On 7 December 2022, the EU Commission issued a proposal for a Directive harmonising certain aspects of insolvency law. In this article, we focus on insolvency avoidance rights from a Slovak law perspective and the impact of the Proposed Directive.
Regulations on Foreign Direct Investment (FDI) are becoming increasingly influential, especially in M&A transactions. It is essential to consider how these regulations will affect foreign creditors, particularly those from non-EU countries. The Slovak FDI Act will have numerous implications for financing and security arrangements.
Security package
Only a year ago, Slovakia transposed EU Directive 2019/2023 on preventive restructuring frameworks with an intention to reform insolvency proceedings and make them more effective.
Only a year ago, Slovakia transposed EU Directive 2019/2023 on preventive restructuring frameworks with an intention to reform insolvency proceedings and make them more effective.
June 2023 – As part of a package of measures in the field of commercial law, the National Council of the Slovak Republic approved today, 28 June 2023, amendment to Act no. 7/2005 Coll. on Bankruptcy and Restructuring and on Amendments to Certain Acts, which confirms the long-standing treatment of the creditor-debtor relationship in Slovakia in cases of the potential relationship between the debtor and the creditor.
Finance companies in Slovakia have felt endangered since 2019 when the Regional Court in Košice, acting as a second instance court confirmed a lower-court ruling that a financial party could be qualified as a related party in the eventual insolvency of the borrower as debtor.
The new Slovakian preventive restructuring framework aims to provide companies with a viable toolkit to deal with financial distress at an early stage and to counter the fact that the majority of Slovak companies enter an insolvency process having been insolvent for more than a year.
Main characteristics
The Slovak parliament recently passed a new law – The Temporary Protection of Distressed Undertakings Before Creditors – which came into effect on 1 January 2021. It replaces the current temporary protection (moratorium) adopted at the outset of the COVID-19 crisis.
The new regulation will only be granted where a majority of the unrelated creditors involved agree with the stay. This marks a departure from the COVID-19 moratorium, which could be easily accessed by all debtors impacted by the coronavirus pandemic.
On 22 April 2020, the Slovak parliament passed a new law to help reduce the impact of COVID-19.
It is now possible for businesses to request temporary protection that will have the following effects: