TerraLex Cross-Border Guide to Cross-Border Merger & Acquisition Guide

Foreign direct investment screening based on the Act on Screening of Foreign Investments (FDI), which is derived from the EU FDI Regulation is applied in Slovakia.

The FDI Act has implemented an approval procedure by the Slovak Ministry of Economy mandatory for all critical foreign investments and it is voluntary for other foreign investments.

“Critical foreign investments” include investments in the areas of arms and military equipment, dual-use items, biotechnology, national cryptographic information protection, operation of critical infrastructure, operation of essential services, provision of digital services in the area of cloud computing, nation-wide television or radio broadcasting, provision of a content sharing platform with annual turnover exceeding EUR 2 million, publishing of periodical publications, and operating a news website or news agency.

For critical foreign investments, the foreign investor must file an application with the Ministry of Economy prior to the investment. A critical foreign investment may not be completed before the clearance is issued by the Ministry.

“Foreign investor” is defined as anyone who implemented, or intends to implement, a foreign investment, and is not a citizen of Slovakia or any other Member State of the EU, or does not have a registered office or place of business in Slovakia or any other Member State.

There is no exchange control or currency regulation, except for those relating to money laundering and the financing of terrorism.

There is a wide range of incentives and subsidies available in Slovakia to support private investments. The incentives are usually awarded in the form of tax reliefs, contributions to newly created jobs, training and education support, and cash grants. The territory of the Slovak Republic is divided into zones with different eligible levels of state aid.

The Slovak Investment and Trade Development Agency (SARIO) www.sario.sk is the central state agency responsible for the area of incentives and also the main point of contact for investors.

If the transfer of employees to the legal successor is triggered by a transaction (for example, in the case of the sale of an enterprise), both the transferor and the transferee are obliged to provide information to the employees’ representatives or, where no employees’ representatives operate within the employer, directly to the employees about the grounds for the transfer and its timing, as well as the labour, economic, and social consequences of the transfer for the employees.

Further information obligations vis-à-vis the employees’ representatives/employees apply also in the case of mass redundancies as defined below.

Otherwise, employee representation at the level of the supervisory board is mandatory for each joint-stock company employing more than 50 FTE employees.

Employment may be terminated unilaterally by the employer by serving notice with a minimum statutory notice period varying from 1 to 3 months, depending on the length of the employment. Grounds for unilateral termination by the employer are explicitly defined by Slovak Labour Code. Termination with immediate effect is possible, if serious cause is given.

Specific protection against employment termination is granted to certain groups of employees, such as in cases of pregnancy, sick leave, maternity/parental leave, employees with severe disabilities, or if the employees act as employees’ representatives within the employer.

If employees’ representatives operate within the employer, the employer must inform them prior to any unilateral termination of employment.

In certain instances, in particular if employment is terminated due to organisational reasons or employee’s health conditions and depending on the duration of the employment, termination is connected with the employer’s duty to pay severance to the affected employee.

Invalid termination of employment can be challenged by the employee in a court within 2 months after the termination (in the case of invalid termination, salary compensation up to 36-month average salary can be awarded to the employee by the court).

The collective redundancy regulation under the Slovak Labour Code applies to every employer having more than 20 employees, who intends on terminating the employment relationships due to organisational changes within 30 days with at least:

• 10 employees, if the total number of employees is below 100;
• 10% of employees, if the total number of employees is at least 100, but below 300;
• 30 employees, if the employer employs at least 300 employees.

Collective redundancies must be consulted by the employer in advance with the employees’ representatives or directly with the employees where no employees’ representatives operate within the employer and information about at least the grounds for the layoff, number and employees to be laid off and the number of employees and their structure, as well as the planned timing of the layoff, the criteria of selection for dismissal and its order must be provided to them.

Information about collective redundancies must be notified to the labour administration authority and the first notices may be served one month after such notification at the earliest.

The redundant employees are entitled to severance pay.

Certain transactions may trigger the obligation of the legal successor/transferee to take over the transferor’s employees under the same terms and conditions (The Transfers of Undertakings Directive 2001/23/EC).

There are no sales or excise taxes or stamp duties on the sale or issuance of shares or business shares (depending on the legal form). There is also no real estate transfer tax currently adopted in Slovakia.

Profits resulting from the sale of shares or assets, including real estate, are in principle subject to income tax (CIT, PIT). CIT tax rates differ from PIT rates and the exact tax rate also depends on the tax base.

Merger control notification must be filed, and clearance by the Slovak Antimonopoly Office is required, if the following thresholds are exceeded:

(i) combined aggregate turnover of the parties to the concentration is at least €46 million for the accounting period preceding the establishment of the concentration in Slovakia and at least two of the parties to the concentration attain a turnover of at least €14 million each in Slovakia for the accounting period preceding the establishment of the concentration; or

(ii) combined turnover for the accounting period preceding the establishment of the concentration in Slovakia:

 (a) in the case of a merger, turnover of at least one of the parties to the concentration is €14 million and simultaneously the global combined turnover for the accounting period preceding the establishment of the concentration attained by another party to the concentration is at least €46 million; or

 (b) in the case of acquisition of control by at least one party to the concentration over which (or its part) the control will be acquired is at least €14 million and simultaneously the global combined turnover for the accounting period preceding the establishment of the concentration attained by any other party to the concentration is at least €46 million.

Documents usually produced and executed at signing include a transfer agreement.

Documents usually produced and executed at closing include: updated documents proving ownership of the shares or business shares (such as the most recent extracts from the Commercial Register or the register of shares) and principal property (extracts from the real estate cadastre), minutes of the general meeting containing the resolution approving the transfer, if such prior approval is required under the articles of association of the target company (this is quite usual in relation to limited liability companies), resolutions of other corporate bodies from each party, if required, documents proving the completion of conditions precedent (e.g., extracts from public registries, confirmations, clearances, if required), disclosure letters, new service agreements of the retained officers and new employment contracts of the retained key employees of the target, and ancillary agreements (e.g., escrow or custody deed, depending on the structure). It is also common to execute a power of attorney to the buyer for filing an application for registration of transfer with the Commercial Register.

N/A

No such requirement exists under Slovak law and generally, this is a matter of negotiation. A gap requirement can also be triggered by a specific law, most typically where merger-control clearance is required.

No regulatory requirements.

Using escrow or notarial custody is not uncommon. This may be connected with certain additional KYC/AML verifications.

Signatures verified by a notary public are generally required for share deals and certain types of asset deals, such as transfers of real estate. Slovakian notaries always require proof of identity of the acting persons and presentation of ID cards or passports is therefore common practice.

Most share deals and certain types of asset deals, such as transfers of real estate, involve registration with public registers, e.g., the Commercial Register for share deals and the real estate cadastre for transfers of real estate. The authority to sign must be proven within the registration process and the respective deeds or documents translated into the Slovak language must be attached to the respective motion.

The representatives of Slovak companies who are authorised to act and sign on their behalf are listed in the Slovak Commercial Register (information is public and can be obtained by anybody). For foreign companies, excerpts from the relevant business registers are generally required.

Generally, transfer agreements must be executed before a notary public. Depending on the particular type of contract, notarisation of other ancillary documents may be required.

Mandatory filing with the Commercial Register in the case of share deals must be carried out electronically. Those filings involve certain formal requirements as well.

In the case of sales of real estate, there are additional formal requirements, e.g., executing a purchase contract in counterparts is not possible.

Statutory representatives (one or several managing directors, one or several members of the BoD), usually appointed by the general meeting, can act and sign on behalf of a Slovak company in a manner specified in its articles of association or statutes (one director individually, two directors jointly, etc.). The statutory representatives of the Slovak companies must be registered with the Slovak Commercial Register. Registration with the Commercial Register is of an “evidentiary” nature only, i.e. appointment/recall takes effect when the respective resolution is adopted, not by registration. Thus, it is always necessary to check authorisation to act on behalf of the company.

Limitations imposed on the statutory representatives’ acting on behalf of a company (e.g. value thresholds, nature of the contract, etc.) are ineffective vis-à-vis third parties, even if stated in the articles of association or published.

Generally, transfer documents and a number of other corporate documents intended for filing must be signed before a notary public.

Written documents must be signed by the individuals who are parties thereto. Generally, transfer documents must be signed before a notary public.

There are no different/specific/increased formalities when compared to companies.

There are no different/specific/increased formalities when compared to Slovak companies.

Requirements of the jurisdiction of incorporation of the foreign company apply for acting on behalf of such foreign company. Evidence of authorisation of the signatories must be provided, in the case of filing with the public registers, such as the Commercial Register or real estate cadastre.

If the documents are signed abroad or issued by a foreign authority, further requirements may apply, such as the requirement to attach an apostille on the document or provide legalisation/superlegalisation.

All documents signed abroad or issued by a foreign authority intended for registration in Slovakia, for example, with the Commercial Register or real estate cadastre, must be translated into the Slovak language by a sworn translator registered with a court in Slovakia.

In the case of the purchase of shares or the business shares, the signatures of the parties on the transfer agreements must be verified by a notary public.

The same applies for certain asset purchases. Specifically, the signature of the seller must be verified in the case of the transfer of real estate. The signatures of both the seller and the buyer must also be verified in the case of transfer of enterprise.

Executing transfer agreements in the form of a notarial deed is currently not required in most types of companies.

There is a regulation imposing specific formal requirements on director appointments. In some types of companies, e.g. in limited liability companies, the signature of the chairperson of the general meeting on the minutes of the general meeting which recalled or appointed a director, must be verified.

A notary cannot change the deal terms.

The notary fees are set in the Notary Fees Act. In terms of their level, they are nominal.

Notaries do not have an impact on the transaction timeline.

In most types of companies, the powers of the statutory body (managing directors, members of the BoD) and its appointment and dismissal are set out in the articles of association or statutes and the statutory body is appointed or recalled by the general meeting or by the sole shareholder, if the company has only one shareholder.

Managing directors (in the case of LLCs) and members of the board (in the case of joint stock companies) of Slovak companies are obligatorily registered with the Commercial Register. Therefore, the change must be entered therein after each appointment or recall. However, registration is only of an “evidentiary” nature, i.e. the appointment or recall takes effect by the adoption of a resolution or on the date specified on such resolution, not by registration.

There are no specific additional conditions for appointing executive directors or members of the BoD as long as they are citizens of EU or OECD member states. In the case of non-member citizens, obtaining a residence permit is required for the appointment.

For a limited liability company, signing a share purchase agreement is required for transfer of title to the business share subject to the transfer. The transfer takes effect vis-à-vis the company by presenting a copy of the agreement thereto.

For a joint stock company transfer of title depends on the type of shares. Endorsement and handover are required in case of physical registered shares. In the case of book-entry shares (either registered or bearer shares) transfer of title takes effect by its registration with the Central Depository, upon two identical in content instructions filed by both the transferor and the transferee.

Transfer of registered shares takes effect vis-à-vis the company when the new shareholder is registered in the list of shareholders. The company is obliged to ensure registration with the list of shareholders as soon as the transfer is presented to it.

Both individuals and companies may appoint attorneys-in-fact to represent them at signing/closing and sign documents on their behalf. Generally, the power of attorney must be executed with at least the same level of formality that is required of the document that the attorney is being empowered to sign.

The scope of the authorisation is determined by the power of attorney document.

A faxed or emailed document shall not be rejected by court as evidence per se. However, in the event of a dispute or if such evidence is contested, the need to produce the original or a certified copy of the document cannot be excluded.

Digital signatures compliant with Slovak law (Civil Code, including Regulation EU No. 910/2014) are treated as equal to handwritten signatures. If signed by a qualified electronic signature or qualified electronic seal with an electronic time stamp, the signature is treated as a certified signature.

As a result of ongoing developments, the approach and practice of the relevant authorities is not yet unified. In particular, there are still uncertainties and various approaches are taken when foreign elements are involved.

Executing documents in counterparts is possible in the case of share sales. The counterparts must subsequently be put together and attached to the filing with the Commercial Register.

In the case of a purchase agreement regarding the real estate, signatures of both the seller and the buyer must be on the same deed, i.e. executing in counterparts is not possible.

The concept of strictly enforced undertakings is not used in Slovak law.

There is no specific legal regulation of a closing mechanism under Slovak law.

A closing mechanism can be agreed upon by the parties, usually in the acquisition agreement. It is often structured as a “condition precedent” where the closing occurs when all conditions agreed by the parties have been satisfied or waived.

Share sale closing formalities depend on the legal form of the company.

In the case of a limited liability company, a share purchase agreement complying with the required formalities (especially, verified signatures of all parties, declaration of the new shareholder on accession to the articles of association) must be executed. Subsequently, the transfer must be registered with the Slovak Commercial Register and the list of the shareholders administered by the company must be updated.

In the case of joint stock companies, closing formalities depend on the type of shares. For physical shares (only registered, not bearer, ones are permitted), endorsement and handover are required with subsequent update of the list of shareholders by the company. For book-entry shares (either registered or bearer shares), registration with the Central Depository is required, with the subsequent update of the list of shareholders by the company in the case of registered shares.

If a joint stock company has one (sole) shareholder, registration with the Slovak Commercial Register must also be carried out.

Not required.

Registration with the Commercial Register is generally required. Filing must be done within 30 days from closing.

Beneficial ownership must be notified with the Slovak Commercial Register within 30 days from the change.

This is not required, if the legal entity is (a) a public administration entity, (b) an issuer of securities admitted to trading on a regulated market subject to information disclosure requirements pursuant to a special regulation, or (c) registered with the Register of Public Sector Partners (a special register administered in Slovakia). When a company is registered with the Register of Public Sector Partners, filling must be done within 60 days from the change of beneficial ownership.

There is no “typical” timetable for share and asset sales and the length of the process always depends on the particular circumstances of the transaction.

The main factors influencing the timetable include the complexity of the transaction, scope and extent of the due diligence, negotiation between the parties, necessity of regulatory approvals (merger-control clearance or other regulatory approval, if required in the specific case), necessary third-party approvals, and so on.

Non-compete undertakings of the sellers are generally possible.

Slovak law does not expressly set forth a term for non-compete covenants in respect of transfer of shares. In addition to the approach applied within the EU, usually justifying non-complete clauses for up to three years, there are legal standpoints setting the time limit to two years at most.

The requirements regarding the legitimate goals of the non-compete covenants, and their geographical coverage, subject matter and necessity must also be taken into account.

Non-compete covenants may be agreed upon with employees for a maximum period of one year from the date of termination of the employment relationship. Such covenant must be for consideration whereas the minimum compensation is 50% of the employee’s average monthly salary.