Category: Slovakia

MCL has advised Reinoo and V6 on the sale of NordCity Postova building in Zilina, Slovakia to Erste Asset Management.

Reinoo has been operating in the development of office buildings, residential units, and property rentals since 2011.

Erste Asset Management operates as an investment management company. 

According to MCL, the transaction was preceded by a “complex reorganization of the NordCity zone in Zilina, in which the NordCity Postova building is located, and in which the developer Reinoo has been developing several projects for years. The NordCity Postova building underwent extensive renovation in 2019 and has a leasable area of almost 13,000 square meters.”

The MCL team included Partners Vojtech Palinkas and Martin Jurecek, Senior Attorney Nora Sajbidor, Junior Associate, Simona Javorska, and Paralegal Viktoria Fiserova.

MCL did not respond to our inquiry on the matter.

Majernik & Mihalikova has advised Blockmate on its EUR 1.5 million seed round led by Erste’s Seed Starter with the participation of various Slovak and foreign VC funds. Havel & Partners reportedly advised Seed Starter.

Blockmate is a Bratislava-based provider of financial services.

Seed Starter is a program that helps startups with the go-to-market phase and engages their projects in Slovenska Sporitelna’s environment.

The Majernik & Mihalikova team included Partner Ivan Kormanik and Of Counsel Michal Ranostaj.

Editor’s Note: After this article was published, Havel & Partners confirmed its involvement to CEE Legal Matters. The firm’s team included Partner Jaroslav Baier, Senior Associate Josef Bouchal, and Associate Kristyna Saktorova.

Schoenherr has advised the BHM Group on the share-deal acquisition of the Trencin Industrial Park in Slovakia and related financing. Kinstellar advised the Nova Real Estate investment fund on the sale.

According to Schoenherr, the Trencin Industrial Park is one of the largest production and logistics centers in Slovakia. “With this acquisition, the BHM Group has become one of Slovakia’s largest industrial and logistics landlords, being the only local developer and investor in the top five.”

The BHM Group is a private investment company founded in 2014 and majority-owned by Tomas Krsek. It focuses mainly on investments in projects and companies in the fields of new technologies and renewable resources as well as on development projects across sectors and regions.

The Schoenherr team was led by Czech Republic-based Attorney at Law Michal Jendzelovsky and included Partner Ondrej Havlicek and Attorney at Law Petr Koral together with Slovakia-based Attorneys at Law Jan Farbiak and Tomas Silhanek and Associate Maria Gabriella Manzone.

The Kinstellar team was led by Bratislava-based Partner Tomas Melisek and included Senior Associate Dasa Labasova and Junior Associate Martin Danco as well as Prague-based Managing Associate Michal Kniz.

Editor’s Note: The article was updated on October 31, 2023, to include Kinstellar’s team composition.

The primary focus for most in Slovakia right now – and the talk of the town this season – is the upcoming elections. According to Dentons Bratislava Managing Partner Peter Kubina, the elections have led to the markets going into somewhat of a maintenance mode, yet things stand to pick up the pace again as autumn progresses, with litigious activities taking center stage.

“The legal market in Slovakia has been primarily focused on maintenance and ongoing work in the first half of 2023, due to the impending elections,” Kubina begins. “The summer months typically bring a lull but, now that autumn is here, we’re seeing renewed activity. The banking and finance sector, for example, has seen more maintenance-related activities, and more interesting developments are on the horizon.”

Specifically, Kubina mentions that while the banking and finance sector “hasn’t seen many new financings,” there have been “numerous amendments, refinancing, and restructuring activities. Despite some challenges, this year is faring better in terms of overall activities compared to the previous year,” he outlines, citing a few examples of interesting M&A activity areas. “One major regional transaction is taking place in the energy sector right now, with Slovakia at its epicenter, and there are a few interesting regional developments that hold a lot of promise,” he says.

Furthermore, Kubina continues by mentioning that “there has been a reorganization of courts, particularly impacting Bratislava. This led to disruptions in court hearings during May and June, but things have since settled down,” he explains. “We have resumed our activities, and several high-profile disputes, such as those concerning the national football stadium and the Slovak public online portal, are still pending.”

Specifically, Kubina mentions that “criminal litigation has thrived as a market” but that the upcoming elections are expected to “influence its trajectory. A noteworthy case is the prosecution of former President Andrej Kiska, involving tax-related allegations that have been subject to wide political abuse. The trial has been ongoing since late June, with four sessions held already and the final one planned for October 11, 2023. The political turmoil surrounding the elections adds a layer of complexity to such cases,” Kubina stresses.

Finally, he reports that the “legal community is watching the elections with a mix of hope and fear. The outcome of the elections will determine the geopolitical course and influence investments, especially larger projects,” he says. “We’re actively involved in criminal litigation, and the elections will have a significant bearing on whether such cases continue, as they are intertwined with the high-level political management of the country,” Kubina adds in conclusion. “In the meantime, the result of the elections may bring a degree of uncertainty into the rule of law in Slovakia and its geopolitical orientation.”

Wolf Theiss, working with Bryan Cave Leighton Paisner, has advised South Korean waste management company IS Dongseo on its acquisition of Slovakia’s BTS Technology.

BTS Technology is a Slovakia-based electric vehicle battery recycling company operating in Slovakia, Hungary, and Poland. According to Wolf Theiss, it manages 50% of EV battery waste in Europe.

The Wolf Theiss team was led by Counsel Bruno Stefanik and included Counsels Rudolf Pfeffer and Zuzana Hodobova, Senior Associate Vladimir Simkovic, and Associate Karin Kirchnerova.

The firm did not respond to our inquiry on the matter.

The EU Directives on Work-life balance and on Transparent and predictable working conditions were introduced into the Latvian national legislation in August 2022 and brought about significant changes and obligations for the employers. What do they mean for businesses?

This report is designed to help companies to understand the requirements and how they have been implemented.

Implementation of EU Directives on Work-Life Balance (EU Directive 2019/1158) and on Transparent and Predictable Working Conditions (EU Directive 2019/1152)

Have the directives been implemented in the jurisdiction?

Yes.

What is the status of the implementation or draft implementation?

The directives have been implemented into the Slovak Labour Code. The National Council of the Slovak Republic accepted the Amendment of the Labour Code on 04 October 2022, and the President signed it on 21 October 2022. 

The new Labour Code came into force on 01 November 2022.

What are the key changes for employers and employees?

1. Paternity leave (“otcovska dovolenka”)
   • Paternity leave shall be granted for the purpose of caring for the new-born child by the father.
   • In practice, this amounts to the transformation of the current parental leave granted to the man/father into paternity leave.
   • The leave shall last for up to 2 weeks (14 calendar days), and can be taken in the first 6 weeks following the birth of the child.
   • The leave will be paid by the Social Insurance Agency.
2. Probationary period
   • For an employee with a fixed-term employment relationship (and only for these employees), the agreed probationary period shall not be longer than half of the agreed duration of the employment relationship itself.
   • The maximum length of the probationary period – 3 months, or 6 months for senior employees –
     remains unchanged.
3. Information on working conditions
   • The employer is obliged to inform the employee in writing about certain working conditions and any changes to them if these are not specified in the employment contract.
   • The deadline for providing such information is 4 weeks from the date of commencement of the employment (or 7 days in certain cases).
   • The employer has the right to choose whether the information about working conditions will be provided to the employee separately in written form (when an electronic form can be used), or if they should agree on them as additional working conditions in the employment contract.
   • Employers are subject to new information obligations, namely to inform the employee:
     1. About the deadline for filing a lawsuit to determine the invalidity of the termination of the employment relationship; and,
     2. On the right to and scope of any professional training provided by the employer.
4. Right to request a change to more stable working conditions
   • The amendment introduced the opportunity for an employee who works part-time and for a fixed period, and whose employment relationship is longer than 6 months, to submit a request for transition to an employment relationship with more stable working conditions (e.g. to full-time working or to a fixed weekly working time for an indefinite period).
   • The employer is obliged to provide a written, reasoned response to such a request within 1 month. This one-month period also applies to every subsequent application by the employee, which he or she submits no sooner than 12 months after the previous application.
5. Essential elements of an employment contract
   • The amendment introduced new essential elements of an employment contract, namely:
     • The identification data of the employer and the employee (such as the name of the company and its registered office or place of business, and data on the employee, such as name, date of birth and place of permanent residence).
     • The change also affects employees with a place of work outside the territory of the Slovak Republic. It introduces the essential elements of such contracts.
6. Freedom to carry out other gainful activities
   • The amendment explicitly introduces a ban to prevent employers from restricting employees from performing other gainful activities in their free time.
   • The ban does not apply to competitive activities,
     where the employee still needs to request the
     employer’s permission.
   • Consent will not be required to carry out scientific, educational, journalistic, lecturing, literary or artistic activities.
7. Employee rights and protection against termination of employment
   • In the event that the employee testifies in a court case that the termination of his or her employment occurred because he or she exercised their rights (e.g. filed a complaint with the National Labour Inspectorate), the employer will have to prove that the termination occurred for other reasons.
8. Changes in the regulation of agreements conducted outside the employment relationship
   • Employers are required to provide written information about the days and time periods during which they may require an employee to perform work.
   • If the employer cancels the performance of the work less than 24 hours before it was due to be carried out, the employee is entitled to compensation of at least 30% of the remuneration he or she would have received for carrying out the work.
9. Delivery
   • For the first time, the Slovak Labour Code establishes a general minimum storage period of 10 days for the delivery by post of parcels (i.e. labour documents).
10. Greater space for unions
    • Following the amendment, the right of a trade union to approach an employee in an appropriate manner with the purpose of offering membership in it has been modified.
    • Trade unions should agree with the employer on the method of approaching employees.
    • If no such agreement is reached, the employer is obliged to provide the employee with written information about the existence of trade unions.
    • Trade unions are allowed to publish reports about their activities, including in the employer’s electronic information system.

What are the main actions for HR departments in preparing for the changes?

1. Review and revise internal labour documentation, such as:
   • The HR policy or similar work regulations;
   • Remuneration regulations or other employment policies and practices;
   • Templates, application forms etc.;
   • On- and off-boarding procedures (if these exist) etc.
2. Training to acquaint HR colleagues with the new rules and new obligations for employers.

By Robert Minachin, Senior Managing Associate, and Boglarka Nagyova, Associate, Deloitte Legal Slovakia

This communication contains general information only, and none of Deloitte Touche Tohmatsu Limited (“DTTL”), its global network of member firms or their related entities (collectively, the “Deloitte organization”) is, by means of this communication, rendering professional advice or services. Before making any decision or taking any action that may affect your finances or your business, you should consult a qualified professional adviser. No representations, warranties or undertakings (express or implied) are given as to the accuracy or completeness of the information in this communication, and none of DTTL, its member firms, related entities, employees or agents shall be liable or responsible for any loss or damage whatsoever arising directly or indirectly in connection with any person relying on this communication. DTTL and each of its member firms, and their related entities, are legally separate and independent entities.

The upcoming parliamentary elections at the end of September are the talk of the town in Slovakia, with a slew of interesting legislative changes – including those covering whistleblowing, corporate restructurings, and construction – coming in before the buzzer, according to Wolf Theiss Managing Partner Katarina Matulnikova.

“The expectations for the upcoming parliamentary elections are high and the political discourse is dominated by opinion polls, proposed party candidates, and potential coalition talks,” Matulnikova begins. Campaigning is in full swing, and there is great anticipation for the formation of a new government. However, the “recent announcement by President Zuzana Caputova that she will not be a candidate in the upcoming presidential elections next year has been met with disappointment,” she adds.

Matulnikova reports there has been a “legislative race leading up to the elections in Slovakia. Currently, one of the most debated issues is the amendment to the whistleblowing regulation – Slovakia has been a pioneer in this area, having dedicated regulation in place since 2015,” she says. “The proposed changes include widening the definition of the term whistleblower, the group of individuals granted protection against retaliation, and the group of employers mandated to introduce a reporting system.” She also explains that the new regulation “expands the illegal activity or transactions covered, modifies the competencies of employers with 250+ employees during investigation by preventing them from outsourcing report investigations, and increasing the penalties for failure to comply with the new regulation significantly.”

And there are further interesting legislative developments garnering attention in Slovakia, Matulnikova adds. “One such topic is the upcoming change to the Construction Act becoming effective in April next year and the changes to the related regulation. This has sparked intense debates, discussions, and votes, with recent clashes centering around environmental impact assessments within the process of getting building permits,” she explains. Also, Slovakia adopted the long-awaited new regulation on the transformation of corporate entities, she notes. “The new legislation will provide more instruments for cross-border and domestic restructurings, including spin-offs.”

Notably, a recent judicial reform brings changes to the country’s court structure, Matulnikova says. “The primary objective of this reform is to allow for greater specialization among judges. It entails altering the number of district courts” she explains. “Moreover, new municipal courts have been established in Bratislava and Kosice. The reform also aims to allocate specific agendas to particular courts and enhance the expertise and efficiency within the judicial system,” she says, adding that the changes have caused many hearings to be postponed, but “things are expected to pick up speed by autumn.”

Moving on to market movements, Matulnikova says the high inflation rate remains a significant economic concern, despite gradually decreasing. “Currently, it stands at approximately 11%, down from nearly 13% in previous months. The high inflation rate has put pressure on employers. However, rising energy and utility prices have intensified counter-pressure, resulting in economic debates permeating collective bargaining processes throughout Slovakia’s industry sectors,” she explains.

Finally, Matulnikova notes that the topic of AI is important across various industries in Slovakia, particularly in the IT sector. “Bratislava and Kosice have a strong presence of established IT companies and a history of technological innovation. As a result, the market is actively seeking ways to adapt to the rise of AI,” she says. “Draft AI regulation introduced by the EU this spring and its impact on the use of AI is very prominent in debates among the lawyers in the country.”

The Act No. 497/2022 Coll. on the screening of foreign investments and on amendments and supplements to certain acts, as amended, and Slovak Government Regulation No. 61/2023 Coll. establish critical foreign investments rules (the “FDI legislation“). In cooperation with the Ministry of Economy of the Slovak Republic (the “Ministry“) we have prepared an overview of some practical issues in connection with the FDI legislation.

We would like to thank the Ministry and in particular, Mrs. Martina Stratena for co-operation that was crucial in writing this article.

1. Determining whether an investment meets the characteristics of a critical foreign investment

In the event that the foreign investor cannot assess, with certainty, whether the planned investment meets the characteristics of a critical foreign investment under the FDI legislation, the Ministry provides support – informal consultations, on whether the foreign investor must submit an application for screening.

The Ministry provides consultation mainly by e-mail. An outcome of such consultation is directly influenced by the quantity and quality of information provided by the foreign investor. In absence of sufficient information, the Ministry may not be able to provide advice.

In such case, the Ministry recommends closer cooperation with the target. In specific cases where the proposed closer cooperation is not possible or does not lead to a definitive determination of whether the foreign investment is critical, the Ministry recommends filing a voluntary submission for screening with a brief explanation of the situation.

The proceeding will not only establish whether the subject of the assessment is a critical foreign investment or not but at the same time, the foreign investor will gain certainty of not violating the FDI legislation; hence, the foreign investment in question will not be subject to ex officio review in the future.

The Ministry plans to prepare guideline facilitating the process of voluntary filing of an application for foreign investment screening, hoping that these guidelines will be helpful in understanding the new legislation.

2. Termination of activities due to which the investment meets the characteristics of a critical foreign investment

Even if the foreign investor decides immediately after acquiring the target to cease all activities for which the investment meets the characteristics of a critical foreign investment, it is obliged to submit a request for review before the investment is made. This obligation is imposed regardless of the foreign investor’s intention/plan to cease all such activities. The rationale is, that in some case, it may be the termination of the activity that triggers negative impact of the foreign investment on security or public order.

3. Voluntary submission

At voluntary submission, the foreign investor may also make the investment before the conclusion of the screening. However, it bears the responsibility for any subsequent additional restrictions or prohibitions of foreign investment. The Ministry advises investors to stay the investment if the investor is unsure about whether the investment is critical.

4. Consequences of failing to apply for a critical foreign investment screening

If a foreign investor concludes, on the basis of the self-assessment of the critical foreign investment, that it does not meet the prerequisites, but later it is discovered that such assessment was incorrect, the Ministry will additionally examine such foreign investment ex officio.

The Ministry stresses that in such a case, foreign investment is neither invalid nor automatically prohibited. Along with the ex officio procedure, an administrative offence procedure under the FDI legislation will be initiated, in which the foreign investor may be fined. However, when imposing a fine, the Ministry shall consider all circumstances of possible infringement, such as gravity, manner, duration, consequences, the repetition of infringement and failure to provide cooperation during an investigation. The legislation does not provide for a minimum amount of the fine.

If a foreign investor wishes to invoke liability against the target, the Ministry recommends examining whether the assessment of foreign investment as non-critical was based on incorrect information provided by the target and it can be proven.

5. Criteria for permitting a critical foreign investment under the FDI legislation

In case of a voluntary submission for review of a “non-critical” foreign investment, primary subject of assessment is whether it may have a negative impact on the security and public order of the Slovak Republic and the European Union. In assessing the risk of a negative impact, a number of factors are taken into account under the FDI legislation[1].

The screening of a foreign investment under the FDI legislation focuses on the precise identification of possible vulnerability and negative consequences that threaten as a result of the foreign investment, including their severity.

In relation to the target, the Ministry takes into account, inter alia, the customer-supplier chain, existence of a business relationship with the Slovak Republic, the relationship of the target with other persons with a specific status (e.g. an operator of an critical infrastructure element, an economic mobilisation entity, supplier of the state etc.), the position of the target person in the market, the uniqueness of its product/services, the availability of alternative products/services or suppliers in the EU market, the involvement of the target in projects of interest to EU, the specific position of the target itself, etc.

In a case of a foreign investor, the Ministry takes into account, inter alia, the foreign investor’s previous business activities, e.g., crossover with the target’s activities, the long-term strategy of its activities, the strategy under which the foreign investment is planned, investor’s ownership structure, the ultimate beneficiary owners and their strategy and influence on the foreign investor’s management.

A good example of the criterion to be considered is the financing of the foreign investment, i.e., the capacity of the foreign investor to finance the investment, the use of external funds where appropriate, their origin, etc.

In assessing a critical foreign investment, the Ministry takes holistic approach. It sees higher level of risk (without taking into account other relevant information) in case of a foreign investment where 1% of turnover consists of specified products supplied to the armed forces than in case of a foreign investment in a target where, even though, specified products account for a higher proportion of turnover these are not supplied to the state.

6. Proceedings of the Ministry ex officio

In case of ex officio proceedings, the FDI legislation, in general, does not provide for obligations of the foreign investor in relation to the functioning of the target. This does not apply when a foreign investor makes a critical foreign investment without prior permit or conditional approval. An exercise of rights acquired by the foreign investor as a result of making a foreign investment in violation of the FDI legislation is prohibited. The prohibition lasts until the issuance of a decision on the authorization (or conditional authorization) of the foreign investment.

This prohibition does not apply to rights that are necessary for

1. the reversal of the foreign investment and the fulfilment of other obligations imposed in the decision on the prohibition of the foreign investment,
2. ensuring the orderly operation of the target,
3. securing the supply of critical inputs related to energy, raw materials or food security.

7. Consequences of a ban on foreign investment

The prohibition of a foreign investment that has already taken place may be imposed in ex officio proceedings, as well as in voluntary submission for screening of a “non-critical” foreign investment.

The Ministry stresses that the prohibition is a mean of protecting security and public order and is sought only as a last resort. It is invoked only when the use of sectoral legislation or the conditional authorization is not sufficient to protect security and public order.

Given the above, in practice, prohibition is imposed exceptionally; however, once imposed, there are no options for the foreign investor to continue with the banned investment.

Prohibition of a specific foreign investment does not automatically mean prohibition of any other business activity of a foreign investor in Slovakia or other foreign investment.

8. Capacity for voluntary screening

Based on available information and communication with relevant stakeholders, the Ministry does not expect a large number of voluntary submissions aiming to prevent incorrect assessment. In the event of increased activity (for whatever reason), the Ministry will take the necessary steps to ensure that each request is properly assessed within the statutory deadlines.

9. Open space for discussion

The Ministry has invited and encouraged foreign investors to consult necessary issues at fdiscreening@mhsr.sk.

At the same time, the Ministry advises targets and their owners who enter negotiations regarding contemplated foreign investment to check, to the extent possible, the history of the foreign investor, as well as the foreign investor’s strategy and plans.

In general, the Ministry recommends that both groups monitor Ministry’s website for up-to-date information on foreign investment screening, including the necessary forms.

By Katarina Mihalikova, Partner, and Veronika Haladova, Trainee, Majernik & Mihalikova, PONTES

Majernik & Mihalikova has advised DealMachine on its seed round investment from Vision Ventures. Sparring advised Vision Ventures.

DealMachine develops real estate investor-orientated solutions.

Vision Ventures is a Slovak venture capital fund.

The Majernik & Mihalikova team included Partner Ivan Kormanik and Junior Associate Veronika Haladova.

The Sparring team included Attorney at Law Natalia Felvidekyova.

The Government of the Slovak Republic has introduced a draft law on the conversions of companies and cooperatives (the Draft Law) that implements EU Directive 2019/2121, amending Directive 2017/1132 with regard to cross-border conversions, mergers and divisions (the Directive).

Introduction

The Draft Law aims to create a unified, comprehensive and clear legal framework for both domestic and cross-border mergers, divisions and changes of legal form, which should completely replace the current legal framework contained in the Slovak Commercial Code.

The Draft Law, which is proposed to take effect 1 March 2024, is currently in the early stage of the legislative procedure, and therefore the final wording of the legislation may differ from the submitted draft.

The aim of this article is to summarise the main changes that the Draft Law proposes with regard to domestic conversions of Slovak companies and to point out the main benefits and obstacles we perceive in connection with the proposed new legislation.

New instruments

The Draft Law introduces several new instruments:

(i) conversion (in Slovak: premena) as a new common term for a merger and division;
(ii) conversion project (in Slovak: projekt premeny) as a term replacing merger agreement (in Slovak: zmluva o zlúčení/splynutí) and division project (in Slovak: project rozdelenia);
(iii) partial division (in Slovak: odštiepenie) as a new instrument allowed only for limited liability companies and joint-stock companies;
(iv) cross-border division as a new instrument to support the cross-border mobility of companies within the European Union;
(v) cross-border change of legal form as a new instrument required by the Directive.

Key benefits and possible obstacles
From our point of view, the main benefits and possible obstacles of the Draft Law are

Benefits:

• Unification and creation of a comprehensive legal framework, as opposed to the current fragmented legal framework in the Commercial Code.
• The possibility to terminate an approved conversion project (this option is unclear under current law).
• Retaining the possibility to simplify the conversion process by agreement of the shareholders or in conversions within the group.

Obstacles:

• The auditor preparing the report on a draft conversion project of a joint-stock company must be approved by the court (which will most likely result in a prolongation of the process and additional costs);
• Stricter formal requirements for draft conversion projects and the decision on their approval, i.e., the prescribed form of a notarial deed in case of limited liability companies, joint-stock companies and cooperatives.
• “Gold plating” – in a number of cases, the Draft Law goes beyond the minimum requirements of the transposed EU Directives and imposes stricter requirements on joint-stock companies as well as on simpler company forms.

Simple step-by-step plan outlining the main steps in relation to the conversion process for Slovak companies under the Draft Law

Required step

1. Preparation of the draft conversion project.
2. Publication of the draft conversion project in the Collection of Documents / Commercial Journal.
3. Notification of the tax administrator.
4. NEW – Notification of the pledgee on the preparation of the draft conversion project – obligation of the shareholder.
5. NEW – Court approval of the auditor.
6. Auditor’s report
7. Statutory body’s report
8. Supervisory board’s report
9. Disclosure of documents to shareholders.
10. Approval of the draft conversion project
11. Registration in the Commercial Register
12. NEW – Termination of an approved conversion project

Additional note

1. Notarial deed required for limited liability companies, joint-stock companies and cooperatives.
2. Each dissolving company must notify the tax administrator at least 60 days prior to the approval of the draft conversion project.
3. If the ownership interest in the dissolving company is subject to a pledge.
4. Current legislation imposes this obligation on the company and not its shareholders.
5. Applicable only in case of joint-stock companies.
6. May be excluded if all shareholders agree.
7. May be excluded if all shareholders agree.
8. May be excluded if all shareholders agree.
9. May be fulfilled by publishing the documents on the company’s website.
10. Notarial deed required for limited liability companies, joint-stock companies and cooperatives.
11. The conversion becomes effective upon its registration in the Commercial Register.
12. Possible until the application for the registration of the conversion in the Commercial Register is filed.

By Dominika Bajzathova, Counsel, and Michaela Strakova, Associate, Kinstellar