Slovakia

In a recent decision (7 Cmo 21/2024), the High Court in Prague delivered a landmark ruling on the invalidity of contractual representations and warranties in a share transfer agreement, with significant implications for M&A practice across the CEE region. The case revolved around whether certain boilerplate declarations of the transferor about the status of the company (target), not linked to clearly defined contractual obligations, could give rise to a contractual penalty. The claimant sought payment of CZK 400,000 (approx. EUR 16,000) as a contractual penalty for the alleged breach of representations concerning the target company’s legal and financial standing. These included broad statements such as the company not having any outstanding loans or legal impediments, and its compliance with Czech employment laws. The representations were contractually linked to specific penalties in case of breach. The defendant (seller) disputed both the factual basis and the legal enforceability of these declarations. The Prague High Court ultimately sided with the defendant, ruling that such statements were too vague and insufficiently defined to constitute legally binding contractual obligations. Specifically, the court held that: The general nature of the declarations prevented them from being objectively assessed. They referred to corporate status and internal affairs of the target company which were not adequately specified in the agreement, and not on the status of the subject of the transfer itself (business share), which causes their uncertainty. The legal framework under Czech civil and commercial law (notably § 553 and § 555 et seq. of the Civil Code) requires clear, certain and actionable undertakings to enforce contractual penalties. This ruling underscores the importance of precision and legal certainty in drafting representations and warranties. Courts will not accept and enforce penalties for breach of vague or overly generic statements, especially when they are detached from measurable or verifiable obligations. Relevance for Slovak Practice While the case was adjudicated under Czech law, the decision is of high relevance for Slovak legal practitioners. Slovak courts frequently draw inspiration from Czech jurisprudence, particularly in civil and commercial matters where the legal frameworks remain conceptually aligned post-recodification. In Slovak M&A transactions, it is common to see similar sweeping representations mirrored from foreign templates. This decision serves as a warning: absent a clear connection between a representation and a defined legal duty or factual basis, such clauses may be deemed void or unenforceable. Slovak law similarly recognises the concept of contractual penalty (§ 544 et seq. of the Slovak Civil Code) but, like Czech law, requires a breach of a concrete obligation for enforcement. As transactional structures become more complex and cross-border in nature, legal certainty in documentation becomes indispensable. Parties must carefully tailor their representations and remedies, ensuring that any penalties are enforceable under Slovak law. Conclusion This decision by the Prague High Court adds to a growing body of case law stressing the need for clarity and specificity in transaction documents. For clients planning acquisitions or divestments in Slovakia, this is an important reminder to revisit boilerplate language and seek local legal guidance. At G. Lehnert, our corporate and transactional team has deep experience advising international and domestic clients on acquisitions across sectors. If your transaction involves Slovak assets or entities, we are ready to assist in ensuring your documents are not only commercially sound but legally enforceable. Contact us to discuss how this decision may impact your next deal in Slovakia. Lehnert s.r.o., Bratislava, Slovakia Norbert Smaho [email protected]

Dentons has advised Bank Gospodarstwa Krajowego (BGK), the Polish development bank, on a long-term investment loan of up to US$60 million granted to the Molo Group, owned by the Slominski family. The financing will be used to build a hotel complex with 251 rooms and suites on Providenciales, the main island of the Turks and Caicos archipelago in the Caribbean. The buildings will be constructed from equipment and modules manufactured in Poland. “It has been a great pleasure and satisfaction to assist BGK with this prestigious financing transaction, supporting the expansion of Molo Group in their largest investment to date. This project not only promotes Polish exports but also features exceptional hotel developments in some of the most stunning locations in the Caribbean”, said Tomasz Zwoliński, partner in the Banking and Finance practice in Warsaw. The complex includes two modular hotels: the 4-star boutique Indigo hotel and the 5-star Kimpton hotel. Both brands are owned by the international IHG group. The Indigo hotel is scheduled for completion by the end of 2025, while the Kimpton is scheduled for completion in the first half of 2027. Tomasz Zwoliński supervised and led the cross-border project, advising on English and Polish law matters related to preparing, negotiating and signing the finance documents and securities, which covered five jurisdictions and involved collateral and mechanisms related to hurricane risk. He was supported by Jakub Zienkiewicz (counsel) and Kamil Bator (associate) from the Banking and Finance team in Warsaw. The transaction team also included partner Babette Märzheuser-Wood, Global Head of the Franchise Group, and Agnieszka Nagórska-Kordeczka (counsel), who advised on hotel franchise agreements. Dentons worked alongside teams from Griffiths & Partners, who served as Turks and Caicos counsel, and Massiah Law, acting as Gibraltar law counsel, both members of the Nextlaw referral network. About Dentons Across over 80 countries, Dentons helps you grow, protect, operate and finance your organization by providing uniquely global and deeply local legal solutions. Polycentric, purpose-driven and committed to inclusion, diversity, equity and sustainability, we focus on what matters most to you. dentons.com Media contact Lidia Adamczyk Communications, Marketing & Business Development Manager +48 513 045 352 [email protected]  

Kinstellar is proud to announce it has successfully advised CCC—a leading Polish-based footwear manufacturer and retailer with a network of over 1,000 stores across 29 countries—on the Romanian, Czech, Croatian, Hungarian and Slovak legal aspects of a PLN 1.8 billion (approximately EUR 420 million) term and revolving facilities agreement. The financing, which is provided by a consortium of lenders including mBank, EBRD, Bank Pekao, BNP Paribas Bank Polska, PKO Bank Polski, Santander Bank Polska, and Bank Handlowy w Warszawie, as well as the factoring entities Santander Factoring, mFaktoring, PKO Faktoring, and BNP Paribas Faktoring, will support CCC’s ongoing operations and the further development of its brands, including HalfPrice. Kinstellar's teams included Special Counsel Magdalena Raducanu (Head of Banking & Finance), Managing Associate Razvan Constantinescu, Associate Alexandra Maria Sofineti in Romania; Counsel Martina Brezinova, Junior Associates Dominik Ctvrtnicek and Tomas Blazek in the Czech Republic; Partner Levente Hegedus, Associates Dorottya Bito and Veronika Heiszer, and Junior Associate Kinga Farkas in Hungary; Partner Mihovil Granic and Senior Associate Franciska Fadljevic in Croatia, and Counsel Dominika Bajzathova in Slovakia. This financing further solidifies our team’s extensive track record of advising on complex, high-profile deals across multiple jurisdictions and demonstrates our ability to deliver outstanding results on a regional scale.