How to proceed in case of bond issuer or alternative fund bankruptcy?

We have been hearing more and more information about the collapses of bond issuers and alternative funds in recent months. In this article, we will summarise the cases of the most well-known ones, as well as the procedure for creditors who have invested their money in them.

Our law firm has extensive know-how in capital markets, bond issues and alternative investment funds and we are prepared to enforce our clients' rights to minimize their losses and maximize their return on investment.

Summary of current insolvency proceedings

Please note that it is not necessary to wait for insolvency proceedings to start - we recommend that you start dealing with or pursuing your claims as soon as you become aware that the company or group in which you have invested your money is in any financial difficulty.

How do we proceed?

Filing claims in insolvency

If the company in which you have invested your money goes into insolvency, the first thing you need to do is to file a claim in the insolvency proceedings, which we will be happy to help you prepare. It is also possible to file claims that are subject to court proceedings or execution or that have not yet become payable, as well as bills of exchange, bonds, shares and similar securities.

Creditors may file their claims with the insolvency court on a prescribed form from the commencement of insolvency proceedings until the expiry of the time limit set in the bankruptcy decision, which is 2 months for all insolvency resolution methods.

Request to initiate proceedings before the Financial Arbitrator

In addition to recovering claims against the bond issuer or alternative fund, it is also possible to seek compensation for damages against investment intermediaries and their bonded representative if they recommended or brokered the investment to the client.

Investment intermediaries and their bonded representative are obliged to provide investment services with professional care. This means that the investment intermediary acts competently, honestly and fairly and in the best interests of its customers.

Furthermore, investment intermediaries are obliged to provide the client with relevant information so that he can objectively decide whether to use investment services and give the order to conclude a trade. This includes information on the potential risks, the total price for the investment services or the amount of commission paid.

If the investment intermediary or its bonded representative causes damage to the client by violating legal obligations, it is obliged to compensate for it. If the financial intermediaries do not agree to compensate for the damage, we file a petition on behalf of our clients to initiate proceedings before a financial arbitrator, which is an out-of-court dispute resolution body in the financial market. Proceedings before a financial arbitrator are free of charge and much quicker than traditional court action. Moreover, a final decision of a financial arbitrator is binding and enforceable.

Criminal notices

An investment company often commits a criminal offence, most often the offence of unauthorised business. In such a case, we recommend exercising your rights in criminal proceedings.

The biggest bond crashes - alternative fund crashes

Last year, SENSE Vital Air, s.r.o. filed for insolvency and defaulted on a total of 3 bond issues. The company was engaged in the manufacture and sale of the Sense Antiviro filtration system for air purifiers.

Similarly, HELSKE SUSTAINED a.s. and subsequently HELSKE SUSTAINED HPC a.s. filed for insolvency, raising funds for the production of innovative building products and financing the Helske People Care project, which aimed to build a network of homes for the elderly in Germany.

NAFIGATE Corporation, a nanotechnology and biotechnology company that focused on developing innovative high-tech products and advanced technologies, did not escape the crash.

Companies linked to the Arca Capital Group also ran into problems, including OH Investments Holding a.s., Krupa Global Investments a.s., České Lithium a.s., European Battery Alliance a.s., BGQ Czech, a.s., Pozitive Energy, a.s., NFA Holding, a.s. and VIPAPP, a.s. Creditors of some companies can still file their claims in insolvency proceedings.

The collapse of the Fair Credit Group

Since 2012, Fair Credit Group has been operating in the Czech market as a provider of non-bank consumer loans. To provide loans, the Group uses the money it borrows from retail investors in the form of bonds and loans or raises it through investment funds.

The financial difficulties of the Fair Credit Group became more widely known in the autumn of 2022 and have been getting progressively worse. Currently, three companies in the group have already filed for insolvency, namely Concord Financial Holding a.s., CEPO Green3, SE (Fair Credit International, SE) and CEPO Green4 a.s. (dříve Fair Credit Holding a.s.), and others are likely to follow. These companies are Detektivní a Inkasní agentura s.r.o., CEPO Green4 a.s. (Fair Credit Holding a.s.) and Grimastar s.r.o., whose financial situation is being monitored and we will keep you informed of further developments.

The insolvency proceedings of Concord Financial Holding a.s. were initiated on 4 November 2022 and the company’s bankruptcy has not yet been decided. Creditors may file their claims in the insolvency proceedings with the Municipal Court in Prague by filing an application until the decision on the company’s bankruptcy is made and subsequently within 2 months from the date of the decision on the bankruptcy.

In the insolvency proceedings of CEPO Green3, SE (Fair Credit International, SE), the company’s insolvency has been decided on 23 January 2023 and the deadline for creditors to file applications expired on 23 March 2023. Thus, claims filed after 23 March 2023 will no longer be satisfied during the insolvency proceedings.

WCA Investment Fund

WCA International s.r.o. is a so-called alternative fund. These funds are not subject to regulation and supervision by the CNB and investments in them are therefore associated with risks and a lower level of investment protection.

WCA ran into financial difficulties in the spring of 2022 and a creditor’s bankruptcy petition was filed against the company in November 2022. On February 27, 2023, the Municipal Court in Prague declared the company bankrupt. Investors, who have invested around CZK 2 billion in the company, have two months to file their claims in the insolvency proceedings.

In addition to the financial difficulties, there is reason to suspect that WCA did not comply with the prohibition on collecting funds from the public and may have committed the crime of unauthorized business.

Český průmyslový holding a.s.

Among the investment companies that succumbed to their financial problems is Český průmyslový holding a.s., which was a producer of ecological fuels and issued mainly sub-limit bonds.

The deadline for filing claims in the insolvency proceedings expired on 31 March 2023. Claims filed later will therefore no longer be satisfied during the insolvency proceedings.

SHIF18 s.r.o.

Owners of bonds issued by SHIF18 s.r.o., an eye care company that sold eyeglass frames and glasses and performed eye examinations, should also pay attention.

The insolvency court issued a bankruptcy order on 3 May 2023 and creditors have a 2-month period to file claims in the insolvency proceedings.

LightGate, a.s.

On 3 March 2023, LightGate, a.s., a company primarily engaged in the production and sale of holograms, filed an insolvency petition in conjunction with a bankruptcy petition.

The insolvency court issued a bankruptcy order on 30 May 2023 and creditors have a 2-month period to file claims in the insolvency proceedings.

If you have invested your funds in the bonds of this company, you can file your claims in the insolvency proceedings conducted at the Regional Court in Pilsen by filing an application.

AMESTA

Another company that has run into financial problems is a small Prague developer, AMESTA a.s., which filed for insolvency at the end of February 2023 due to over-indebtedness. AMESTA focused on the development of commercial real estate and the reconstruction of older apartment buildings.

On 13 March 2023, the Insolvency Court issued an order rejecting the debtor’s insolvency petition due to the lack of outstanding claims. The company has appealed against this order, and we are currently waiting to see how the case develops further. We will monitor the progress of the insolvency proceedings and keep you informed of further developments.

Real estate and investment group Premiot Group

Premiot Group is engaged in the development of real estate or its purchase for reconstruction, sale or lease and operates in the real estate market not only in the Czech Republic but also in Slovakia, Hungary, and Romania.

The group’s financial problems first came to light at the end of last year, when the group’s companies were supposed to repay their creditors for several bond issues, which did not happen and the companies only paid interest to their creditors. Neither Premiot Group, a.s. nor its related companies are insolvent yet but according to available information, all indications are that the group will end up in insolvency proceedings. If you have invested your money in the Group’s projects, we recommend you pay attention and start solving the situation immediately.

On 19 May 2023, a creditor's insolvency petition was filed against PREMIOT obchodní, a.s. (formerly Europa Investment Property CZ a.s.). If you have invested in the company's bonds, you can already file for insolvency proceedings.

CamSystem Group s.r.o. (formerly HYSPERIA GROUP s.r.o.)

The company specialized in security technologies - mainly CCTV security and alarms.

The insolvency petition was filed by the company’s employees because their wages were not paid.

In March 2021, the company issued bonds in the total amount of CZK 10,000,000 with a maturity date of 15 March 2024. We can therefore expect that holders of the company’s bonds will also file their claims in the insolvency proceedings.

On 17 May 2023, the Insolvency Court issued an order rejecting the creditor’s insolvency petition due to the lack of mandatory attachments. We will monitor the progress of the insolvency proceedings and will keep you informed of further developments.

ExploR Capital a.s.

The company raised funds from small investors from the Czech and Slovak Republics to build a sturgeon farm in Russia.

The company has issued several bond issues in the past, of which it owes CZK 172 million.

The insolvency court issued a bankruptcy order on 24 March 2023, and creditors have a 2-month deadline to file claims in the insolvency proceedings.

Alternative fund DIVERSITY CAPITAL

An IC Group company is in default of its obligations to investors. If you have invested your money in DIVERSITY CAPITAL or any other IC Group company, we recommend you pay attention and start solving the situation immediately.

Energetický Holding Malina

Energetický Holding Malina, one of the largest suppliers of rooftop photovoltaics in the Czech Republic, admitted in mid-April that it was having problems securing orders from its clients. Immediately afterwards, the company filed an insolvency petition on 9 May 2023, together with a motion for reorganisation. On 12 May 2023, the insolvency court ruled the company bankrupt and creditors could file their claims in the insolvency proceedings until 12 July 2023.

KTK CONSTRUCT s.r.o.

KTK CONSTRUCT s.r.o. was a construction and development company focusing on family and apartment houses and residential development projects.

According to the company’s website, the company has issued at least one issue of subordinated bonds (i.e., without the need for CNB approval of the prospectus).

If you have invested your funds in this company’s bonds, you can file a claim in the insolvency proceedings filed with the Municipal Court in Prague.

TERRA FELIX s.r.o.

The company was the manager of Albrecht Brewery and has issued two issues of sub-limit bonds in the total amount of CZK 65,000,000.

Apparently, due to problems with the payment of the bond principal, the company converted part of the bonds into loans and also issued new bonds.

A creditor’s insolvency petition was filed against the company. If you have invested your funds in the company’s bonds, you can file a claim in the insolvency proceedings filled with the Regional Court in Ústí nad Labem - Liberec branch.

Conclusion

If you become aware that a company or group in which you have invested your money is in any kind of financial difficulty, you should begin to address the situation as soon as possible by contacting qualified attorneys.

If you would like more information and a quote for our legal services, please contact us at info@stuchlikova.com or by phone at +420 222 767 393.