Revision of bond issuance conditions: How to create a clear and safe issuance?

JUDr. Jakub Dohnal, Ph.D., LL.M.
JUDr. Jakub Dohnal, Ph.D., LL.M.
31.3.2026 | ARROWS law firm

Bond issue terms and conditions are not merely a formal document, but the legal foundation defining the rights and obligations of all parties involved. Properly structured terms and conditions increase investor confidence and reduce the legal risk of sanctions. In this article, you will learn how to draft terms and conditions that are transparent and legally compliant, and how to avoid mistakes that lead to regulatory penalties or disputes.

The photo shows a lawyer discussing the topic of bond issue terms and conditions.

Quick summary

  • Issue terms and conditions are a critical document: They contain all key bond parameters under . Their absence or insufficiency results in invalidity of the issue and sanctions imposed by .
  • Regulatory regimes differ depending on the issue volume: Public offers up to EUR 1 million in the Czech Republic typically do not require a prospectus—only well-prepared issue terms and conditions. Above this threshold, a prospectus must be prepared and approved by the Czech National Bank (ČNB) in accordance with applicable legislation and .
  • Content requirements must be followed precisely: Missing information on security, covenants, or the issuer’s financial position creates a risk of fines from the regulator, which may reach up to CZK 15 million or a percentage of turnover.
  • Reviewing existing terms may be key: If your current bonds contain vague wording, revising them in line with the current “EU Listing Act” () can increase attractiveness and help prevent disputes.

Issue Terms and Conditions as the legal basis of a bond issue

Issue terms and conditions are a document that, under Section 8 et seq. of Act No. 190/2004 Coll., on Bonds, is mandatory for every issue in the Czech Republic. This is not an administrative tool, but a binding text creating the framework between the issuer and the bondholders. The Act clearly sets out their content, and any breach exposes the issuer to the risk of sanctions from the Czech National Bank.

In practice, we often see the importance of high-quality drafting underestimated, which leads to problems ranging from investors rejecting the issue to legal disputes. Our attorneys in Prague at ARROWS advokátní kancelář specialise in preparing and reviewing issue terms and conditions and routinely remedy legally weak texts so that they meet statutory requirements as well as the expectations of institutional investors.

What exactly the issue terms and conditions regulate

Issue terms and conditions regulate several key aspects. First, they include identification of the issuer, definition of the type and form of the bond, the nominal value, and the subscription period. A crucial part consists of information on the yield and the method of its payment, as well as the issue date and maturity date.

The document must also clearly specify whether and how the bonds are secured, or expressly state the absence of security. It also includes information on transferability, the right to early redemption, and processes for dealing with problems. In practice, these elements become the basis for court disputes if they are not drafted clearly.

Why precise wording is so important

The precise wording of the issue terms and conditions has a direct impact on the success of the issue and its administration. Investors study the terms carefully, and ambiguities discourage them. Vague clauses such as “the issuer reserves the right to change the terms” are perceived as an unacceptable risk.

Specific terms with precise descriptions of rights and numerical limits (covenants), on the other hand, build trust. The Czech National Bank increasingly checks whether the terms are misleading. Our Prague-based attorneys at ARROWS will ensure that your documentation meets statutory requirements and minimises legal risks.

New regulatory framework for bond issues (Listing Act)

Significant changes have occurred in capital markets thanks to Regulation (EU) 2024/2809, known as the “Listing Act”. The rules for accessing the market are being simplified, especially for small and medium-sized enterprises. The Czech Republic reflects this framework in the Capital Market Undertakings Act (ZPKT).

Issuers must carefully distinguish between offers requiring a full prospectus, a simplified prospectus, and below-threshold offers. Correctly determining the applicable regime is key to the legality of the entire issue and to avoiding sanctions.

Issue regimes and their content requirements

The system is structured into several basic regimes, depending on the issue volume and the type of offer:

1. Below-threshold public offers (up to EUR 1 million): Under Section 35 of the ZPKT, a public offer in the Czech Republic is not subject to the obligation to publish a prospectus if the value does not reach EUR 1 million over 12 months. Well-prepared issue terms and conditions are sufficient . This is the least administratively demanding regime.

2. Simplified regime (EU Growth / Follow-on): For issues above EUR 1 million, the Listing Act introduces simplification options. This is the so-called “EU Growth issuance document”. These documents have a standardised format and are subject to approval by the Czech National Bank (ČNB).

3. Full prospectus: For large issues or for issuers targeting a regulated stock exchange market, a full prospectus approved by the Czech National Bank (ČNB) is required. It contains detailed information on the financial situation, risk factors, and the issuer’s strategy.

Transitional period and practical implications

The new rules introduced by the Listing Act will be applied gradually, with key changes taking full effect in 2025 and 2026. Prospectuses approved before the new rules take effect remain valid until the end of their original period.

For issuers, it is essential to verify the Czech National Bank’s current practice. Incorrect classification of an issue may lead to severe sanctions. Our attorneys in Prague at ARROWS advokátní kancelář will assess which regime your issue falls under and how to use the new simplifications.

Related questions on the new regulatory framework

1. Can the issue regime change during its lifetime?
Yes. If the issuer decides to increase the issue volume and exceeds the threshold of EUR 1 million over the last 12 months, an obligation arises to prepare and obtain approval of a prospectus for the remaining part of the offer. This is why it is important to plan the total financing volume from the outset.

2. What is the deadline for the Czech National Bank (ČNB) to approve a prospectus?
The statutory deadline for the ČNB’s decision is usually 10 to 20 business days from submission of a complete application. In practice, however, the process may extend to 2–3 months due to rounds of comments. For issue terms and conditions for below-threshold issues, there is no ČNB approval process.

3. If I have already issued bonds under the old rules, do I have to revise them?
A change in legislation does not automatically change issue terms and conditions that have already been issued. However, if you plan to increase the issue or change its parameters, you will have to follow the new rules. For an individual assessment, contact us at office@arws.cz.

Content and structure of issue terms and conditions: What must not be missing

Issue terms must include a number of mandatory elements under Section 9 et seq. of the Bonds Act. The absence of any of them may result in a defective issue and a CNB fine of up to CZK 15 million. Sufficient detail on risks or the repayment method is often missing.

Mandatory elements of the issue terms

The issue terms must, at a minimum, include the following information:

  • the issuer’s identification details (name, registered office, Company ID No.),
  • designation of the bonds (name, ISIN – if assigned),
  • the nominal value and the total expected value of the issue,
  • information on the yield (rate, calculation, payment, taxation),
  • issue date, maturity date and issue price,
  • the type and form of the bond, the method and place of subscription and repayment,
  • information on security or the absence of security,
  • the right to early redemption and information on the bondholders’ meeting,
  • a reference to financial statements and CNB supervision (or the absence thereof).

If the bonds are offered to the public, the issuer must ensure that the information is true and not misleading. ARROWS, a Prague-based law firm, will provide complete preparation of the documentation with a guarantee that all mandatory elements are included.

Security and covenants: How to formulate undertakings

Security is key to investor confidence. The issue terms must distinguish whether the security is created directly for the bondholders or via an agent. For real estate, the pledge must be duly registered in the Cadastral Register.

Covenants are also important, such as limits on indebtedness or a prohibition on disposing of assets. The wording must be precise and define the consequences of a breach. Vague covenants are legally unenforceable and do not protect investors.

Risks: From wording to communication

The issue terms must describe specific risks for the particular issuer, not merely general statements. In development projects, it is necessary to mention risks of the real estate market or the construction permitting process.

It must be clearly stated that the bonds are not insured by the Financial Market Guarantee System. Investors must know that, in the event of the issuer’s insolvency, they may lose their entire investment.

Related questions on the content of the terms

1. How specific must the description of the purpose of the issue be?
The law does not always require a detailed breakdown, but it is crucial for credibility. Instead of “for operating purposes”, state a specific intention, such as refinancing a loan. Investors prefer transparency.

2. What is the difference between issue terms and a prospectus?
Issue terms are the basic contractual document defining the bond parameters and are always required. A prospectus is an extensive information document subject to CNB approval, required for public offers exceeding EUR 1 million.

3. If I revise the terms of an already issued bond, do I have to inform investors?
Yes, any change requires the consent of the bondholders’ meeting unless the law provides otherwise. Changes must be duly notified to and made available to the bondholders.

Typical mistakes when preparing issue terms

In practice, we see recurring mistakes that lead to the issue being rejected by the market or to sanctions. Common examples include vague wording such as “the issuer will inform about important changes” without specifying the deadline and method.

Another mistake is stating security that has not actually been created. If the terms promise security over assets but there is no registration in a public register or no agreement with an agent, this misleads investors and the bond is, in fact, unsecured.

Table of risks and opportunities

Risks and sanctions

How ARROWS helps (office@arws.cz)

Incomplete issue terms: Omitting elements required under Section 9 of the Bonds Act leads to the risk of a CNB fine of up to CZK 15 million.

Comprehensive documentation review: ARROWS ensures the terms comply with the law and CNB practice.

Unclear or misleading wording: Vague texts lead to disputes with investors and suspicion of unfair practices.

Legally precise drafting: ARROWS attorneys will prepare clear terms that exclude double interpretation.

Incorrect identification of the regulatory regime: A public offer exceeding EUR 1 million without a prospectus is a serious offence.

Correct assessment of the regime: ARROWS experts will guide you through selecting the regime under the Listing Act.

Weak security or covenants: Investors will not buy a bond if they do not trust its enforceability.

Structuring security: ARROWS will draft enforceable covenants and arrange pledges.

Review of existing issue terms

The review of issue terms is governed by Section 21 et seq. of the Bonds Act. As a rule, any change requires the consent of the bondholders’ meeting, in particular in the event of the issuer’s default or a material change in circumstances.

Procedural steps in a review

The issuer must convene a bondholders’ meeting and publish a notice in a nationwide daily newspaper unless the terms provide otherwise. To adopt fundamental changes, consent of 75% of the nominal value of the bonds present is required, along with a notarial deed. ARROWS, a Prague-based law firm, will guide you through the entire process.

Specific regulatory aspects in the Czech Republic

The CNB monitors compliance with the law, but for issues without a prospectus it does not assess the issuer’s creditworthiness or the riskiness of the investment. Supervision is limited to formal requirements and the prohibition of unfair practices.

In 2024, the CNB is focusing on greenwashing and hidden public offers (chaining of issues). ARROWS attorneys represent clients in inspections and help set up preventive compliance processes.

The role of a lawyer and specialist

Preparing issue terms requires knowledge of the Bonds Act and related regulations. Using templates from the internet is extremely risky because each issue has its own specifics regarding security or subordination.

Our portfolio includes more than 150 joint-stock companies for which we arrange financing. The lawyer’s role is to set the parameters so that they are legally robust and commercially successful. ARROWS can also provide the function of Issue Administrator.

Table – Practical steps in preparation

Process stage

Activity description

Typical duration

1. Consultation and due diligence

Assessment of the intended transaction, selection of the applicable regime, and setting up security.

2–5 days

2. Drafting the bond terms and conditions

Preparation of the text by ARROWS attorneys in Prague, definition of covenants.

1–2 weeks

3. Finalisation and approval

Approval by the general meeting or the managing director of the issuer.

3–5 days

4. Publication / Filing with the CNB

Making the documentation available to investors or filing an application for approval of the prospectus.

1 day (prospectus: months)

5. Subscription and administration

Collection of orders, subscription agreements, maintenance of the register.

Ongoing

Conclusion

Bond terms and conditions are a fundamental prerequisite for successful financing. Properly set terms protect the issuer from fines and give investors certainty. With the introduction of new rules under the EU Listing Act, it is important to have your documentation in order. If you are considering issuing bonds or need a review, contact us at office@arws.cz.

FAQ – Legal questions on reviewing the terms and conditions

1. Do I need a lawyer to prepare the bond terms and conditions?
The law does not explicitly require it, but given the risk of high fines and the complexity of the matter, professional preparation is essential. An error in the definition of yield can be existential for the issuer.

2. How long does it take to prepare an issue?
A small-scale issue up to EUR 1 million can be prepared within 2–3 weeks. An issue with a prospectus requires preparation and the CNB approval process, which usually takes 3–6 months.

3. What price can I expect for preparing the terms and conditions?
The price depends on the complexity of the structure and the security package. For standard small-scale issues, it is typically in the tens of thousands of Czech crowns; for prospectus issues, the costs are higher. For a quote, email office@arws.cz.

4. What happens if I disagree with an investor on the interpretation?
The wording of the bond terms and conditions is decisive. If the wording is ambiguous, it is interpreted under the Czech Civil Code typically to the detriment of the issuer and in favour of the investor, which is why precision is key.

5. Do I need an ISIN for bonds?
An ISIN is mandatory only for dematerialised bonds recorded in the central register (CDCP). For certificated bonds it is not necessary, but it increases credibility and facilitates record-keeping.

Disclaimer: The information contained in this article is of a general informational nature only and is based on the legal framework in force or expected as of 2026. To verify the current wording of the regulations and their application to your specific situation, it is necessary to contact ARROWS advokátní kancelář directly (office@arws.cz). We accept no liability for any damage arising from the independent use of the information without professional consultation.

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