On 18 October 2013, the National Council of the Slovak Republic adopted an amendment to the Slovak Commercial Code, Act No. 357/2013 Coll. (the "New Regulation") with the main aim of increasing creditors' protection by eliminating fictitious monetary contributions by shareholders to the registered capital of Slovak limited liability companies (spoločnost' s ručením obmedzeným) or joint stock companies (akciová spoločnost') (the "company"). The New Regulation became effective with 1 December 2013; however, it applies also to companies established prior to this date, unless an application to register (i.e. incorporate) the company in the Slovak Commercial Register is filed prior to 1 March 2014.

Previous regulation and the common practice

Until 1 December 2013, company's shareholders could decide whether their monetary contributions to the company's registered capital will be, prior to the company's incorporation, administered by (i) one of the company's shareholders; or (ii) a bank. Usually, the monetary contributions were administered by one of the Company's shareholders. For the purposes of the company's incorporation, such administrator then declared to the district court in charge of the company's incorporation process that the monetary contribution to the company's registered capital has been paid and specified the amount. However, no evidence for the transfer of the monetary contributions was required.

These provisions were often misused by entrepreneurs - the court was often provided with administrator's declaration on full payment of monetary contributions despite the fact that such payments never really occurred. Indirectly, such practices were also indicated by the fact that during the course of October and November 2013, i.e. prior to effectiveness of the New Regulation, the number of newly incorporated companies multiplied.

New regulation of the monetary contributions

Currently, company's shareholders still have the right to decide who will be the administrator of their monetary contributions to the company's registered capital (i.e. one of them or a bank). However, in any case, the elected administrator can administer the monetary contributions only via a separate bank account. Therefore, after the company's establishment, the administrator shall create a new bank account into which the monetary contributions to the company's registered capital should be transferred. Pursuant to the New Regulation, the monetary contributions transferred to such special bank account shall be used prior to the company's incorporation only for (i) payment of expenses related to the company's establishment and incorporation; and (ii) return of monetary contributions under statutorily-defined circumstances.

As a result, it is no longer possible to procure a simple administrator's declaration on payment of the monetary contribution in order to incorporate a company. Instead, the court must be provided with a bank account statement, providing clear proof of the payment of the monetary contributions and their amount.

Conclusion

It is questionable whether the New Regulation will reach its goal, since a company can freely dispose with the monetary contributions after its incorporation, i.e. the money does not have to "sit" in the newly opened bank account. On the other hand, the New Regulation clearly adds a further administrative burden to the process involved in a company’s incorporation, thereby prolonging it.Until 1 December 2013, company's shareholders could decide whether their monetary contributions to the company's registered capital will be, prior to the company's incorporation, administered by (i) one of the company's shareholders; or (ii) a bank. Usually, the monetary contributions were administered by one of the Company's shareholders. For the purposes of the company's incorporation, such administrator then declared to the district court in charge of the company's incorporation process that the monetary contribution to the company's registered capital has been paid and specified the amount. However, no evidence for the transfer of the monetary contributions was required.

These provisions were often misused by entrepreneurs - the court was often provided with administrator's declaration on full payment of monetary contributions despite the fact that such payments never really occurred. Indirectly, such practices were also indicated by the fact that during the course of October and November 2013, i.e. prior to effectiveness of the New Regulation, the number of newly incorporated companies multiplied.