for the co-owners to affect their rights and obligations from the very beginning. Furthermore, the statutory pre-emptive right to a co-ownership share shall only last 6 months from the establishment of the undivided co-ownership and will not apply to transfers to certain family members or other co-owners.

If you have any questions about real estate transfers, please, do not hesitate to contact us at tomas.slaby@randalegal.com.

Ministry of Justice announces simplified restructuring procedure

In response to act BSWW’s request for legislative actions, the Ministry of Justice has announced that it is working on a simplified restructuring procedure for enterprises.

At the onset of the epidemic, act BSWW asked the Ministry of Justice to suspend the obligation to submit bankruptcy petitions. This solution was included in the Anti-Crisis Shield 2.0. However, it was somewhat different from our recommendations. Last Friday, we received an official response to our legislative suggestions. The Ministry explained why it had not decided to suspend the declaration of bankruptcy upon the creditor’s request in case the debtor’s insolvency is caused by COVID-19. The Ministry believes that the best way to ensure protection against the creditor’s motion for declaration of bankruptcy is the debtor’s submission of a restructuring application. In case of concurrence of the bankruptcy and restructuring petitions, the latter is generally considered to prevail. However, the situation is far from simple here.

Unfortunately, the current restructuring procedure is not adjusted to mass insolvencies that we are witnessing right now. Courts were not keeping pace with demand even before the epidemic, when the number of incoming petitions was usual. The period between the submission of a restructuring application and the opening of proceedings or the creditors’ meeting (aimed at voting on arrangement) was often so long that the company was losing the ability to perform the arrangement and was left with no other option than bankruptcy. If all enterprises suffering from financial difficulties submitted restructuring applications now, courts would get stuck for years. It would be advisable to simplify the regulations, making it possible for courts to open restructuring proceedings almost automatically. Also, the restructuring procedure is expensive and (subject to some exceptions) can be afforded primarily by large enterprises that have sufficient resources to pay the costs. In practice, the enterprise should have over PLN 100,000 assigned for costs alone. Of course, the exact amount depends on the specific circumstances of a given case. The fee of an administrator in remedial proceedings varies from approx. PLN 15,000 (extremely rare in practice) to over PLN 1 million. It is strongly recommended to introduce regulations minimizing those costs. Additionally, preparation of the restructuring application, all appendices and the initial restructuring plan is time-consuming and complicated. The procedure should be streamlined.

In its letter, the Ministry mentioned that it was working on legal amendments to make it possible to conduct restructuring procedures during the state of epidemic and over a limited period after its end, using a simplified procedure. This is very good news. What we need is a simple, quick and comprehensible procedure that would allow businesses to recover from the epidemic-induced crisis. Hopefully, the new regulations will indeed make restructuring procedures much more accessible.

Please feel free to contact us for any questions you might have.

What changes in the procedural law issues and enforcement implementations are brought by Lex Covid?

This new Act allows, under defined conditions, relief from the effects of expiry of a time limit, even in cases where it would not otherwise be possible under the law. Lex Covid also sets out that until 30 June 2020, with exceptions, the courts will not undertake enforcements by selling movable assets and buildings in which the debtor has permanent residence.

As we have informed, the President of the Czech Republic signed an Act known as Lex Covid on 20 April 2020. The Act is intended to address practical problems arising in connection with the Covid-19 pandemic in judicial proceedings and bankruptcies, and it also deals with the functioning of legal entities. The purpose of this newsletter is to present the content of Lex Covid concerning the procedural law issues and implementation of enforcements.

Relief from the effects of expiry of procedural time limits

As a result of the adopted extraordinary measures, the courts have scaled down their activity and in particular they have significantly reduced access to the court buildings for the public whereby, among other things, they have limited access to case files. That, however, made it impossible or excessively difficult for some parties to proceedings to carry out the necessary procedural steps within the set time limits, e.g. submission of a response. In some cases, such situation could be addressed by filing a request for extension of the time limit to perform an act but the courts did not manage to deal with the requests within a reasonable time.

Lex Covid therefore enables relief from the effects of expiry of a time limit under set conditions, even in cases where this would be otherwise impossible by law. A condition for the relief is submission of a request/application by the party concerned within a set time limit, to which the omitted act must be attached.

The time limit for filing the application will start to run upon terminating or cancelling the extraordinary measure against the epidemic, which made it impossible or substantially difficult to carry out the act. The time limit will not end before a certain number of days after the emergency ends. The time limits for which it is possible to file an application or request for relief vary in different areas of the procedural law.

In civil justice, the application for relief must be filed within 15 days of the termination or cancellation of extraordinary measures. If the party has missed the time limit for submission of a response, as a result of which a judgement for recognition was issued, the court will decide based on the application of the party concerned on relief from the effects of expiry of the time limit for response and on an annulment of the judgement for recognition.

In administrative justice, the application for relief from the effects of expiry of a time limit must be filed within 14 days of terminating or cancelling the extraordinary measure that hindered or rendered it excessively difficult to carry out the omitted act.

In enforcement proceedings, the application for relief can be filed within 7 days of the termination or cancellation of the extraordinary measure. However, it is not possible to condone non-compliance with the time limit for filing an appeal against a decision in which the ownership of an asset was transferred to the purchaser at auction (an example can be a forced sale of immovable assets, or sanctioning of a business establishment by its sale).

It is newly possible under this extraordinary situation to launch proceedings for a stay of enforcement also after the enforcement has already been performed, provided that the performance took place during the extraordinary measures and the party could not file the application before the enforcement was performed due to the extraordinary measures. The party can launch proceedings for a stay of enforcement, if it was ordered based on an unenforceable decision, the enforcement decision is annulled or rendered ineffective, or if the enforcement was inadmissible because there is another reason why the decision cannot be enforced.

The same applies for enforcement proceedings. If, moreover, the party against whom enforcement is sought permits the time limit for fulfilling the enforced obligation to elapse, it can apply for relief from the effects of the expiry of that period. However, such party must pay the enforced claim and an advance payment for the reduced execution costs within 15 days of the termination or cancellation of the extraordinary measure, which will eventually mean lower execution costs for the party.

In insolvency proceedings, the person who permitted the time limit set for completing acts in this type of proceedings to elapse due to extraordinary measures can file an application for relief, with the omitted act attached, within 7 days of the termination or cancellation of the extraordinary measure. That does not apply if the case in question has already been decided or if the judgment against which the party failed to lodge an objection within the set period has become final and the party would like to file the objection presently.

In proceedings before the Constitutional Court, the application cannot be rejected solely on the grounds of being filed after the expiry of the set period, if the appellant filed it out of time due to restrictions arising from extraordinary measures against the epidemic. But the application must be filed no later than 15 days following the termination or cancellation of the extraordinary measure. That period will not end earlier than 15 days after the termination or cancellation the state of emergency.

If a person in criminal proceedings has allowed a period set for performing an act to expire, the person can apply to have his position restored to the status quo ante. That way, it is possible to restore also the period for lodging an appeal. It is necessary to apply for restoration of the status quo ante within 3 days of the termination or cancellation of the extraordinary measure in question, however, that period will not end earlier than 3 days after the termination or cancellation of the emergency. Such application must be accompanied by the act in question if it still has not been performed.

Lex Covid also deals with relief from the effects of expiry of a time limit in proceedings for satisfaction of property claims pursuant to the Act on the use of funds from material criminal sanctions imposed in criminal proceedings, and also with relief in procedures relating to applications for financial assistance pursuant to the Act on victims – in both cases, the entitled person can file an application for relief within 15 days of the termination or cancellation of extraordinary measures against the epidemic. The application must be accompanied by the submission which was to be made within the missed period.

Court decisions granting the relief, except for decisions of the Constitutional Court, do not have to be justified.

Enforcement and execution proceedings

Lex Covid has also laid down that until 30 June 2020, the courts will not implement enforcement and execution by forced sales of movable assets and buildings in which the debtors are registered as permanently resident. That does not apply if the person against whom the enforcement is brought makes a written notification to the court that the court should continue the enforcement or execution in the above manner, or if the subject of the proceedings is recovery of maintenance claims, personal injury claims or claims of compensation for damage caused by intentional criminal offences.

Should you have any questions concerning procedural law, not only related to the state of emergency, please contact Ladislav Peterka at ladislav.peterka@randalegal.com.

Lex Covid Act – Impact on Bodies of Legal Entities

The Czech Parliament adopted an Act which is also known as „Lex Covid“. This Act is intended to solve the practical problems arising out of pandemic disease Covid-19 in the area of court proceedings, insolvency as well as functioning of legal entities. The purpose of this newsletter is to present the content of the Act relating to the functioning of legal entities.

Decision-making of legal entities’ bodies outside the physical meeting
The essential change being brought by Lex Covid is the extension of the regulation for decision-making bodies of legal entities outside their personal meeting – either in written form (per rollam) or by using technical means. The body of a legal entity may now decide even if the foundation legal act (particularly the Articles of Association or Memorandum of Association) does not permit such procedure. This option applies not only to the General Meetings, but also, for example, to the meetings of the Board of Directors or the Supervisory Board.

Therefore, Lex Covid in fact temporarily supplements (for the duration of the emergency measure) the Articles of Association or Memorandums of Association by allowing flexible actions to be taken by the bodies of legal entities in case this option has not been allowed in these documents yet. This should be very beneficial e. g. for joint-stock companies which are not obligated to hold general meetings with large number of people under difficult conditions, but instead the general meeting’s decisions may be taken in the form of per rollam.

Extension of the term of office of a body member
The extension of the term of office brought by Lex Covid relates to those members of elected bodies whose term of office would expire during the effectiveness of the emergency measure or within 1 month from the day following the date of its expiration. In that case, the term of office shall be extended until the lapse of three months following the end of the emergency measure. Automatic extension can be prevented by a member of the elected body delivering his disagreement to the legal entity before the expiry of the term of office.

Lex Covid also lays down the conditions for the resumption of the office if such term of office has expired between the adoption of the emergency measure and the date on which Lex Covid comes into force. The resumption of the function of a member of the body shall take place only if the member delivers his consent and if no other member has been elected in the meantime. The term of office shall expire 3 months after the day following the date of termination of the emergency measure.

Lex Covid allows, under specified conditions, the co-optation of members of the legal entity’s body, even if this possibility is not allowed within the foundation legal act. The co-optation represents a way in which the missing members of a particular body are elected by that body itself, with the effect until the next meeting of the body which is otherwise authorised to elect those members.

Deadlines for discussion the ordinary financial statements
Lex Covid also solves the practical problem residing in the obligation of general meetings of most companies to discuss the financial statements by the end of June. In this context, Lex Covid extends the deadline for discussing the ordinary financial statements of a private limited liability company, a joint-stock company or a cooperative – so that in case this deadline should expire earlier than 3 months after the date of termination of the emergency measure, it will expire up to 3 months after the termination of the emergency measure, but no later than on 31 December 2020. In fact, the companies are given more time to discuss the financial statements.

The above options are, of course, temporary and last during the emergency measures related to the Covid-19 epidemic.

In case of any questions regarding the functioning of legal entities, and not only during the state of emergency, please contact Mgr. Michal Pálinkás at Michal.Palinkas@randalegal.com.

Updated – Price capping and ongoing agreements in the context of Coronavirus Pandemic

What’s new? – The Presidential Decree No. 240/2020 no longer provides for price capping at the average prices of the three months prior to 16 March 2020. Additionally, in the event of a decrease in the prices of electricity and natural gas, on the regional markets, the Decree provides that the Government will take the necessary measures so that such decrease will be partially or fully reflected in the final price to consumers. However, Parliament Decision No. 4/2020 provides that the restriction of certain rights or freedoms can be ordered only by acts having the force of law.

What is maintained? The possibility of capped prices during the prolongation of the state of emergency for public utility services such as electricity and heat, gas, water, sanitation and fuels is maintained, along with all the measures adopted to enforce the first decree, unless the Presidential Decree no. 240/2020 provides otherwise.

Which price will be applied? Unless other capped prices or tariffs are regulated by the Government, the capped prices at the level existing on 29 March 2020 shall be applied, as provided by the Military Ordinance no. 4/2020.

What’s next? The provisions of the Presidential Decree are very likely to give rise to uncertainty and debate with respect to the capping of the final prices to consumers. It is unclear how the Government will interpret the concept of “regional markets (it should be regarded as referring to EU regional markets only ?) and which measures the Government will take in order to ensure a reflection of the decrease in prices on the regional markets in the final price.

Uncertainty also persists as to how the Government will be able to adopt the restriction of rights; it cannot be excluded that the Parliament intended for the Government to be able to adopt the restrictions only by means of GEO, not by Military Ordinance. In this case, any measures adopted by the Government may be subject to further amendments by the Parliament.

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Article posted on April 4, 2020:

What’s new? Capped prices for electricity and heat, gas, water, sanitation and fuels from 29 March 2020 until the end of the state of emergency. The capping means in this case that the prices cannot increase above the level existing on 29 March 2020, but they can decrease according to supply and demand. This measure was taken through Military Ordinance no. 4/2020.

Who’s affected? The Ordinance does not differentiate with regard to whom the capping measures will apply, meaning that all prices are capped. Therefore, the measure may be applied to producers, distributors, suppliers and end customers. This leads to a certain degree of confusion, since prices in energy are mostly formed on centralized markets such as the Day-Ahead Market (PZU), OPCOM, commodity exchanges, etc.

Which price will be applied? There are inconsistencies between the price caps established under Decree No. 195/2020 and the Military Ordinance. The possibility of price capping for certain goods and/or services was first introduced through presidential Decree No. 195/2020 for declaring the state of emergency in Romania on 16 March 2020. The decree considers the average prices for the three months prior to 16 March 2020. The price capping under the Military Ordinance considers the price levels applicable on the day of the Ordinance – 29 March 2020.

What’s next? The provisions of the Military Ordinance are very likely to give rise to uncertainty and debate with respect to the capping of the prices, since they stray from the provisions of the Presidential Decree for declaring state of emergency.