The Supreme Court cancelled the bankruptcy of Louny wagon workshop. The Šuška’s brothers have a problem.

The Supreme Court cancelled the bankruptcy of Louny wagon workshop. The Šuška’s brothers have a problem.
photo: Archives/Workshop in Louny
04 / 01 / 2021

The Supreme Court of Czech Republic decided on 29th December 2020 that the rulling of the Regional Court in České Budějovice denying the reorganization of the company Heavy Machinery Services and decreeing its bankruptcy was based on wrong application of the Insolvency Act. The Supreme Court decided this in joint case of two extraordinary appeals issued by companies ŠUTKA and DN Art. This might complicate the whole situation in the workshop in Louny previously owned by the company Heavy Machinery Services and last year sold in the bankruptcy to the company Traťová strojní společnost from the holding of Šuška’s brothers.

Among other things, the Highest Court annulled the rulling of the Regional Court in České Budějovice, which rejected the reorganization and declared bankruptcy in June 2019, and returned the case to the court of first instance for further proceedings.

The Supreme Court considered in detail the question of whether Heavy Machinery Services met the definition of a debtor for whom insolvency proceedings preclude the resolution of bankruptcy by reorganizations. The court concluded that the petition for permission to reorganize for the plaintiff's dishonest intention could be rejected only if the meeting of creditors did not decide on the manner of resolving the insolvency in the objectively admissible reorganization.

The Supreme Court went back to 2014, when the first meeting of creditors took place in July, at which it was decided to resolve the bankruptcy by a reorganization. At that time, the insolvency court allowed the reorganization. According to the Supreme Court, if the decision to reject the application for a reorganization permit, the decision declaring bankruptcy for the property of Heavy Machinery Services, was premature and therefore incorrect. According to the Supreme Court, it is not possible to decide on the manner of resolving the insolvency of a debtor whose reorganization is objectively permissible before a meeting of creditors, which may determine the resolution of the insolvency by a binding resolution. The High Court in Prague, which upheld these decisions of the Regional Court in České Budějovice, also ruled incorrectly and the Supreme Court therefore annulled its resolution too.

The legal opinion of the Supreme Court is binding for further proceedings. The question is what effect this decision of the Supreme Court has on the already completed sale of the Louny wagon plant. We are preparing a more detailed analysis for you.

The site in Louny was bought by the company Traťová strojní společnost during 2020 in the auction sale that followed the bankruptcy proceedings. The company, as part of the Rail Invest group owned by Šuška’s brothers, paid 751 million crowns for the purchase. The price at which they bought this factory reached three times the price set by the price evaluation.

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