On 2 November 2017, the president of Slovakia signed an extensive amendment to the Commercial Code (the “Amendment”). Several provisions have come into force following the publication of the Amendment with the Collection of Deeds, however most changes will come into effect on 1 January 2018 and certain provisions on 1 September 2018. The changes relate to various corporate issues including the responsibilities of statutory bodies, business transfers, capital funds and liquidations. This article sets out the changes to company mergers.
In order to address issues surrounding the unfair merger of companies, the Amendment provides stricter rules with respect to mergers, demergers and amalgamations (“mergers”). Additionally, it strengthens the protection provided to creditors and shareholders of companies participating in a merger.
As of 8 November 2017, in order to undertake a merger in accordance with the Commercial Code, the following criteria must be satisfied:
- the dissolving company deliver to (i) the respective Tax Administrator; and (ii) pledgee (if its ownership interests are subject to pledge), notice of the drawing up of the draft merger agreement within 60 days of the General Meeting approving the draft merger agreement;
- the companies participating in the merger are not subject to liquidation, bankruptcy, restructuring or court proceedings on dissolution;
- the value of the assets of the successor company exceeds the value of its liabilities (excluding subordinated debts) as of the effective merger date, which is confirmed by an auditor’s report to be attached to the petition for registration of the merger with the Commercial Register; and
- the petition for registration of the merger with 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 fulfil the above-mentioned conditions, their executive directors shall be liable for damage caused by the merger to the creditors.
It is expected 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.