The Ministry of Finance has prepared an amendment aimed at bolstering protection for sole proprietors and self-employed individuals (OSVČ) when they face difficulties repaying business loans. The objective of the proposed regulation is to prevent manageable financial distress from turning into an inescapable debt spiral due to excessive penalties or loan acceleration terms.
Addressing the Vulnerability of Sole Proprietors
Under current law, self-employed individuals do not enjoy the same statutory protection as consumers when taking out business loans, despite small business owners often being in a significantly weaker bargaining position relative to commercial lenders.
One driver for the proposed legislative change is the predatory practice of certain lenders who actively encouraged loan applicants to register for a trade license. By formally concluding the agreement as a business loan, lenders could circumvent statutory consumer protection rules entirely.
To address these loopholes, the Ministry of Finance proposes extending selected protective measures—currently established under consumer protection law—to sole proprietors and self-employed individuals.
Reforming Loan Acceleration Rules
The most significant change concerns the rules governing loan acceleration.
Under current practice, if a debtor defaults and the creditor demands immediate repayment of the entire balance, the creditor may under certain circumstances demand not only the outstanding principal, but also all unaccrued interest for the remaining term of the loan. This mechanism frequently escalates a entrepreneur's financial distress.
Under the new proposal:
- Principal-Only Immediate Call: Upon loan acceleration, the creditor may only demand the immediate repayment of the outstanding principal.
- Pro-Rata Interest Accrual: Future interest would continue to accrue progressively until full repayment of the debt; however, lenders would be prohibited from demanding unaccrued future interest upfront or charging default interest on top of it.
Example: If a business owner has CZK 300,000 in outstanding principal and CZK 60,000 in future unaccrued interest remaining on a loan, the creditor could immediately demand only CZK 300,000 upon acceleration—rather than CZK 360,000 under current rules.
This framework builds upon existing statutory caps on default penalties for natural persons, helping ensure that temporary repayment difficulties do not lead to an unmanageable debt explosion.
Tightening Rules for Directly Enforceable Notarial Deeds
The amendment extends beyond credit regulation. In cooperation with the Ministry of Justice, the Ministry of Finance proposes stricter rules for drafting notarial deeds with consent to enforceability.
Because these deeds allow creditors to initiate direct enforcement proceedings without prior judicial litigation, they represent a powerful recovery tool. It is therefore vital that debtors fully understand the legal weight and consequences of signing such instruments.
Under the proposed rules:
- The business owner must be personally present during the drafting of the notarial deed.
- The notary must directly instruct the debtor on the precise legal nature of the obligation and the legal consequences of default.
The objective is to eliminate cases where debtors sign binding enforcement documents without adequate advice, only to face immediate execution proceedings later.
Expected Effective Date & Application
If approved through the legislative process, the new rules are scheduled to take effect on January 1, 2028, applying exclusively to credit agreements concluded after that date.
While the amendment does not extend full consumer protection status to business credit, it represents a major regulatory shift toward protecting small business owners and preventing financial distress from compounding through aggressive acceleration mechanisms and enforcement practices.
This text was translated by AI.
