Business shares when travelling: Are you sure you are still a shareholder? by Dávid Oršula

Success and failure often stand close to one another. Companies that are still drawing up expansion plans today may already be in economic turmoil tomorrow. For insolvent foreign companies with a Slovak subsidiary, Slovakian company law offers some a surprise.

According to the principle in §148 (2) of the Slovak Commercial Code, a Slovak subsidiary by law acquires its shares with the insolvency of the shareholder. In this way, an insolvent company ‘loses’ all shareholder rights and a claim remains for financial compensation. The share is transferred to the company itself (own share) according to the law. The company, i.e. the management, must either sell this share within six months or the general meeting, meaning the remaining shareholders, must resolve on a capital decrease with the value of the own share within the same statutory deadline. This rule was introduced to speed up insolvency proceedings, so that the insolvency administrator should not have to worry about exercising any shareholder rights, but could bring a concrete claim for money to the benefit of the insolvent estate. This rule does not apply to companies with only one shareholder, in order to prevent a de facto non-shareholder company.