Inspiration from Germany and the possibilities under Czech law
When a company finds itself in a financial distress, the interests of the shareholder (who is, in the Czech Republic, usually also CEO) and the creditors — typically banks — diverge and potentially clash. The owner tends to delay a solution and shift the costs of the crisis onto the creditors (“gambling on resurrection”), while the creditors need the process to be managed quickly, predictably, and reliably. The Czech Insolvency Act does not fully resolve this conflict, and the Act on Preventive Restructuring offers only partial answers. The transaction structure of the doppelnützige Treuhand — a dual-purpose trust - developed by German practitioners offers an interesting model.
The doppelnützige Treuhand in Germany
It is a simple yet highly effective structure: the owner transfers their shares in the company to an independent trustee. The trustee holds these shares and exercises shareholder rights for the benefit of both parties simultaneously—the original owner (so they have a chance to reclaim the company after a successful turnaround) and the creditors (so they can be certain the recovery plan will be faithfully implemented). The trustee oversees the implementation of the plan, communicates with management or the crisis manager (CRO), and thus serves as both a mediator and a supervisory body.
The scenario is predefined: if the company achieves the set milestones (KPIs) and the creditors are satisfied, the shares are returned to the owner. If the restructuring fails, the trustee initiates the sale of the shares (whether through a fire sale or a standard M&A process) and the creditors are satisfied from the proceeds.
Benefits
The strength of the structure lies in its ability to simultaneously resolve several issues that typically complicate restructuring:
- Trust: overcoming creditors’ distrust of the current management and owners.
- Informal influence with a firm legal basis: the trustee acts without public insolvency proceedings, but with real oversight and power.
- Additional security: for creditors, the appointment of a trustee represents a new element of confidence that they will not suffer unjustified losses.
- Confidentiality: the process takes place outside the insolvency registry.
- Motivation for the owner: if the restructuring is successful, they get the company back.
The Case of Willy Bogner GmbH
A good practical example is the German skiwear manufacturer Willy Bogner GmbH. In 2019, the company reported a loss of €6.7 million on revenue of €167 million. In 2020, an 89% stake was transferred to an SPV of the SGP Schneider Geiwitz advisory group, new top management was appointed, and a performance program was launched with support from EY. Two years later, the company was already reporting a profit of €6.8 million, and equity had grown from €1.6 million to €16.7 million. In 2025, strategic investor Katjes International took over the company.
Can the same be achieved under Czech law?
Yes. The primary structure that can be used is a trust fund under the new Civil Code, which, from a functional standpoint, is the Czech equivalent of an Anglo-Saxon trust. The shares contributed to the fund are not owned by the administrator, the owner, or the creditors. This allows for a very precise balancing of the rights of individual participants, which makes the Treuhand an effective tool in the first place.
The second approach can be developed within the legal framework for preventive restructuring, which provides for a similar structure in Section 25 of the act as part of a restructuring plan — providing the option for shareholders to retain their shares conditionally even if a group of unsecured creditors objects. The practical catch, however, is that the structure is not established until the plan’s effective date, whereas the operational deployment already during the phase of negotiations with creditors and under a standstill agreement constitutes a substantial part of the German model’s benefits.
Another alternative could be the use of a foundation (or its simpler alternative, a nadační fond), or a simple limited liability company established for a specific purpose. The specific structure must always be tailored to the conditions of the target company and its circumstances.
Pitfalls
In practice, the following issues will need to be addressed:
- Taxes: The transfer of shares to a trust-fund is treated as a contribution to a business corporation and is not subject to tax. Dividends and proceeds from sale of shares are exempt within the fund, similar to the treatment of shareholders in legal entities. When shares are returned to a legal entity, however, a tax liability may arise, which must be addressed when designing the structure.
- Insolvency risks: The insolvency of the trustee, shareholders, or the target company does not necessarily require the fund to be terminated. However, it is necessary to thoroughly assess the risk of the transfer becoming ineffective in the event of a shareholder’s insolvency—one solution may be to have the shares valued by an expert opinion.
- Beneficial owner: The fund’s beneficiaries may be creditors, and under the law, they are considered the beneficial owners of the fund, even if their identities are not disclosed. It is necessary in each case to assess the potential impacts of this regulation or, alternatively, to specify in the fund’s charter only a general category of persons from which specific beneficiaries will be designated only if necessary.
- Costs: The administrator’s fee (fixed + success fee) and legal representation are paid by the company for whose benefit the fund is established. Sales costs are covered by the proceeds.
- Role separation: if the trustee is a lawyer or an insolvency administrator, they may be tempted to assume other roles within the corporate crisis resolution process, e.g., as the debtor’s legal representative or a member of management. The German experience shows that separating these roles and having them performed by independent entities is healthier and creates better conditions for achieving the Treuhand’s objectives.
Another relevant aspect in the future will be the pre-arranged sale of a business (a “pre-pack”) in accordance with the new European Directive on the harmonization of certain aspects of insolvency law, but more on that another time in a different post.
Summary
Dual-purpose trust administration is a proven tool in Germany that can preserve a company’s value where formal insolvency would otherwise lead to its destruction. Czech law provides the means to utilize this creative tool, but proper timing and a carefully prepared restructuring plan that gives the entire structure a clear purpose are essential. For creditors seeking an effective alternative to resolving a debtor’s crisis through insolvency proceedings, and for owners who wish to save their business with dignity, this is a relevant alternative worth considering.
