M&A – Main differences between Share Deal and Asset Deal in Slovakia

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Slovakia

What are the main features of a share transfer agreement in Slovakia?

  • With the share transfer the buyer acquires from the seller the shareholding or so-called ownership interest in the target company.
  • Transferability of a share to other shareholder or to a third party may be subject to prior approval of general assembly or board depending of the legal form of company and specific regulation in Memorandum of Association (MoA) or Articles of Association (AoA).
  • There is no statutory pre-emptive right of other shareholders unless provided for in MoA or agreed in shareholders' agreement (in case of Simple Joint Stock Company). 
  • The Share Purchase Agreement (SPA) as a separate type of contract with specific content requirements under Slovak law (e.g. declaration of buyer on accession to MoA and AoA if adopted in case of Limited Liability Company) that needs to be executed in writing and duly notarized.
  • Consent of tax administrator with majority share transfer in case of Limited Liability Company may be required in certain circumstances.
  • SPA needs to be properly designed to take into account all circumstances of the particular deal, including appropriate representations, warranties and indemnities.

What are the main features of an asset transfer agreement in Slovakia?

  • In an asset transfer agreement the buyer can choose, or “cherry pick”, to purchase either (i) only certain agreed assets (such as real estates, equipment, licences, customer's lists) or (ii) business unit/enterprise or part of it creating separate organizational unit, while the seller retains ownership of the company and the purchaser will become owner of the transferred assets only. 
  • If the parties agree to transfer only certain assets, an asset transfer agreement should include individual description of assets or liabilities to be transferred. In case of business unit/enterprise transfer agreement or its part, all rights and obligations that relate to the sale are transferred to the buyer (including contracts, intellectual property rights, rights arising out of employment, right to use business name, rights to reals estates) as a whole. In case of agreement on transfer of part of enterprise assets to be transferred need to be described in a way to be clearly distinguishable from the other assets of the seller. 
  • The agreement on transfer of business unit/enterprise or its part needs to be executed in writing with duly notarised signatures of the seller and the buyer and is subject to prior approval of the general assembly of the limited liability company or the joint stock company.
  • The seller is obliged to notify the buyer of any defects in the transferred assets of which he knows or must know, otherwise the seller is liable for damages that could have been prevented by this notice. 
  • In relation to the rights and obligations arising from employment relations with the company's employees being transferred (which is not the case with each asset transfer) the seller is obliged to inform the employees' representatives or directly employees (if there are no employees' representatives) in writing no later than one month before the transfer about date and reasons of transfer including employment, economic and social consequences and planned measures applicable to employees.
  • In case of business unit/enterprise transfer agreement the transfer of the liabilities does not require the consent of the creditor, but the seller is liable for the fulfilment of the transferred liabilities by the buyer. The buyer is obliged to notify the creditors without undue delay of the assumption of obligations and the seller is obliged to notify the debtors of the transfer of receivables to the buyer. The creditor can file a claim to the court to declare ineffectiveness of transfer against him within 60 days from the day he became aware of the asset/business transfer, but no later than six months from the day the sale was registered with the Commercial Registry, provided that the transfer undoubtedly worsens his claim.

How to transfer the shares of a company in Slovakia?

Specific requirements for transfer of shares apply depending legal form of the companies:

Limited Liability Company – s. r. o.:

  • Need to obtain shareholder's resolution granting approval with share transfer depends on the fact whether the share is transferred either to another shareholder or a third party. Share transfer to other shareholder is subject to prior general assembly approval unless excluded by MoA. Share transfer to a third party is possible only if allowed by MoA and may be subject to prior general assembly approval if required by MoA. 
  • Change of shareholder needs to be entered in the list of shareholders and registered with the Commercial Registry.
  • A consolidated version of MoA reflecting the new shareholding must be filed with the Collection of Deeds of the Commercial Registry. 
  • With effectiveness as of 1 October 2020 prior to registration of change in majority shareholding the registry court shall verify whether the seller or the buyer is not registered as debtor in the register of issued authorizations for the execution.

Joint Stock Company – a.s.:

  • Transferability of shares may be limited but not excluded in AoA. 
  • The company is obliged to ensure change in list of shareholders without undue delay following demonstration of change to the company. 
  • Provided that the buyer shall become a sole shareholder, such change needs to be registered with the Commercial Registry.

Simple Joint Stock Company – j. s. a.

  • Transferability of shares may be limited or excluded in the AoA. A prior approval of the company may be required for transfer of shares by AoA. In such case AoA must also contain reasons for refusal of granting approval with share transfer. 
  • The company is responsible for keeping a list of shareholders.

The new ultimate beneficial owners need to be registered with the Commercial Registry notwithstanding the legal form of registered company within 30 days following effectiveness of the share transfer.

How to transfer the assets/business of a company in Slovakia?

  • In case of the asset transfer agreement the price for the assets to be transferred should be negotiated and agreed between the seller and the buyer. 
  • In case of agreement on business transfer (or its part) the purchase price is agreed between the contractual parties. If the purchase price was determined on the basis of data stated in the accounting records of the company at the date of agreement conclusion and the agreement takes effects at a later date, the purchase price may be agreed to be adjusted based the its increase of decrease which occurred in the interim period.
  • The agreement on the business transfer or its part needs to approved by the general assembly of the seller and the buyer.
  • The seller registered with the Commercial Registry shall apply for registration of business transfer with the Commercial Registry.
  • The business transfer agreement must be filed into the Collection of Deeds of the Commercial Registry.
  • Ownership title to real estate transfers upon its registration respectively deposit with the respective cadastral office.

What are the transfer taxes for a share deal in Slovakia?

The transfer of a share may result in taxable capital gains for the seller. Due to complex and evolving tax and levy regulation each transfer needs to be assessed individually with authorised tax and accounting advisors.

What are transfer taxes for an asset deal in Slovakia?

The transfer of a business is subject to income tax and a specific regime applies in relation to VAT. Due to complex and evolving tax and levy regulation each transfer needs to be assessed individually with authorised tax and accounting advisors.

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