Business Transformation Made Easier

The new Act on Conversions of Commercial Companies and Cooperatives shall become effective in Slovakia. The Act shall make national and cross-border mergers and divisions of companies much easier. It shall create a unified and coherent legal framework to mergers and divisions of companies and cooperatives. 

Instead of a merger agreement a so-called conversion project („projekt premeny“) shall govern merges. Foundation of new companies and the dissolution of existing ones, as well as the transformation of the company's registered capital, have a significant impact on shareholders. The Act shall determine the rights and the position of the shareholders within the whole process more precisely. In case of a limited liability company (s.r.o.), a joint stock company (a.s.) or a simple company for shares (j.s.a.), the conversion project requires approval by at least two-thirds of the shareholders’ votes. 

The Act comes with several changes required by the application practice and introduces into the Slovak legal system spin-offs, i.e. a demerger („odštiepenie“). The consequence of this will not be the dissolution of the company being divided. This allows the company being demerged to continue to exist and, at the same time, to transfer part of its capital defined in the conversion project to another company. Either to one or more existing companies, called a demerger by merger („odštiepenie zlúčením“), or to a newly created company, called a demerger by amalgamation („odštiepenie splynutím“). 

The Act also enables cross-border conversions and is intended to promote cross-border mobility of companies in the EU. For example a demerger where the successor company is a newly established company and there is a cross-border element in the form of at least one participating or successor company incorporated in another EU Member State is now possible. 

Furthermore, the Act regulates when national and cross-border conversions are permissible. In general, a conversion (e.g. merger, demerger) is only possible if both companies involved have the same legal form, whereby the Act regulates certain exceptions, e.g. a merger of a limited liability company and a joint stock company shall also be possible if the registered capital is fully transferred to the joint stock company. 

It is also now possible to cancel an approved conversion project, i.e. to cancel the implementation of the conversion. The shareholders may revoke the decision to approve the conversion project until the application is filed with the Commercial Register.

By JUDr. Valter Pieger

Download

Author