Sources of Business Information

In document DOING BUSINESS IN THE SLOVAK REPUBLIC 2016 (Page 8-0)

ARTICLE 1. GENERAL INFORMATION

1.5. Sources of Business Information

(a) SARIO, the Slovak Investment and Trade Development Agency, address: Trnavská cesta 100, Bratislava, Postal Code: 821 01, phone: +421 258 260 100, fax:

+421 258 260 109, www.sario.sk;

(b) Slovak Business Agency, address: Miletičova 23, Bratislava, Postal Code: 821 09, phone: +421 250 244 500, fax: +421 250 244 501; www.sbagency.sk;

(c) Ministry of Economy of the Slovak Republic, address: Mierová 19, Bratislava, Postal Code: 827 15, phone: +421 248 541 111; fax: +421 243 337 827, www.mhsr.sk;

(d) Ministry of Finance of the Slovak Republic, address: Štefanovičova 5, Bratislava, P.O.

BOX: 82, Postal Code: 817 82, phone: +421 259 581 111, fax: +421 259 583 048, www.finance.gov.sk;

(e) National Bank of the Slovak Republic, address: Imricha Karvaša 1, Bratislava, Postal Code: 813 25, phone: +421 257 871 111, fax: +421 257 871 100, www.nbs.sk.

(f) Commercial Register, www.orsr.sk.

9 Section 2.

Establishing a Business

2.1. Establishment Procedure

Forming a company or a partnership in the Slovak Republic is a two-step process. Firstly, the company or partnership must be established by execution of a deed of foundation by all of its founders. Following its establishment, the company or partnership must be incorporated by registration in the Commercial Register (an official register administered by the courts, containing relevant information about companies and partnerships).

Registering a company or partnership in the Commercial Register is carried out in court proceedings which generally take two business days; however, the court may prolong the period for an additional ten days. In these proceedings the court assesses whether the newly established entity meets all statutory requirements for its formation (validly executed deed of foundation, payment of registered capital, legal title to use its registered office, and others). If all statutory requirements are fulfilled, the court will issue a decision on registration in the Commercial Register of the company or partnership. The company or partnership is then fully incorporated on the day the court's decision enters into legal force.

2.2. Principal Forms of Business Entities

In the Slovak Republic, business entities are governed primarily by the Commercial Code. In addition, the legal regulation of certain specific business entities, such as banks and insurance companies, is contained in special laws.

There are four principal forms of business entities:

(a) partnership (in Slovak verejná obchodná spoločnosť – "VOS"), is a company whose partners are personally jointly and severally liable for the company's obligations in full;

(b) limited partnership (in Slovak komanditná spoločnosť – "KS"), is a company which has two types of members (partners): limited partners (analogical to SRO as explained below) and unlimited partners (analogical to VOS as mentioned above);

(c) limited liability company (in Slovak: spoločnosť s ručením obmedzeným – "SRO"), which is the most commonly used business form in the Slovak Republic; and

(d) joint-stock company (in Slovak: akciová spoločnosť – "AS") is the corporate form most widely used for operating a business involving larger investments.

Since the partners of a VOS or a KS (for unlimited partners) are personally liable for the company's obligations in full (and their liability for the company's obligations cannot be decreased or excluded), these forms of entities are rarely used. For the same reason, we have provided below further details regarding only the SRO and AS forms:

2.3. Limited Liability Company (SRO)

As mentioned above, the SRO is the most commonly used business form in the Slovak Republic. Among the advantages of the SRO are the relatively low minimum registered capital requirement (EUR 5,000), and limited liability of SRO members (interest holders) for the company's obligations.

Each member of an SRO is jointly and severally liable for the obligations of the SRO only up to the aggregate amount of unpaid capital contributions, as registered in the Commercial Register. Once all capital contributions are paid up and registered in the Commercial Register, the members' liability for the company's obligations terminates.

2.3.1. Establishing the Company

An SRO may be established by one or more natural or legal persons. There can be a maximum fifty members. Slovak law provides for the chaining prohibition principle, meaning that a sole-member company may not be the sole member in another SRO.

10 An SRO is established upon the execution by all its founders of the deed of foundation

(signatures of the founders must be verified by a notary public). Apart from the deed of foundation, an SRO may also adopt articles to further govern selected corporate matters.

2.3.2. Registered Capital and Contribution

The minimum registered capital requirement for an SRO is EUR 5,000, while the minimum capital contribution of a member is EUR 750. The total amount of all contributions must equal the amount of registered capital.

The members' capital contributions to the registered capital of the SRO may be in cash or in-kind contributions. The value of an in-in-kind contribution to an SRO must be appraised by an independent expert.

The contributions must be paid up within five years from the incorporation of the company at the latest. Before filing the application for incorporation at Commercial Register (i) at least 30%

of the amount of each contribution must be paid up and (ii) the aggregate amount of paid-up contributions must be at least EUR 2,500. However, for sole founder (shareholder), the contributions to the registered capital of SRO must be paid up in full before incorporation. The same applies also to any in-kind contributions.

2.3.3. Ownership Interest

Each member of an SRO may have only one ownership interest. The amount of a member's ownership interest stake is determined according to the ratio of the amount of the members' capital contribution and the total amount of the company's registered capital, unless the deed of foundation provides otherwise.

2.3.4. General Meeting and Voting Rights

The members (interest holders) of an SRO exercise their voting rights at the general meeting, which is the supreme corporate body of the SRO. At the general meeting, the company's members decide on the company's most important corporate matters. Matters which fall within the powers of the general meeting are listed in the Commercial Code. The deed of foundation of the SRO may generally increase (but not decrease) the scope of powers of the general meeting.

The general meeting must be held at least once a year. To adopt resolutions, at least a majority of the votes of members present at the general meeting must be in favour of the proposed resolution (unless the law or deed of foundation stipulates otherwise). In most fundamental corporate matters, a higher quorum of votes is required).

2.3.5. Statutory Body and Management of the Company

The statutory body of an SRO, generally empowered to act on behalf the company in all matters, is one or more executives, who are elected and recalled by the general meeting. Each executive is authorized to act individually on behalf of the company (unless the deed of foundation or articles of association stipulate otherwise).

The deed of foundation, articles or general meeting may limit or restrict the rights of the executive(s) to act on behalf of the company in relations with third parties (typically, the deed of foundation may set forth financial thresholds for the execution of certain transactions by the executive which require the prior approval of the general meeting of the company). However it is a concept of Slovak law that any such limitations are not effective towards third parties (even if known to them), and an act of an executive in breach of any such restriction is fully valid and binding for the company.

Executives are responsible for the overall business management of the company (organization and management of the company's business affairs, strategic decisions, day-to-day operations, accounting, etc.).

Executives may not, among other things, be engaged in business activities connected with the business activities of the company or be a statutory body in a company with a similar scope of activities, except for the subsidiaries of the relevant company. Such restrictions can be broadened (but not reduced) by the deed of foundation/memorandum of association.

11 2.3.6. Supervisory Board

An SRO may form a supervisory board, if the deed of foundation so provides. The main competences and responsibilities of the supervisory board are supervision of the executives' activities, revision of the company's accounts and financial statements, and it must inform the general meeting of its findings at least once per year. The supervisory board must have at least three members, who are elected by the general meeting. Executives of the company cannot be members of the supervisory board.

2.3.7. Accounting

An SRO is obliged to keep accounts from the day of its incorporation. The accounting period of an SRO is generally one calendar year, but the company may change its accounting period to a fiscal year different from the calendar year.

An SRO is obliged to prepare its financial statements for every accounting period. The financial statements must be approved by the general meeting and filed with the relevant tax office. The relevant tax office then files the financial statements to the Register of Financial Statements and Collection of Documents of Commercial Register.

2.3.8. Auditing Requirements

An SRO is obliged to have its financial statements audited if, at the end of the final day of the given accounting period; at least two of the following conditions are fulfilled:

(a) the total book value of the company's assets is greater than EUR 1,000,000;

(b) the company's yearly turnover exceeded EUR 2,000,000;

(c) the average number of company employees in the given accounting period was greater than thirty.

2.4. Joint-Stock Company (AS)

A Slovak AS is the corporate form most widely used in the Slovak Republic for operating a business involving larger investments. The company is fully responsible for its obligations towards third parties; however, the shareholders are not personally liable for the company's obligations.

2.4.1. Establishment of the Company

The company may be established by one or more legal entities or by at least two natural persons. The company is established by executing a deed of foundation by all its founders in the form of a notarial deed. The company may be established:

(a) without a public offering of shares – in this case the founders subscribe shares whose nominal value equals the total amount of the company's registered capital; or

(b) with a public offering of shares – in this case the founders subscribe shares whose nominal value forms part of the company's registered capital, and the remaining part of the registered capital is formed by the nominal value of shares to be subscribed by future shareholders, who may subscribe the shares in a public offering of shares.

An AS is obliged to adopt articles of association which supplement the deed of foundation and govern matters such as the rights and obligations of the shareholders and rules regarding management of the company. The articles of association form an inseparable part of the deed of foundation.

2.4.2. Registered Capital and Shares

The minimum registered capital of an AS is EUR 25,000. The registered capital of an AS is divided into shares, the aggregate nominal value of which corresponds to the total amount of the registered capital. Before incorporation, the entire amount of the registered capital must be subscribed and at least 30% of it must be paid-up.

12 2.4.3. General Meeting and Voting Rights

The shareholders of an AS exercise their voting rights at the general meeting, which is the supreme corporate body. At the general meeting, the shareholders may decide on the most fundamental issues regarding the company. Matters which fall within the powers of general meeting are listed in the Commercial Code (the list may be extended in the articles of association. The general meeting may not, however (contrarily to the general meeting of an SRO), reserve the right to decide upon matters not entrusted to it by law or by the articles of association.

The general meeting must be held at least once a year. To pass a resolution, at least a majority of the votes of the current shareholders must vote in favour of the proposed resolution (unless the law or articles of association stipulate otherwise. In most fundamental corporate matters, a higher quorum of votes is required).

Voting rights at the general meeting are connected to a share (i.e., its nominal value). The number of votes per one share is determined according to the ratio of the nominal value of shares belonging to the particular shareholder to the entire registered capital of the company.

2.4.4. Statutory Body and Management of the Company

The statutory body of an AS is the board of directors. Each director may act on behalf of the company individually, unless provided otherwise in the articles of association. The board of directors is also responsible for management of the company and its business.

The right of directors to act on behalf of the company toward thirds persons may be limited; however, such limitations or restrictions are not effective vis- à-vis third parties (analogically to an SRO), and an act of a director in breach of any such restriction is fully valid and binding for the company.

The general meeting elects and recalls the directors, unless the articles of association provide that the supervisory board elects and recalls them.

2.4.5. Supervisory Board

An AS is obliged by law to form a supervisory board. The main competences and responsibilities of the supervisory board are to supervise activities of the board of directors, revise the company's accounts and financial statements, and inform the general meeting of its findings at least once per year.

The supervisory board must have at least three members who are elected by the general meeting. In companies with more than fifty employees, one-third of the members of the supervisory board must be elected by the employees of the company. Members of the board of directors cannot be members of the supervisory board.

2.4.6. Accounting

An AS is obliged to keep its books from the day of its incorporation. With regard to the accounting period and financial statements, the accounting requirements of an SRO described above also apply mutatis mutandis to an AS.

2.4.7. Auditing Requirements

An AS is obliged to have its financial statements audited by an independent auditor if, at the end of the final day of a given accounting period, at least two of the following conditions are fulfilled:

(a) the total book value of the company's assets is greater than EUR 1,000,000;

(b) the company's yearly turnover exceeded EUR 2,000,000;

(c) the average number of company employees in the given accounting period was greater than thirty.

2.5. Branch Offices of Foreign Companies

Under Slovak commercial law, a foreign company is a company which has its registered office outside the Slovak Republic. Foreign companies may establish branch offices in the Slovak Republic and carry out their business activities in the Slovak Republic via their branch offices in the same extent as Slovak entities.

A branch office of a foreign company is not a legal entity, but serves to represent a foreign company.

Therefore, all rights and obligations arising from the business activity of the branch office are not rights and obligations of the branch office, but of the foreign company itself.

In order for a branch office of a foreign company to be entitled to commence business activities in the Slovak Republic, the branch office must be registered in the Slovak Commercial Register, on the basis of

13 an application filed by the foreign company. In addition, the branch office must also obtain all relevant

Slovak trade licenses and must appoint a head of the branch in the Slovak Republic.

2.6. European Company

In the Slovak Republic, European forms of commercial companies may also be incorporated. One such form is the societas europaea (European company or SE), which is primarily governed by EU Legislation1. An SE with its registered seat in the Slovak Republic is also governed by the provisions of the Commercial Code (mainly those regulating a joint-stock company) and by provisions of a specific Act2.

2.7. Company in Financial Difficulties

As of 1 January 2016 a rather extensive amendment of the Commercial Code came into force. Among others, this amendment incorporated into the Commercial Code the rules regarding Slovak companies in financial difficulties (in Slovak: spoločnosti v kríze).

Its purpose, as declared by the Slovak government, is to set up rules for providing the loans to Slovak companies and, in case of shareholder financing to motivate the shareholders to prefer equity financing instead. The new rules apply to certain Slovak companies, among others also to the AS and the SRO.

The company in financial difficulties is defined as a company which:

(i) is insolvent; or

(ii) with respect to which an insolvency is threatened. A company is considered under an insolvency threat if its ratio of equity to all liabilities is less than 4:100 in 2016, 6:100 in 2017 or 8:100 from 2018.

2.8. Licenses and Permits

2.8.1. Trade Licenses

In order for a company or partnership to be entitled to carry out business activities, the company or partnership must obtain the relevant trade licenses. The Trade Licensing Act3 contains the requirements for an entrepreneur or, in the case of a company or partnership, its statutory body. These requirements must be fulfilled before the company or partnership is able obtain the required trade license(s) authorizing it to carry out the relevant trade activity.

The general requirements for obtaining trade licenses, which must be fulfilled by the entrepreneur (or for companies and partnerships, by its statutory body), are as follows:

(a) minimum 18 years of age (required for all trades);

(b) full legal capacity (required for all trades);

(c) integrity in the sense of the Trade Licensing Act (i.e. a clean criminal record in respect of a broad range of criminal acts – required for all trades);

The special requirements (required for carrying out regulates trades and crafts), mainly involve prescribed education, professional qualification and/or professional expertise in the relevant field. If a company/partnership intends to carry out any regulated trades or crafts it must appoint a so-called responsible representative, who needs to meet in addition to the general requirements also the special requirements for the relevant type of activity performed by the company/partnership and who is either a Slovak resident or a foreigner with other permit of residency in the Slovak Republic. In addition, as a general rule, a responsible representative has to be a full-time or part-time employee of the company/partnership.

2.8.2. Special Permits and Regulated Activities

In addition to trade licenses issued by the Trade Licensing Office, other state authorities grant licences for carrying out certain specific activities. These regulated sectors include insurance, banking, energy, broadcasting and retransmission and pharmaceuticals.

Insurance

1 Council Regulation (EC) No 2157/2001 of 8 October 2001 on the Statute for a European Company (SE) and Council Directive 2001/86/EC of 8 October 2001 supplementing the Statute for a European Company with regard to the involvement of employees

2 Act No. 562/2004 Coll., on European Company, as amended

3 Act No. 455/1991 Coll., the Trade Licensing Act, as amended

14 The Slovak Insurance Act4 is a primary law governing the activities of insurance companies in the Slovak

Republic. Insurance activities may be carried out in the Slovak Republic by Slovak insurance companies (i.e., companies with their registered office in the Slovak Republic), insurance companies from other EU member states or foreign insurance companies (i.e., companies with their registered office outside the EU).

Insurance companies in the Slovak Republic may be established either as a joint-stock company or a European company (societa europea). A Slovak insurance company is authorized to carry out its insurance business based on a license granted by the National Bank of Slovakia (NBS), which also determines the extent of such business.

An insurance company from other EU member state is authorized to carry out its insurance business in the Slovak Republic either under the freedom of establishment or under the freedom to temporarily provide services within the same scope as it is authorized to carry out its insurance business in its home member state (i.e. the state of its registered office).

A foreign insurance company from a non-EU country may carry out insurance business in the Slovak Republic only through its branch, based on a separate license granted by the NBS.

A foreign insurance company from a non-EU country may carry out insurance business in the Slovak Republic only through its branch, based on a separate license granted by the NBS.

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