Starting from March 1, 2017, the Slovak personal insolvency regime will change. The new system aims to make personal insolvency available to a wider debtor audience, while keeping it simple and cost efficient. Today, only individuals with assets over €1,659.70 can seek declaration of bankruptcy. Otherwise, the proceedings could be stopped and the doors to a “fresh start” closed for “poor” debtors (also called No Income No Asset debtors (NINA)).

The Slovak personal insolvency regime will change on March 1, 2017. The new system is aimed at opening personal insolvency to a wider debtor audience, while keeping it simple and cost effective. Today, only those individuals with assets over EUR 1,659.70 could seek a declaration of bankruptcy. Otherwise, the proceedings would be stopped and the doors to a “fresh start” would be closed for “poor” debtors (also called No Income No Asset debtors (NINAs)).

Summary

Are you already a board member or executive of a Slovak company or about to become one? If so, you should know about the proposed amendment to the Slovak Commercial Code. The amendment aims to address the so-called “white horses” and “tunneling (asset stripping)” of the companies.

Background

New rules strengthen the position of individual creditors and weaken the concept of insolvency proceedings as a means of final collective satisfaction of creditors. Taylor Wessing in Bratislava, as an advisor to the Ministry of Justice, has been actively involved in the creation of this new regime.

New provisions

Do you know the new rules?

The alarming increase in "speculative mergers" and the increasingly frequent occurrence of strawmen in commercial companies' management structures has long been seen as a major obstacle on the Slovak market. In response, the Ministry of Justice of the Slovak Republic has amended the Commercial Code to support and encourage business in Slovakia.

Below we summarise the key changes that affect all business entities, not only with respect to mergers, but also in other areas of day-to-day commercial activity in Slovakia.

As of 1 January 2018, those who are obliged to file a petition for declaration of bankruptcy of a company will face stricter liability in Slovakia. This could result in them being required to pay a fine/damages and can even result in their disqualification from sitting on boards of Slovak companies.

The Slovak Ministry of Justice was very busy last year, and the recent amendment to the Commercial Code introduces a number of provisions that are aimed at fixing local malpractice related to mergers and liquidation of companies, use of “straw men” as executives and the impact of bad decisions of shareholders on the local affiliates.

In a previous post, we covered the topic of increased liability of executives for not filing the petition for bankruptcy. However, the Ministry of Justice did not stop just there.

Corporate Veil Pierced

As of January 1, 2012, the Slovak Act on Bankruptcy and Restructuring (Act No. 7/2005 Coll.) has been amended to introduce a statutory subordination of claims of related credi-tors (Section 95(3) of the Slovak Bankruptcy Act). The Amendment affects the ability of creditors to obtain satisfaction from companies in bankruptcy by classifying claims by “related” parties as subordinate to other claims.

Since gaining its independence in 1993, the Slovak Republic has adopted new laws at a rapid pace. As a country in transition, its legal system continues to develop.