On 12 October 2017, the Slovak parliament passed an extensive amendment of the Commercial Code which has been published in the Collection of Laws under number 264/2017 Coll. on 8 November 2017. The amendment introduces several novelties into Slovak company law.

STRICTER CONDITIONS FOR MERGERS

From all the legislative changes contained in the amendment the most attention has been aimed at the new legal requirements for mergers, i.e. winding up of a company without liquidation. Relevant provisions in this area have entered into force on 8 November 2017 (although most of the amendment provisions will only become effective on 1 January 2018).

Upon the dissolution of the company without liquidation new special conditions will have to be fulfilled, otherwise the merger shall be prohibited. These are the following:

• the value of the successor company's equity must not be negative;
• merged companies must not be in liquidation;
• effects of declaring bankruptcy or restructuring cannot be placed upon the merging companies (the exemption in case of approval by the insolvency administrator);
• there cannot be a court proceeding pending in order to wind up the merged companies.

The introduction of these conditions aims to prevent unfair practices (in particular, the targeted avoidance of liquidation or bankruptcy) in merger transactions. The central incentive is to secure sufficient economic condition of the successor companies, which will continue to be the contractual partner of creditors and third parties after the merger.

In case of breaching the above-stipulated criteria, the explicit liability of the statutory bodies of the merging companies for the damage incurred by their creditors as a result of their breach has been incorporated.

Obligation to acquire the auditor's report is also a novelty which is likely to increase transactional costs. The auditor will have to certify that the value of the successor's equity (value of liabilities vs. value of the asset) will not be negative as of the effective date of the merger and auditor's report is later obligatorily attached to the application in the Commercial Register.

The draft of a merger agreement must also be notified to the tax authority (not later than 60 days before the general meeting which is to decide on the proposal).

IMPROVEMENT OF TRADE SECRET PROTECTION

Changes have been adopted in the area of trade secret protection, mostly due to the transposition of the Directive 2016/943 (EU) of the European Parliament and of the Council on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure.

New terminology has been introduced with the concepts of “trade secret owner” and “trade secret violator” and violation of trade secret (as well as relevant exceptions) has been redefined more precisely as a separate unfair competition offence

Furthermore, the portfolio of legal remedies has been extended. Specifically, there is a new regulation of interim injunctions (lex specialis in relation to regulation in Civil Procedure Code) consisting of set of obligations which may be placed upon the violators of trade secret. New set of corrective remedies possibility which are imposed upon the violators in the merit decision itself have also been introduced.

Despite the introduction of a special legal remedies against trade secret violation, the general legal remedies against unfair competition remain fully applicable.

DE FACTO STATUTORY BODY AND THE DUTIES OF THE FORMER STATUTORY BODY AFTER THE TERMINATION OF OFFICE

The amendment to the Commercial Code introduces a new rule, according to which a person who has not been formally appointed as a statutory body but who de facto carries out its responsibilities is also subject to the requirement to perform the office with professional due care and such person has the duties of a trustee. The regulation aims to cover the issue of shadow management of the companies by the persons background, and aims to apply the liability rules for statutory bodies under certain circumstances also to these persons. In order for the provisions in question to be applied, the person must actually exercise the powers of the statutory body and must do so without appointment.

The amendment also addresses the application problems associated with frequent non-compliance with Section 66 (1) of the Commercial Code (obligation to appoint a new member of the statutory body within 3 months of the cessation of the function of the previous sole member). If the new person is not registered within 60 days of the expiration of the above-mentioned three-month period, the former member of the statutory body is obliged to file a petition for the company's winding-up. It also explicitly introduces the obligation of the former statutory body to provide co-operation to selected public authorities after the termination of the function.

LIABILITY OF CONTROLLING COMPANIES FOR BANKRUPTCY OF CONTROLLED COMPANIES

The amendment introduces liability of the controlling persons (i.e. direct or indirect owners of the business share connected to majority of the voting rights) against the creditors of the controlled subsidiary for the damage caused by the bankruptcy of that subsidiary, if its actions substantially contributed to the bankruptcy of the controlled person. The law offers the controlling person the possibility of disclaiming liability, provided that the company demonstrates due information and conduct in good faith in favour of the controlled person.

OTHER PARTIAL CHANGES

The Disqualifications Register, introduced into Slovak corporate law with effect from 1 January 2016 is subject to change as well. It introduces the possibility that the sentence of disqualification may be imposed on the members of the statutory or supervisory bodies no longer only by the court, but also by other bodies (especially administrative and tax authorities) in the future. However, this option (as well as specific grounds for disqualification) will have to be explicitly granted to these bodies by a separate law.

The amendment adds new restrictions on the transferability of an ownership share in private limited companies, and that is in the situations where the company is in the judicial process of winding-up or the effects of declaring bankruptcy or restructuring are be placed upon the company in place.

Also, a new criminal offence of unfair liquidation has been introduced into a Criminal Code.