News

10.9.2020September
2020

Amendment to Slovak Commercial Code - new obligations of companies

We would like to inform you about the result of legislative process of National Council of Slovak republic, within which the Act No. 390/2019 Coll., amending and supplementing Act No. 513/1991 Coll. Commercial Code, as amended, and other certain acts (hereinafter referred to as the "Amendment") was adopted. Most of the changes introduced by the Amendment will enter into force as of October 1, 2020.

More

 

The purpose of this Memorandum is to briefly describe the most significant changes that the Amendment introduces into the Slovak legal order, and which could significantly affect your companies as well.

 

1. The Scope of data registered in the Commercial Registry

The Amendment extended the scope of data about shareholders registered into the Commercial Registry. In relation to shareholders – natural persons the registered data were extended by birth numbers. In case of shareholders who are foreign natural persons or persons to whom birth numbers have not been assigned, other identification data will most probably have to be registered instead of birth numbers (e.g. data assigned by a foreign state which are equivalent in meaning and nature to a Slovak birth number).

In relation to shareholders – legal persons the registered data were extended by identification numbers (IČO), if they have been assigned. In the case of shareholders, who are foreign legal persons, instead of the identification number, it will most probably be necessary to enter identifiers assigned by their home state, which are equivalent in nature to the identification number granted under Slovak law.

The shareholder´s identification data will not be publicly accessible, however it will be necessary to carry out their registration into the non-public part of Commercial Registry together with the submission of the nearest proposal for registration of changes in registered data, but no later than September 30, 2022 (under the threat of sanction imposed under the Slovak Act No. 530/2003 on Commercial Registry). Should any assistance with fulfilling of this obligation be required, we are of course available to our clients.

In relation to statutory bodies, under the Amendment it will no longer be possible to register their internal restrictions of authorizations to act on behalf of the company into the Commercial Registry. Just as in the case mentioned in the previous section, companies will be obliged to synchronize their registered data in the Commercial Registry by September 30, 2022.

The Amendment also enshrines the obligation of an officially certified signature of the property owner on his consent to registration of the property as the registered office of the company in the Commercial Registry.

 

2. Change of registration of organizational units of enterprises of Slovak and foreign legal persons in the Commercial Registry

As of the effectiveness of the Amendment, the registration of the organizational units of enterprises of Slovak legal persons into the Commercial Registry will change from mandatory to voluntary. However, this change will not affect organizational units of enterprises of foreign legal persons, which will continue to be subject to registration into the Commercial Registry

In the event that persons authorized to act on behalf of a Slovak and foreign legal person, which organizational units of enterprises are concerned, do not confirm the registered data of the organizational unit of the enterprise in the Commercial Registry by September 30, 2021, the Registry Court will remove such organizational units of enterprises of Slovak and foreign legal persons from the Commercial Registry. We therefore recommend to our clients that they fulfil the obligation in question as soon as possible, and in case of interest we are ready to provide assistance in fulfilling this obligation.

 

3. Change of registration of natural persons in the Commercial Registry

As a result of the Amendment, the range of entities registered in the Commercial Registry has also changed. Natural persons - entrepreneurs who were interested in registration in the Commercial Registry could do so on a voluntary basis. However, from October 1, 2020, in accordance with the Amendment, this possibility will cease to exist. Nevertheless, they will continue to be subject to the obligation to register in the Trade Registry.

 

4. Process of establishment of limited liability company

The Amendment adjusted the circle of persons who will not be able to establish a limited liability company, extending it to persons who are registered as obligors in the register of issued authorizations to carry out execution. In addition to the abovementioned such persons will not be able to (i) be appointed to the position of executive director of a company, (ii) acquire an ownership interest and (iii) transfer their own ownership interest to a third party or other shareholder.

 

5. Modification of the dissolution of companies and cooperatives

Within the Amendment, the regulation of winding - up and dissolution of companies is complexly adjusted. In addition, the Amendment sanctions the company by its winding-up if the company is six months overdue in depositing the financial statements into the Collection of Deeds. The company is obliged to deposit separate financial statements and extraordinary financial statements within nine months as of the date of their elaboration.

 

6. Removal of certain entities from the Commercial Registry

As a part of the process of cleansing of the Commercial Registry, which is also related to the change of the range of registered entities, the Registry Court will remove from the Commercial Registry certain types of entities such as old legal forms (national committees, municipal enterprises), natural persons voluntarily registered in the Commercial Registry, companies that did not convert the nominal values of contributions and registered capital from the Slovak koruna to the euro until December 12, 2020, or companies with respect to which the fiction of bankruptcy occurs.

 

7. Process of liquidation of companies and cooperatives

At present, a company enters into liquidation as of the day of its winding - up. However, the Amendment introduces as the day of the company's entry into liquidation the day of the first liquidator's registration into the Commercial Registry. To protect creditors during the period between the winding - up of the company and registration of the liquidator into the Commercial Registry, the company will be considered as "company in crisis" and therefore the respective restrictions will apply (such as prohibition of reimbursement of the performance replacing own resources).

The entry into liquidation is also associated with a new obligation, which is the deposit of an advance payment to cover the remuneration and expenses of the liquidator. The advance payment will be deposited in the amount of EUR 1,500 into the notarial custody before the liquidator is registered into the Commercial Registry.

The company's entry into liquidation will have, among other things, the effect of automatic expiration of unilateral legal acts, such as orders, authorizations, powers of attorney or procurations. However, after entry into the liquidation, the powers of attorney for representation in legal proceedings will remain in force.

The satisfaction of receivables during the process of liquidation has also undergone a partial adjustment, when, same as until now, the satisfaction of receivables will be approached continuously, but the receivables that would have the character of subordinate receivables in the event of bankruptcy proceedings will be satisfied only after the satisfaction of all other receivables.

The abovementioned represents only a brief overview of some of the many measures introduced by the Amendment, which cannot replace a comprehensive legal assessment of a specific case. Therefore, in case you need help with a specific situation to which the Amendment applies, do not hesitate to contact us at any time.

 

In Bratislava, on September 9, 2020


24.6.2020June
2020

Jiří Němec Heads into the World of Financial Investment

As of June 30th of this year, our law firm’s long-time Partner, Jiří Němec, will leave his long-standing and highly regarded practice in the high-pressure legal profession in order to apply his talents to the business of financial investment.

More

“In twenty years of working for successful clients, leaders in the Czech and international financial and industrial sectors, I have learned a great deal about investment strategy and development. I would now like to use this unique experience and direct my skills in more independent work”, says Mr. Němec about his decision.

 

“While confident of Jiří’s great success in his new endeavours, we are further pleased that he will remain closely involved with the firm. We have agreed that, in addition to his new projects, Jiří will continue to provide strategic support to BBH’s existing clients, as optimal. We recognize and appreciate that his know-how is irreplaceable,” notes BBH’s Managing Partner Petr Mlejnek.


23.4.2020April
2020

BBH SK/ COVID 19/ Temporary protection

We would like to draw your attention to the amendment of the Act No. 62/2020 Coll. on certain emergency measures in relation to the spread of dangerous contagious human disease Covid-19 and in the judiciary and amending certain acts (hereinafter only as the „Amendment“) approved by the National Council of Slovak Republic on 22.04.2020.

More

The Amendment creates a legal framework for provision of newly-created institute of temporary protection to entrepreneurs that have their registered offices in the Slovak Republic. Entrepreneurs will be able to apply for the temporary protection to the competent court, which will publish this information in the Commercial Journal without delay. According to the Amendment, provision of the temporary protection will be able as from 12.05.2020.

 

The purpose of the abovementioned temporary protection to entrepreneurs is to maintain business activities of the concerned entrepreneur and at the same time, to provide at least partial protection to its creditors. The consequences of the temporary protection will be, inter alia, as follows:

 

  • protection against creditors' petitions in bankruptcy against the property of an entrepreneur under the temporary protection and suspension of the bankruptcy proceedings initiated based on creditors’ petitions,
  • suspension of the obligation of debtors to file petitions in bankruptcy against their property,
  • suspension of certain enforcement (execution) proceedings against entrepreneur under temporary protection,
  • provision of temporary protection to entrepreneurs against exercise of a pledge;
  • prohibition of offsetting certain claims against related parties,
  • prohibition of termination of a contract or withdrawal from a contract with an entrepreneur under temporary protection and prohibition of refusal to perform under such contract due to delay in performance of the protected entrepreneur between the period of 12.03.2020 and 12.05.2020,
  • interruption of the running time periods for claiming rights against entrepreneurs under temporary protection, including time periods for contesting of legal acts,
  • obligation of the entrepreneur under temporary protection to make an effort to ensure that its creditors will be satisfied as much as possible and to put interests of the creditors over its own; entrepreneur shall not, inter alia, distribute profits or other own resources and refrain from disposing of material assets pertaining to its enterprise;
  • relaxation of rules for financing by related parties (related loan receivables against entrepreneurs under temporary protection shall not be considered as subordinated within a potential bankruptcy).

 

The temporary protection expires ex lege on 01.10.2020. However, this time period may be prolonged by the Government of the Slovak Republic, no longer than until 31.12.2020. The temporary protection shall also expire if the entrepreneur under temporary protection applies for its termination or if the court decides to terminate it on its own initiative or based on a qualified request of a third party.

 

Taking into account the severity of consequences of providing temporary protection and further specifics of the Amendment, we recommend our clients the following:

 

  • to carefully consider all consequences of possible application for temporary protection (especially considering the fact that an already filed application cannot be withdrawn);
  • in case of interest in temporary protection, to file the respective application as soon as possible, considering capacity options of the competent courts;
  • to review continuously in Commercial Journal whether the temporary protection was provided to business partners and subsequently follow the rules arising from the protection;
  • to consider carrying out actions in relation to business partners/debtors, which may not be possible to carry out after the provision of temporary protection to them (e.g. unilateral termination of contracts).

 

 

Besides introduction of the institute of temporary protection to entrepreneurs, the Amendment, with an immediate effect:

 

i. extends the prohibition of exercise of pledge and prohibition of sale of assets at voluntary auctions, in executions and bankruptcies to 31.05.2020;

 

ii. introduces a general prohibition to landlords of real estate to unilaterally terminate rental contracts for the reason of tenant’s payment default occurred between 01.04.2020 and 30.06.2020 (if the payment default is caused by consequences arising from the COVID-19 situation);

 

iii. provides a right to natural persons in execution (enforcement) proceedings to request the court executor to postpone the execution if statutory conditions are met.

 

 

The abovementioned is just a brief overview of the many measures introduced by the Amendment. Therefore, if you are interested in a complex comprehensive information, please do not hesitate to contact us at any time.

 

BBH advokátska kancelária, s.r.o.

 

In Bratislava, on 23.04.2020

 

This memorandum may not be relied upon or used by any party without the prior written consent of BBH advokátska kancelária, s.r.o., regardless of whether the use is of private nature, or for civil, administrative, criminal or other court purposes.


9.4.2020April
2020

BBH SK / COVID 19/ Postponement of loan repayment

Following the publicized information on postponement of repayment of bank loan instalments, on April 7th 2020 the National Council of the Slovak Republic passed in an urgent legislative procedure an act amending and supplementing the Act No. 67/2020 Coll. on certain extraordinary measures in the financial field in relation to the spread of a dangerous infectious human disease COVID-19 (hereinafter only as the “Amendment”).

More

The Amendment introduces the right of physical persons-entrepreneurs and small and medium sized enterprises during the COVID-19 pandemic to request from a bank or branch of a foreign bank (or other lenders providing loans within the scope of their business) a postponement of repayment of loan instalments for up to nine months, while the lenders are obliged to grant such requests under conditions set out by law.

 

In this respect, the Amendment provides for a detailed mechanism for postponement of loan repayment, including:

 

  • specification of borrowers who may request the postponement of loan repayment,

 

  • conditions under which the lender is not obliged to grant such postponement,

 

  • particulars of the application for postponement of loan repayment and the manner of its submission,

 

  • time periods within which the submitted applications have to be approved or rejected by the lenders,

 

  • introduction of information obligations of the lenders (i.e. banks, branches of foreign banks, other lenders), which must be fulfilled as soon as the Amendment enters into force, including the obligation to publish certain information and documents determined by law on its website and in its operational premises.

 

 

The postponement of the repayment of the loan in accordance with the Amendment does not deteriorate the credit quality of the borrowers and as its result the total amount of the outstanding loan principal under the concerned loan agreements cannot be increased. The lender shall distribute the unpaid interest for the period of the loan repayment into the remaining loan instalments payable after the expiry of the repayment postponement, unless otherwise agreed with the borrower.

 

The Amendment introduces similar rules for possible postponements of loan repayments also in relation to consumers.

 

The aforementioned is only a brief overview of some of the measures introduced by the Amendment. If you are interested in a complex comprehensive information, please do not hesitate to contact us at any time.

 

BBH advokátska kancelária, s.r.o.

 

 

In Bratislava, on April 8th 2020

 

This memorandum may not be relied upon or used by any party without the prior written consent of BBH advokátska kancelária, s.r.o., regardless of whether the use is of private nature, or for civil, administrative, criminal or other court purposes.


8.4.2020April
2020

BBH SK / COVID 19/ Act on extraordinary measures in financial area

The National Council of the Slovak Republic, in order to mitigate negative consequences of the pandemic caused by the spread of coronavirus, passed in an urgent (shortened) legislative procedure on April 2nd 2020 the Act on certain extraordinary measures in the financial field in relation to the spread of a dangerous infectious human disease COVID-19 (hereinafter only as the “Act“).

More

The Act introduces a number of extraordinary measures in the financial area, which aim to rapidly support the financial condition, liquidity and cashflow of businesses and prevent the imminent collapse of the business environment.

 

Most of the measures resulting from this Act will apply during the pandemic period, i.e. from March 12th 2020 (when the Government of the Slovak Republic declared an emergency situation) until the end of the month in which the Government of the Slovak Republic recalls the emergency situation. However, if the economic, social or health situation requires so, the Government of the Slovak Republic may decide, that the measures under this Act shall continue to be applied after the pandemic period.

 

Hereby, we would like to briefly summarize the most important changes introduced into the Slovak legal system with immediate effect by the new legislation:

 

 

Financial aid to support the maintenance of operations in small and medium-sized enterprises

 

The law provides for a financial aid scheme aimed at maintaining the employment and operation in small and medium-sized enterprises during the pandemic. Financial aid shall be provided in form of a loan guarantee and/or the payment of loan interests. The provider of such financial aid shall be the Export-import bank of Slovak Republic and the Slovak Guarantee and Development Bank (hereinafter only as the “Bank“).

 

The provision of a loan guarantee is a form of financial assistance and represents an obligation of the Ministry of Finance of the Slovak Republic to fulfil the obligation of the small or medium-sized enterprise towards the Bank, arising from the loan agreement concluded between the Bank and small or medium-sized enterprise.

 

The second form of financial assistance is the payment of interest on the loan provided by the Bank from the resources of the state budget (interest bonus), under the conditions defined by the Act.

 

The beneficiaries of the above forms of financial assistance will be small and medium-sized enterprises meeting the definition of the relevant regulation of the European Commission and other requirements under the Act and related legislation.

 

The specifics regarding the process of application and approval of the financial aid and provision of loans supported by it are not yet known. However, as there may be high demand for the aid in question given the current situation among small and medium-sized businesses, we recommend that clients, if interested, draw up and submit an application as soon as possible after the official launch of the program.

 

 

Measures in the area of taxes, duties, accounting, administrative fees etc.

 

In addition to the abovementioned, the Act introduces a number of other measures in connection with the pandemic and its consequences for the economy of the Slovak Republic, especially in the areas of taxes, duties, accounting, but also financial market supervision and budgetary rules of public administration.

 

These include the following measures:

  • simplification of the institute of waiver of missing deadlines in tax proceedings;
  • suspension of tax controls;
  • postponing of due date of tax arrears and non-updating of published lists of tax debtors;
  • interruption of running of time periods for expiration of the right to levy tax, recover tax arrears and statute of limitations for the right to recover tax arrears;
  • deferral of tax enforcement (execution) proceedings;
  • postponing of the deadlines for filing the income tax return and tax return on tax on motor vehicles;
  • postponing of the deadlines for compliance with the obligations arising from the Accounting Act;
  • waiver of certain administrative charges;
  • introduction of certain extraordinary powers of the National bank of Slovak Republic.

 

 

The abovementioned is just a brief overview of the many measures introduced by the Law and cannot replace a comprehensive legal assessment of a particular case. Therefore, if you need help with a particular situation, to which the Law applies, please do not hesitate to contact us at any time.

 

 

BBH advokátska kancelária, s.r.o.

 

In Bratislava, on April 3rd 2020

 

This memorandum may not be relied upon or used by any party without the prior written consent of BBH advokátska kancelária, s.r.o., regardless of whether the use is of private nature, or for civil, administrative, criminal or other court purposes.


6.4.2020April
2020

BBH SK / COVID 19/ Labour Code amendment

In response to the pandemic of coronavirus and the COVID-19 disease, in order to mitigate effects of the pandemic on employment in the Slovak Republic the Parliament of the Slovak Republic approved a governmental proposal of a law amending the Act No. 311/2001 Coll., Labour Code, as amended (hereinafter only as „Amendment to the Labour Code“). The Amendment to the Labour Code becomes effective by its publication in the Collection of Laws of the Slovak Republic.

 

More
 

The measures in the area of labour law are primarily concerned with the organization of work, the allocation of working time, taking of holiday leave and obstacles to work on side of employee and employer. The mentioned amendments of the Labour Code shall apply only in the time of an emergency situation or state of emergency and within two months after these have been called off (hereinafter only as „crisis situation“).

 

We would like to briefly summarize the adopted changes affecting the Labour Code below.

 

1. Performance of work from home (Home office)

 

Under the legislation applicable outside the crisis situation the employer was not entitled to order an employee to work from home and similarly the employee did not have the right to demand to perform his/her work obligations via means of work from home even in the event of a crisis situation. The employer and employee had to agree on work from home.

 

Amendment to the Labour Code introduces the possibility for the employer, during the effectiveness of a measure for prevention of occurence and spread of infectious diseases or a measure during endangerment of public health to order an employee to work from home, provided the agreed type of work permits it. The employer may therefore order an employee to work from home in order to prevent the spread of an infectious disease even if the employee refuses it.

 

At the same time, an employee has been granted the right to perform work from his/her home, if the agreed type of work permits it and there are no serious operational reasons, for which this employee cannot work from home (e.g. requirement of a part of the employees to be present at place of work in order to secure basic operation).

 

 

2. Allocation of working time

 

The Amendment to the Labour Code shortens the time limit for announcement of working time allocation to 2 days in advance, with validity for at least a week, while the employer and the employee may also agree on a shorter notification period (for reasons of legal certainty we recommend to conclude such agreement in written form).

 

Pursuant to the legislation applicable outside the crisis situation, the employer was obliged to notify the employee on the schedule of working time allocation at least 7 days in advance with validity for at least a week. Employers can thus react flexibly to changes caused by the crisis situation and thus adapt their operation to the new situation.

 

 

3. Holiday leave

 

Pursuant to the legislation applicable outside the crisis situation, the employer had to notify the employee on taking of holiday leave ordered by the employer at least 14 days in advance. Shortening of this period could have been reduced only exceptionally, with the consent of the employee.

 

On the basis of the Amendment to the Labour Code, the employer must notify the employee on ordered holiday leave at least 7 days in advance. In case of unused holiday days from previous year, the employer is obliged to notify the employee on ordered holiday leave at least 2 days in advance. This deadline can be shortened with the consent of an employee. The abovementioned does not apply to holiday leave, which has not been taken for reasons of maternity or paternal leave, temporary work incapability or the exercise of public office, since taking of such holiday leave is foreseen directly by the Labour Code (after the obstacle has ceased).

 

 

4. Protection of an employee against termination of employment

 

The Amendment to the Labour Code explicitly stipulates, that not only the quarantine and the nursing of family members or caring for a child under 10 years of age, but also an ordered isolation has to be regarded as important personal obstacle on the side of an employee, where the employer is obliged to excuse the absence of an employee from a place of work. Employee is not entitled to wage reimbursement during this time, unless special regulation stipulates otherwise (e.g. Social Insurance Act).

 

According to the Amendment to the Labour Code, during quarantine, isolation or nursing a family member an employee is considered as temporarily incapable of work for the purposes of termination of employment via means of notice of termination. Such employee is therefore in the protective period and is subject to the statutory provision on prohibition of termination of employment. At the same time, the employer is obliged to assign the employee to the original work and workplace and if this is not possible, to another work corresponding to the employment contract, after the isolation, quarantine or nursing a family member period has ended.

 

 

5. Obstacles on the part of the employer – cessation or restriction of activity

 

The Amendment to the Labour Code explicitly specifies, that if the state prohibits or restricts the operation of some employers due to a decision of a public authority or a crisis situation, it is considered an obstacle on part of the employer. In case of such obstacle, an employee is entitled to a wage compensation in the amount of 80 % of the average earnings of the employee, but at least on the amount equal to the minimum wage. However, this change does not affect the existing agreements with the representatives of the employees, which allow for lower wage compensations (at least 60 %).

 

The legislator has explicitly stipulated, that the abovementioned does not apply to employees of subjects of economic mobilisation, on which an obligation to work has been imposed. An entrepreneur may as well fall under the scope of the subject of economic mobilisation under specific circumstances, if it has been designed as a subject of economic mobilisation via means of an order of the competent authority.

 

 

The summary above provides a basic overview of the changes in labour law adopted in the context of the coronavirus pandemic crisis. The Amendment to the Labour Code also includes amendments to other laws, such as Social Insurance Act, Employment Services Act, Occupational Safety and Health Act and Social Services Act.

 

 

We are available in case of any questions related to possible impacts of the aforementioned adopted changes on labour relations in your company.

 

BBH advokátska kancelária, s.r.o.

In Bratislava, on April 3rd 2020

 

This memorandum may not be relied upon or used by any party without the prior written consent of BBH advokátska kancelária, s.r.o., regardless of whether the use is of private nature, or for civil, administrative, criminal or other court purposes.


1.4.2020April
2020

BBH AWARDED IN CHAMBERS AND PARTNERS 2020

We are pleased to announce that BBH has been ranked among the leading law firms in the Chambers and Partners international ranking 2020. 

More

BBH has upheld its top Band 1 ranking in the category of Dispute Resolution. In addition BBH succeeded also in all of our other key practice areas: Restructuring/Insolvency (Band 2), Banking & Finance (Band 3), Capital Markets (Band 3) and Corporate and M&A (Band 3).

 

BBH Partner František Honsa achieved an unprecedented success in individual rankings whereby he not only retained his Eminent Practitioner ranking in Dispute Resolution, but in addition to that he was named Eminent and Most in the category of Most in Demand Arbitrator in the Czech Republic.

 

Apart from that other BBH lawyers have marked individual success being recognised as prime advisors in various categories, namely Vladimír Uhde who succeeded in Dispute Resolution (Band 2) and Arbitration Counsel (Band 4), Robert Klenka who succeeded in Insolvency a Restructuring (Band 2) and Dispute Resolution (Band 4), Petr Přecechtěl ranked in Corporate and M&A (Band 3) and Tomáš Sedláček ranked in Banking & Finance (Band 3) and Capital Markets (Band 3).

 

Celkové naprosto výjimečné hodnocení a úspěch v dílčích kategorií jak v hodnocení firemních, tak i v hodnocení individuálních, pak podtrhuje skutečnost, že BBH bylo i letos nominována do užšího výběru mezi 6 nejlepších advokátních kanceláří v České republice. Konečné vyhlašování cen se bude konat tento rok v dubnu.

 

These unique firm and individual rankings are underlined by the fact that BBH has been shortlisted among the 6 best law firms in the Czech Republic. The final awards will take place this April.

 

Please see the following link for more information:


https://chambers.com/law-firm/bbh-advokatni-kancelar-sro-europe-7:1427


31.3.2020March
2020

Publication: Arbitration in the Czech Republic in 2020 - 25 years of the Arbitration Act and counting

František Honza and Petr Vošahlík give an overview of arbitration in the Czech Republic in Disputes Yearbook 2020.

More

Please see the following link for publication:

https://indd.adobe.com/view/c2cb9aa1-5e55-435b-b563-aa3a27efb8e0


30.3.2020March
2020

BBH SK / COVID 19/ Act on emergency measures

In the fight against viral disease Covid-19, on March 25th 2020 the National Council of the Slovak Republic passed, in an urgent (shortened) legislative procedure, Act No. 62/2020 Coll. on certain emergency measures in relation to the spread of dangerous contagious human disease Covid-19 and in the judiciary and amending certain acts (hereinafter the „Covid-19 Act“), which entered into force on March 27th 2020.

 

The Covid-19 Act introduces a number of emergency measures relevant to the spread of Covid‑19 and related emergency situation and state of emergency that are declared for the territory of the Slovak Republic. Hereby, we would like to summarize the most important changes introduced into the Slovak legal system with immediate effect by this new legislation:

More

Temporary limitation of running of time periods and return of time periods

Pursuant to the Covid-19 Act, from March 27th to April 30th 2020, there is no running of limitation periods (In Slovak: premlčacie lehoty) and preclusion periods (In Slovak: prekluzívne lehoty) in private-law relationships – i.e legal relationships arising pursuant to private law regulations, in particular the Civil Code and the Commercial Code.

 

As a result of the aforementioned, all limitation and preclusion periods in legal relationships governed by Slovak law shall expire 34 days later (if the period set by the Covid-19 Act will not be extended repeatedly), which will have to be taken into account for the next several years when calculating the limitation and preclusion periods.

 

At the same time, under the Covid-19 Act, the limitation and preclusion periods which have expired between March 12th 2020 (after the declaration of the emergency situation for the territory of the Slovak Republic) and March 27th 2020 shall not expire earlier than 30 days after the entry of Covid-19 Act into force (i.e. April 27th 2020).

 

The legislator thus de facto renews the already expired legal periods, which may in certain cases have a significant impact on the legal relations of concerned persons. Despite likely a good intention of the legislator, this legislation causes undoubtedly an infringement of the legal certainty of a certain group of concerned persons with consequences which are difficult to estimate.

 

Temporary limitation of procedural time periods

Under the Covid-19 Act, from March 27th 2020 until April 30th 2020 the procedural periods set by the law or determined by the court for carrying out of a procedural act in proceedings before a court by parties of a proceedings do not run (a special regime applies for criminal proceedings).

 

In the event that a case cannot be postponed for reasons of threat to life, health, safety, liberty or substantial damage to a party of the proceedings, the court may determine that such limitation of the running of a period shall not apply and at the same time set a new reasonable time limit. An appeal against such resolution of the court shall not be possible.

 

Among other things, the above limitation shall apply also with respect to appeal periods in court proceedings, which will cause delays in entering of court decisions into effect. It is also not yet clear, how shall the new legislation apply to enforcement (execution) and bankruptcy proceedings, where it will be necessary to observe, how will the decision-making practice of the courts or eventually the Ministry of Justice of the Slovak Republic deal with this issue when interpreting the Covid-19 Act.

 

Conduct of court hearings in times of emergency situation and state of emergency

The Covid-19 Act sets out, that in times of emergency situation or state of emergency shall the courts conduct all forms of court hearings only in the necessary extent (especially in criminal cases and in cases of custody and care for minors).

 

It will also be possible, during emergency situation or state of emergency, to exclude the public from court hearings for a reason of protection of health. The court will be obliged to execute and make publicly available a sound recording of such hearing.

 

Temporary prohibition of the exercise of pledge and refraining from conducting of an auction

Pursuant to the Covid-19 Act, in the period up to April 30th 2020 a right of pledge cannot be exercised and auctioneer, court enforcer and trustee are up to April 30th 2020 obliged to refrain from conducting of an auction, organizing of a bidding proceedings or other competitive process leading to sale of property.

 

A consequence for the breach of these provisions is that acts leading to the exercise of a pledge right in the relevant period will be ineffective and auctions carried out in the relevant period will be invalid. From the point of view of creditors, it will therefore be necessary to proceed with enforcing their claims in this period in such manner that the validity of their actions in this respect cannot be contested by the debtor and/or third parties in the future.

 

It is also noteworthy that the Covid-19 Act did not prohibit other methods of sale of assets in bankruptcy proceedings declared against the property of the debtor, therefore such sale is still, according to our opinion, permissible.

 

Extension of the deadline for filing of petition in bankruptcy by debtor

Pursuant to the Covid-19 Act, the period in which a debtor is obliged to file a petition in bankruptcy over its property is extended from 30 to 60 days. This adjustment is applicable to over-indebtedness of a debtor that occurred between March 12th 2020 and April 30th 2020.

 

Enabling of per rollam decision-making for legal persons of private law

Collective bodies of legal persons established under regulations of civil law or commercial law (companies, cooperative societies, civil associations, foundations, etc.) may, under Covid-19 Act, in times of emergency situation or state of emergency make their decision per rollam, even if such possibility is not stipulated in their internal regulations, statutes or articles of association.

 

The provisions on voting at a general meeting of a public joint-stock company shall apply mutatis mutandis on such decisions of company bodies. Failure to comply with the legal rules during voting or failure to fulfil the requirements of subsequent corporate documentation may still cause invalidity of the decisions taken by company bodies.

 

Exemption from the registration obligation in the Register of the partners of the public sector in public procurement

The Covid-19 Act provided for an exemption from the obligation of registration in the Register of the partners of the public sector in public procurement during the emergency situation or state of emergency for procurement of goods (such as protective face masks, respirators, test kits, etc.) and services (or construction works), if these serve the purpose of ensuring the protection of life and health.

 

Provision of localization and other data to the Public Health Authority of the Slovak Republic

In times of emergency situation or state of emergency in the healthcare sector, which are caused by the occurrence of a pandemic or the spread of a dangerous contagious human disease, the Public Health Authority of the Slovak Republic will be able to obtain location data and so‑called operational data generated by electronic communications from the mobile operators for the purposes of protection of life and health of the population.

 

The mobile operators will provide these data to the Public Health Authority of the Slovak Republic only on the basis of justified written requests. The Public Health Authority of Slovak Republic will be able to collect, process and store these data only for the duration of the emergency situation or state of emergency in the healthcare sector, but not longer than up to December 31st 2020. The purpose for processing of these data is the early identification of potential carriers of the disease and prevention of its further spreading.

 

Part of the abovementioned measures is designed to be applied only in case of emergency situation or state of emergency, in accordance with the applicable legislation (as is currently the case for coronavirus and Covid-19 disease).

 

The other measures are of a temporary nature (to be applied until April 30th 2020), and their petitioner, the Ministry of Justice of the Slovak Republic, does not exclude their further prolongation. Therefore, it will be crucial to monitor the activities of the Ministry and the entire legislative process in order to be prepared for any upcoming changes in time.

 

We are available to answer any questions.

BBH advokátska kancelária, s.r.o.

 

 

This memorandum may not be relied upon or used by any party without the prior written consent of BBH, advokátní kancelář, s.r.o., regardless of whether the use is of private nature, or for civil, administrative, criminal or other court purposes.


26.3.2020March
2020

BBH SK / COVID 19/ Loan Agreements

In connection with the continuously emerging negative impacts related to the spread of the coronavirus and the dangerous contagious COVID-19 disease, we would like to send you some of our remarks on the possible consequences of the current situation on the obligations arising from loan agreements governed by Slovak law. Following our experience, the information below apply mainly to obligations from such loan agreements, where one or more banks or other institutional creditors are acting on the side of the lender.

 

Of course, the information provided below cannot replace a comprehensive legal assessment of a specific relationship; such assessment and its outcome always depend on the individual circumstances of a particular case (terms of the specific contract etc.). Therefore, in case you need assistance in a specific case, do not hesitate to contact us.

More

Relevant provisions of loan agreements

Due to adverse consequences of the situation caused by the coronavirus on the economic performance of the borrowers, several types of provisions typically found in loan agreements may be breached by the borrowers:

 

Material adverse change on the part of the borrower

Negative impacts of the coronavirus and related governmental measures in the business activity and economic performance can cause the so-called material adverse change on the part of the borrower. In relation to the coronavirus, the definition of a material adverse change consisting of the change (i) in income, assets, business activities, operation or financial (or other) situation of the borrower and/or (ii) in the ability to fulfil its obligations under the loan agreement of other financial documents may be fulfilled.

 

Breach of financial covenants by the borrower

The worsening of the economic situation of the borrower may probably also lead to the inability of the borrower to comply with the so-called financial covenants, the purpose of which is to measure the economic performance or condition of the borrower at a specified date, typically quarterly. In particular, negative impacts on income and hence on EBITDA indicator may be expected.

 

Other provisions of loan agreements

Due to the negative impact of the coronavirus, other provisions of loan agreements may be breached, in particular due to (i) default with payment obligations (i.e. non-payment of the loan, its instalment, interest or agreed upon charges), (ii) breach of obligations towards other persons (Cross default) (e.g. breach of the payment obligations of the borrower towards other lenders), (iii) bankruptcy/crisis occurring at the side of the borrower, (iv) bankruptcy, restructuring or enforcement proceeding being initiated against the borrower, or (v) the borrower being in breach of its representations and guarantees.

 

Consequences of events of default

Each of the abovementioned events usually causes or may cause (after expiration of a remedy period) an event of default which generally entitles the lender mainly to stop further provision of financing, accelerate the loan, claim contractual penalties, take steps towards exercise of security, etc. Specific terms and conditions are always stipulated in the individual loan agreements.

 

In case an event of default occurs or threatens to occur, the borrower is obliged to notify the lender on such event without delay. It is generally recommended to fulfil such information obligation without delay and to enter into negotiations with the lender in order to resolve the event of default in such manner, so that the consequences of a breach of an agreement are as minimal for the borrower as possible.

 

Possibilities of the borrower to defend itself

Loan agreements usually transfer all risks that may be relevant for the performance of the loan on the borrower. Liberation from liability for damages due to a force majeure event (Section 374 of the Slovak Commercial Code) is therefore not directly applicable in relation to the exercise of the rights of the lender arising from breach of a loan agreement.

 

It is also theoretically possible to consider, in a particular case, whether the legal regulation on liberation from liability for damages in the event of a force majeure (Section 374 of the Slovak Commercial Code) may be analogically applied to the given situation. In such case it is possible to argue that if the borrower breached the loan agreement as a result of the emergency situation connected to coronavirus (which has the nature of force majeure) and for this reason the loan has been accelerated by the lender, the borrower is not able to repay the loan early again as a result of the emergency situation connected to the coronavirus (force majeure event).

 

Thus, if the borrower repays the loan later (after this obstacle has disappeared and the economic situation has improved), it can be argued that it could not have been done earlier due to a force majeure event, and thus the borrower relieves itself of liability at least in the extent of the default interest accrued on the unpaid loan over that period. The interest on late payment generally constitutes appurtenances to a monetary claim and not a separate claim for damages. However, it is also the case that the interest on late payment usually serves to compensate for any damages incurred as a result of the delay in the performance of the monetary debt. It can therefore be argued by the borrower that the legal regulation regarding force majeure events may be applied to the interest on late payment per analogiam.

 

In general, the conduct of a lender during the duration of the emergency situation connected to the coronavirus will also need to be assessed in terms of its compliance with good morals and fair business conduct rules. These are situations, where actions of the lender, despite being formally in line with the loan agreement, would appear to be manifestly inappropriate, illogical or leading to the economic destruction of the borrower, who would otherwise, after the removal of the temporary obstacle, be able to fully restore its economic activity and properly repay its debts.

 

Such conduct of the lender could be considered in extreme cases as contrary to good morals and/or principles of fair business conduct. The terms of good morals and fair business conduct are not defined by law, and therefore offer relatively wide application possibilities as well as wide range for judicial discretion. Exercise of a right that is contrary to the fair business conduct principle does not enjoy legal protection (Section 265 of the Slovak Commercial Code) and a legal act that is by its content or purpose contrary to good morals is absolutely invalid (Section 39 of the Slovak Civil Code).

 

Within their loan agreements, the contracting parties may stipulate most issues in a manner different from the law or the market standard. Therefore, it is always necessary to assess the relevant loan agreement directly and not to follow only the general rules resulting from the applicable legislation.

 

We are available to answer any questions.

BBH advokátska kancelária, s.r.o.

 

 

This memorandum may not be relied upon or used by any party without the prior written consent of BBH, advokátní kancelář, s.r.o., regardless of whether the use is of private nature, or for civil, administrative, criminal or other court purposes.