Planned changes and modernizations of companies as part of the restructuring under private law
The life of companies under the current market conditions is significantly influenced by the electronization, digitization and automation of internal processes as well as processes related to the external environment, which modern company law must reflect.
In order to increase the attractiveness of the business environment and the economic competitiveness of Slovakia and to take into account the needs of economic practice as well as the modernization trends in advanced European legal systems and the harmonization of legislation at the level of the European Union, the Ministry of Justice recently presented the legislative intention that Re-codify company law (the complex material is available at the link: https://www.slov-lex.sk/legislativne-procesy/SK/LP/2020/627).
The new codification of private law presupposes that the new civil code represents a general norm of private law and repeals the previous legal dualism of the contractual law regulation, which provides for a fundamental intervention in the commercial code in its current form. The result of the proposed changes is the creation of a comprehensive and uniform civil code as the primary code of private law, on which a new company law similar to the one currently in the Czech Republic should be enacted. The new company law is only intended to regulate the specifics of the company as a special legal form with a focus on corporations (limited liability company and stock corporation). The aim of the proposed changes is to increase the flexibility of corporations and to simplify their establishment through various state-defined forms and thus to reduce administrative obstacles to business start-ups.
Katarína Bieliková, Managing Partner at LEXIA Attorneys at Law
Due to the current situation on the corporate market, Slovakia is characterized by a relatively close and closed shareholder structure of the companies, which means a high level of interdependence between the shareholders and the company management and the associated risk of prioritizing the interests of the shareholders at the expense of the creditors. In terms of corporate forms, the market is dominated by limited liability companies, which make up more than 95% of all existing companies, with group structures being relatively common. Among the joint stock companies, which make up less than 3% of all companies, the so-called private joint stock companies dominate, whose shares are not traded on the public market.
The economic aspects of running companies in Slovakia are mainly based on financing from foreign resources and the lack of significant equity, while the growing trend in private equity investments (venture capital in the form of equity) in start-ups and project companies (so-called Start-ups and scale-up) as well as the absorption of foreign resources outside the traditional banking sector (e.g. by issuing corporate bonds and other securities).
The intention of the law provides for the retention of the four basic legal forms of companies:
- a joint stock company,
- a limited partnership
- a limited liability company and
- a corporation.
A fundamental change compared to the current regulation is the one proposed Abolition of the legal form of a simple stock corporation (yes)which was formed as a hybrid between a limited liability company and a public company. The aim was to streamline and facilitate the entry of venture capital, especially in joint venture structures and start-ups. However, the relatively complex changes in the standard legal forms of companies and their modernization would make them superfluous. Existing simple joint stock companies (jas) can be converted into limited liability companies and those who do not make use of this option are subject to joint stock company law.
Significant changes are proposed for corporations – a limited liability company (sro) and a joint stock company (as).
(Source: )
In order to make a limited partnership more attractive, the legislator provides that, depending on the purpose of the establishment, the founders decide whether the limited partners’ participation is to be brought into collateral. At the same time, in connection with changes in the law of a GmbH, it should be possible that shares are not necessarily concentrated on one share.
In particular, the following should be assumed for corporations:
- certain rules for exercising shareholder rights, e.g. the minimum scope of the right to information and the legal instruments for its enforcement,
- common rules for the decision-making of corporate bodies, e.g. B. Remote decision-making by organs using electronic means of communication, the invalidity of company resolutions and legal instruments for their enforcement,
- Uniform rules for the protection of the company’s assets so that the shareholders only receive shares in the profits from the company’s assets and this rule is not circumvented,
- special provisions for the protection of capital, which under European law only apply to stock corporations, only apply to stock corporations (or only stock corporations) and generally do not extend to companies with limited liability,
- Rules for transactions with related parties, in particular transactions between the company and the shareholder as well as members of the company’s bodies and their related parties,
- a revised legal regulation of the corporate crisis and related obligations,
- special regulations on the tasks and responsibilities of the members of the company’s bodies,
- Regulation of corporate decision-making (in particular of the statutory body) – application of the Business Judgment Rule,
- Regulation of subsidiary contracts of shareholders and affiliated institutes (drag-along or tag-along rights or shoot-out),
- Regulation of the principles of company law, content requirements and disclosure requirements of the so-called contractual company (domination agreement) as well as the conditions under which a member of a body of a controlled company may take the interests of the company into account to the detriment of the company to which he belongs, the creditor or the public Obligations not to harm and with an obligation to offset the concern.
Limited Liability Company (sro)
The aim of the proposed changes is to modernize the legal form of a GmbH and thus to take foreign regulatory trends into account. It is to be set up as a company with share capital, which is liable with all of its assets for its liabilities and whose shareholders, who have fulfilled their contribution obligations, are not liable for the company’s liabilities. Currently only one person can set it up and be the sole shareholder.
With regard to the share capital, the legislative plan provides alternatively to adopt the Czech model and generally reduce the company’s share capital to 1 euro (Czech model), or the German model of gradually increasing the share capital from the economic results achieved with a temporary prohibition on profit sharing .
Among other things, the draft law provides for the following:
- the possibility of a simplified online formation using formation documents that reduce registration fees,
- the abolition of the principle of uniformity of the business share, i.e. the partner can dispose of several business shares with different properties, which he can sell and encumber separately,
- The possibility of remotely exercising the shareholders ‘right to participate in the management of the company within the framework of participation in the general meeting will be expanded and the regulation of the shareholders’ resolution by rollam will be clarified,
- the possibility of including a business share in the legal form of security,
- Creation of space to regulate the rights of the shareholder associated with securities, similar to what is currently the case with a simple stock corporation (jas),
- Suggestions for solving specific practical problems, in particular the financial relationship to the business share (especially with regard to the co-ownership of the spouses) and the sale of the business share.
Aktiengesellschaft (as)
The proposed new law on a joint stock company reflects the fact that most joint stock companies in the Slovak corporate market are characteristic of private joint stock companies. The underlying motive for the new codification of stock corporation law is therefore the division into private and public stock corporations, while a significant part of the legal regulation of public stock corporations and other forms of investment (stock corporation or investment company), funds with variable share capital) is being transferred to capital market law.
The legislative proposal proposes:
- the abolition of the gradual establishment of public limited companies. In the case of formation with subscription of shares, the cooperation with the securities dealer and the capital market law procedure are already provided for in the formation process,
- the abolition of the numerous classes of share classes, ie as long as this does not contradict the content of the provisions on capital protection of a stock corporation (prohibition of interest shares). It is possible that a stock corporation stipulates the issue of different types of shares in the articles of association, which can be accompanied by different rights specified in the articles of association,
- the abolition of the option of issuing bearer shares in the books,
- the regulation of the remote decision-making of shareholders, also via rollam form,
- the regulation of the shareholder’s right to information and tools for its application,
- enabling a monistic structure of a joint stock company, ie; In addition to the general meeting, a stock corporation only forms the company’s management board or a structure made up of a management board and a supervisory board.
* * *
In view of the complexity of the new corporate law codification that has been introduced, it will also be necessary to take into account the changes in the relevant legal framework, in particular the Transparency and Disclosure Ordinance for companies, the Insolvency and Reorganization Act, the capital market rules, and securities and tax law regulations (in particular the tax aspects of group relationships, taxation in the event of company or shareholding transfers) and criminal law (e.g. the criminal liability of board members and shareholders)).
We see the proposed legislative intent and the resulting efforts to fundamentally modernize company regulation as an approximation to the economic reality and market standards of the European Union, which is undoubtedly a significant step towards improving the business environment in the Slovak Republic in line with trends in the Neighboring countries represents European countries.
The paragraph text of the new law should be submitted to the Government of the Slovak Republic by the end of June 2022.
This article was brought to you by LEXIA lawyers
June 21, 2021 at 0:10 am