After undergoing healthy levels of Corporate/M&A activity in recent times, as we move towards 2019 we expect the Slovak market to remain stable. A notable exception, however, is in the logistics asset class, where we project inbound investment to soar.
After historically lagging behind the likes of the Czech Republic and Poland in terms of market maturity, it seems Slovakia is catching up at a rapid pace. The economic forecast remains healthy and stable, unemployment figures are low, and greenfield investment is at an all-time high. Underlying this excitement for investment in the region is apparently the sentiment that the market is no longer as distinguishable from its CEE neighbors as it was five to ten years ago.
Legal Changes Affecting Mergers of Companies
Without question the most significant legislative change is an extensive amendment to the Commercial Code. Most changes came into effect on January 1, 2018, though certain provisions will apply from September 1, 2018. The changes relate to various corporate issues including business transfers, capital funds,liquidations, and the responsibilities of statutory bodies.
In order to address issues surrounding the unfair merger of companies, there are stricter rules with respect to mergers, demergers, and amalgamations. Additionally, the protections provided to creditors and shareholders participating in a merger will be enhanced.
According to the amendment, in order to undertake a merger in Slovakia in accordance with the Commercial Code, the following criteria must now be satisfied: (1) the dissolving company must deliver notice of the drawing up of the draft merger agreement within 60 days of the General Meeting approving the draft merger agreement to: (i) the respective Tax Administrator; and (ii) the pledgee (if its ownership interests are subject to pledge); (2) the companies participating in the merger are not subject to liquidation, bankruptcy, restructuring, or court proceedings of dissolution; (3) the value of the assets of the successor company exceeds the value of its liabilities (excluding subordinated debts) as of the effective merger date,confirmed by an auditor’s report attached to the petition for registration of the merger with the Commercial Register; and (4) the petition to register the merger in the Commercial Register by all companies participating in the merger is filed within 30 days after the date of approval of the merger agreement by General Meetings of the companies.
The new rules were adopted in response to the current application issues associated with chain mergers, which have been used as a means to evade the statutory obligations that are applicable in the event of liquidation or bankruptcy of a company.
Should companies participating in the merger not fulfill the above-mentioned conditions, their executive directors shall be liable for damage caused by the merger to the creditors.
It is expected that the amendment will increase the administrative burden on companies participating in mergers and will result in greater liability for executive directors. Nevertheless, it appears it will bring more legal certainty to the Slovak business environment and help prevent unfair practices when dissolving companies.
By Helen Rodwell, Managing Partner, CMS Prague and Bratislava, and Petra Corba Stark, Counsel, CMS Bratislava
This Article was originally published in Issue 5.6 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.
