An amendment to the Slovak Commercial Code entered into force on 8 November 2017, introducing, among others also changes in the area of company mergers. The purpose of this amendment is to increase the level of creditors’ protection by imposing new rules on mergers.
The changes introduced by the amendment can briefly be summarised as follows:
- Only companies in good financial health may be involved in mergers. Therefore, such companies must meet the following requirements at the effective day of merger: (i) the value of liabilities of a successor company must not exceed the value of its assets; (ii) a successor company or a dissolved company must not be in liquidation; (iii) a successor company or a dissolved company cannot be subject to the declaration of bankruptcy (unless a bankruptcy trustee has given consent to that effect) and must not be facing any restructuring proceedings initiated against them, or restructuring permitted; (iv) a successor company or a dissolved company must not be subject to winding-up proceedings.
- If the aforementioned requirements are not met, all members of company bodies must refrain from taking any actions towards effecting a merger. Otherwise they will be held liable for any damage caused to creditors.
- The companies involved are required to have an auditor’s report prepared to verify that the value of the assets of the successor company will be higher than the value of its liabilities as at the decisive date. If the dissolved company does not have its financial statements verified by an auditor, the report must include an auditor’s statement on the company’s receivables and payables. The auditor’s report needs be attached to a proposal for the registration of merger in the Company Register.
- From the accounting perspective, the decisive day may retroactively be set to not earlier than the first day of an accounting period in which a draft agreement on merger project has been prepared. The rule stating that the decisive day cannot be later than the day of merger registration remains unchanged.
- The companies involved are required to notify a tax administrator (tax authority, customs authority) that a draft agreement on merger project has been prepared; such notification must be submitted not later than 60 days prior to the date of a general meeting which should decide on the approval of the draft agreement. If shareholding interests or shares of the companies involved are encumbered by a pledge, a similar notification must also be delivered to a pledgee;
- The proposal for registration of merger in the Company Register must be submitted not later than 30 days after the approval of the agreement on merger project.
Originally, the draft amendment assumed that these changes become effective on 1 January 2018 but, during the discussion and voting on the amendment in the Parliament, the effective date of the changes concerning mergers was changed to an earlier date – 8 November 2017 – i.e., the date of its publication in the Collection of Laws. The only exception from this rule are those mergers where the relevant draft agreements were approved by company bodies before 8 November 2017. Provided that these companies submit the proposal for registration in the Company Register within 90 days, they will be governed by the hitherto applicable regulations.
Boris Brhlovič, Dominika Schweighoferová