Slovakia

Slovakia is strategically located in the “heart” of Europe, making it a suitable location for businesses. Hence, it is no surprise that Slovakia is home to businesses from various industry sectors including machinery, electronics & electronic equipment, banking & finance, pharmaceuticals, chemicals, plastics, services outsourcing (including shared services centres), information, communication & technology, real estate, retail, R&D, etc. In addition, Slovakia is well known for its automotive industry, with global car brands such as Volkswagen, PSA Peugeot Citroën, Kia Motors, and Jaguar Land Rover, all having production facilities in Slovakia.

Top 10 biggest businesses (excluding financial companies) according to their turnover in 2019 are1:

1.
VOLKSWAGEN SLOVAKIA, a.s.
automotive

2.
Kia Motors Slovakia s.r.o.
automotive

3.
Slovnaft, a.s.
oil refinery

4.
PCA Slovakia, s.r.o.
automotive

5.
Slovenské elektrárne, a.s.
energy

6.
U. S. Steel Košice, s.r.o.
metallurgy

7.
Mobis Slovakia, s.r.o.
automotive

8.
SAMSUNG Electronics Slovakia s.r.o.
electronics

9.
TESCO STORES SR, a.s.
retail

10.
Lidl Slovenská republika, v.o.s.
retail

The Slovak economy is very open, and a significant part of business in Slovakia is focused on export. As in other countries, the COVID-19 pandemic has adversely affected the Slovak economy, and an economic recession and decrease in the GDP of Slovakia is expected. After ten years of continuous growth of the Slovak economy, the relevant economic figures in 2020 reported negative results for the first time since the financial crisis of 2009. According to the report published by the Financial Policy Institute of the Ministry of Finance in September 2020, the Slovak economy is expected to contract by 6.7% in 2020 due to the global COVID-19 crisis. However, an improvement is expected in 2021 as the restart and revival of the economy should continue, and an increase of the GDP in the amount of 5.5% is predicted.2 The European Commission predicts a slighter lower GDP increase for Slovakia in 2021 at 4.7%.3 Nevertheless, the outlooks presented in both reports are much more positive than those presented by each of these institutions earlier in 2020, which is a good sign.

Commercial Companies

Slovak commercial companies can have the following legal form:

• limited liability company;
• joint stock company;
• simple joint stock company;
• general partnership;
• limited partnership.

Legal entities (foreign or local) can also carry out business in Slovakia through a branch office. Please note that a branch office is not an independent legal entity. The most common types of commercial companies in Slovakia are limited liability companies (with a minimum mandatory registered capital of EUR 5,000), and joint stock companies (with a minimum mandatory registered capital of EUR 25,000). Joint stock companies can be public or private.

Individuals can carry out business in Slovakia also as self-employed persons.
In general, a limited liability company is the most common type of commercial company in Slovakia. Compared to a joint stock company, the costs related to the incorporation of a limited liability company and its corporate life are lower, and the administration of the company is also simpler.

All commercial companies, and certain other legal entities, are registered in the commercial register, which is a public record and contains relevant data about the companies (such as a scope of business, registered address, statutory bodies, amount of the registered capital, shareholders or partners etc.). The commercial register also includes a collection of deeds, which is also publicly available and includes basic corporate documents of the company such as articles of association, foundation deed, corporate documents on the appointment of executive directors and other individuals, business license, etc. The process of establishment and incorporation of a limited liability company is rather simple and quick unless the company requires a special regulated business license. In general, if all goes well, obtaining a “free” trade license (such as a general retail and wholesale license, or general licenses for marketing, advertising, intermediation, administrative, programming services etc.) takes about one week in practice, and the subsequent registration proceedings before the Slovak commercial register also take approximately one week. The related administrative and court fees for the incorporation of the company are nominal (e.g. the court fee for the incorporation of the limited liability company is EUR 75, if the application is filed electronically, and the administrative fee for one “free” trade license is EUR 5). From 1 November 2020, applications for registration of commercial companies with the Slovak commercial register (and consequently, for existing incorporated companies) can only be filed electronically (via special electronic forms).

A foreign person or entity may participate in Slovak companies as a shareholder or partner, and a foreign legal entity can also establish a branch (not having its own legal capacity) in Slovakia. In general, foreign persons may carry out business in Slovakia under the same terms and conditions as Slovak persons. Unless foreign persons carry out business in Slovakia via Slovak legal entities (in which they hold shares), in order to carry out business in Slovakia, foreign nationals must obtain a relevant business license in Slovakia, and foreign legal entities must register their branch with the Slovak commercial register. Of course, they may also pursue their business activities in Slovakia – under the same conditions as are imposed on Slovak persons – without needing to obtain a business license or register the branch in Slovakia, provided they do so on the basis of the EU principle of freedom to provide services temporarily.

Foreign Investment Control

Regulation (EU) 2019/452 of the European Parliament and of the Council establishing a framework for the screening of foreign direct investments into the Union, is directly applicable in Slovakia. At this time, there is no separate or specific mechanism for foreign direct investment screening or review of acquisition of local targets by foreign investors on the grounds of security or public order in Slovakia. In this respect, the Slovak government, in September 2020, has approved the proposal of the Ministry of Economy of Slovakia to establish a contact point for the verification of investments to ensure compliance with requirements of the regulation.

Investments in Regulated Businesses

In certain business sectors, acquisitions of shares or an increase in existing shareholding in Slovak companies either requires an approval from the respective regulatory authority, or are subject to certain other restrictions.
These regulations apply, for example, in the following sectors:

• Banking, insurance, investment services. An acquisition or an increase in the qualifying holding in the relevant entity (bank, insurance company, investment firm) having its registered seat in Slovakia, so that the share in the entity’s share capital or voting rights reaches or exceeds 20%, 30%, or 50%, or causes the entity to become a subsidiary of the person acquiring such holding in one or more transactions, whether directly or by acting in concert, is subject to prior approval by the National Bank of Slovakia;
• Gambling. Foreign ownership interest in a legal entity holding a gambling license and having its registered seat in Slovakia may be held only by a natural person or legal entity having its/her/his registered seat in an EU or EEA member state, or an OECD member state;
• Mining. A mining license may be issued to a foreign person or entity only if the foreign natural person has his/her permanent residence in an EEA member state, or if the foreign legal entity has its registered seat or branch in an EEA member state, or if it has a branch in Slovakia; etc.

Antitrust Clearances

A concentration (i.e. a merger or amalgamation of two or more previously independent undertakings, or an acquisition of direct or indirect control by one or more undertakings over another undertaking or part of it, or over more undertakings or parts of them) may be subject to a merger clearance provided that the statutory requirements are met. Whether or not the mergers meet the notification criteria is determined by the Antimonopoly Office of the Slovak Republic (the “AMO”).

A concentration has to be notified to the AMO if the following turnover thresholds are met:

• the combined aggregate (group consolidated) turnover of the undertakings concerned for the financial year immediately preceding the concentration in the Slovak Republic was at least EUR 46 million, and at least two of the undertakings concerned have each generated an aggregate turnover of at least EUR 14 million in the Slovak Republic for the financial year preceding the concentration, or
• the aggregate turnover in the Slovak Republic for the financial year immediately preceding the concentration was(i) in the case of concentration by merger or amalgamation of two or more independent undertakings – at least EUR 14 million generated by at least one undertaking concerned, and the worldwide aggregate turnover generated by the other undertaking concerned was at least EUR 46 million for the financial year immediately preceding the concentration,(ii) in the case of concentration by acquisition of control – at least EUR 14 million generated by at least one target undertaking, and the worldwide aggregate turnover generated by the other undertaking concerned was at least EUR 46 million for the financial year immediately preceding the concentration.

  (iii) in the case of concentration by creation of a full-function joint venture – at least EUR 14 million generated by at least one of the undertakings creating the joint venture, and the worldwide aggregate turnover generated by the other undertaking concerned was at least EUR 46 million for the financial year immediately preceding the concentration.

All domestic and international transactions which meet the above notification thresholds are subject to review by the AMO.

As Slovakia is an EU Member State, certain categories of concentrations are subject to control of the Commission. Should the turnover of undertakings concerned meet the notification thresholds stipulated in Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings, the concentration shall be regarded as being of community dimension. In such cases, exclusive competence of the Commission to deal with a concentration having community dimension is established, and the AMO is competent to act only in cases specified in the EU Merger Regulation.

At the time of writing of this article, the AMO has released a first draft of the proposed new competition act for consultation. The proposed date of the new legislation coming into force is 4 February 2021. The primary purpose of the new legislation is the transposition of the EU Directive 2019/1 that empowers the competition authorities of the Member States to be more effective enforcers, and to ensure the proper functioning of the internal markets (ECN+ Directive). The draft of the new competition act will introduce several changes to the current antitrust regulation. Among other changes, the draft proposes the abolition of the current notification criterion for concentrations establishing a full-function joint venture, according to which currently a concentration is subject to notification in Slovakia if the turnover in Slovakia for the previous financial year of at least one of the undertakings creating the joint venture was at least EUR 14 Million, and the worldwide turnover for the previous financial year of the other undertaking concerned was at least EUR 46 Million. This change is positive, since the current threshold covers numerous foreign-to-foreign transactions with no relation to the Slovak market. Under the new legislation, concentrations establishing a full-function joint venture would be considered under the general notification test, or the test for concentrations by acquisition of control, which are based on turnover generated in Slovakia of both undertakings or the target undertaking. In addition to the aforesaid, the definition of the “undertaking” will also be changed.4

Register of Public Sector Partners

In addition to the mandatory registration of ultimate beneficial owners (“UBO”) of a commercial company with the Slovak commercial register, which results from the EU legislation (and hence this requirement is similar as in other EU countries), in Slovakia there is another specific regulation applicable to UBOs.

In general, all legal entities or individuals (both local and foreign) engaged in business with the state, state-owned enterprises and companies, or with other public entities, or otherwise receiving money or assets from public funds, must be registered in a Register of Public Sector Partners (certain exceptions apply), which is also called an “anti-letterbox register”. In the register – which is public record – partners of the public-sector enterprises and entities must register and disclose their UBOs. Only specific persons and entities (such as attorneys-at-law, notaries, etc.) are empowered to make the registration on behalf of the person to be registered (partner of the public sector), hence a partner of the public sector cannot directly make the registration on their own. The persons making the registration in the UBO register on behalf of a partner of the public sector, as well as the partners of the public sector themselves, shall be held liable for providing false or inaccurate information about their UBOs in the register, and failure to be registered in the register (in cases where the registration is mandatory) may have serious legal consequences.

This regulation came into force in 2017, and its purpose is to promote transparency, and to fight against corruption and bribery in the public sector.

Court Proceedings

The judicial system in Slovakia consists of district courts, regional courts, the Supreme Court of the Slovak Republic, Specialized Criminal Court, and the Constitutional Court of the Slovak Republic. In Slovak civil law court proceedings, a two-instance principle is applicable – in general, first instance court proceedings can be followed by a second instance in appellate proceedings. Generally, commercial law matters are handled by district courts at the first instance, and by regional courts in appellate proceedings, but in certain commercial law matters, the regional courts act as the forum of the first instance, and the Supreme Court of the Slovak Republic decides in appellate proceedings. In very special cases there may be extraordinary legal remedies available against a valid and effective court decision. At the time of writing of this article, formal consultations in the Slovak parliament on the draft constitutional bill proposing to create a new court – the Supreme Administrative Court – have been initiated. The Supreme Administrative Court shall primarily handle administrative law cases (currently handled by regional courts at first instance).

One of the main challenges not only for foreign investors, but also for local entrepreneurs, is the length of court proceedings, and hence the challenges in efficiently and quickly enforce one’s legal rights. Court proceedings can sometimes take several years. Pursuant to the Program Declaration of the Slovak Government (for 2020-2024), it is intended to introduce time frames for the courts’ decisions in particular matters, and to monitor the courts’ compliance with the prescribed time frames. This data should be publicly accessible. It is also intended to introduce a reform of the judicial map. As part of this reform, the total number of courts shall be reduced, but courts or judges shall be more specialized for a more efficient handling of specific agendas or fields of law. These intended changes in the legislation are aimed at shortening the duration of court proceedings, and at improving the quality of court decisions.

In general, court decisions are publicly available to anyone, as courts are obliged to publish the final valid and effective court decisions on the merits, decisions on discontinuance of court proceedings, decisions on preliminary injunction, and decisions on postponement of enforceability of administrative decisions (personal data are anonymised). These are currently published on the website of the Ministry for Justice of the Slovak Republic.

e-Government

As part of the digitalization of public sector efforts, Slovak commercial companies are encouraged to communicate electronically with public authorities. Certain legal proceedings (for example, proceedings in front of the Slovak commercial register, as outlined above) can be conducted only electronically. From 1 July 2017 onwards, a mandatory electronic box (the “e-box”) has been assigned and automatically activated by law for each Slovak commercial company. This e-box serves as a portal for communication with the Slovak public authorities. In general, all official correspondence from the Slovak public authorities is now delivered to commercial companies via their e-box, and not in paper form (this also includes documentation from courts, administrative authorities, public distrainors, etc.). Thus, it is important that the relevant officer(s) of Slovak companies have practical and technical access to the e-box. However, there are certain exceptions, and some state authorities have their own electronic portals for the electronic communication with companies (e.g. tax authorities have their own electronic portal, or the Ministry of Health of the Slovak Republic uses its specific electronic portal for matters concerning the reimbursement and price determination of medicinal products, medical devices, special medical materials, and dietetic food, etc.).

While access to the e-box for the statutory representatives of a Slovak company is automatically established by virtue of law, for practical and technical access to the e-box, all relevant officers of a the concerned company need to have an electronic card with the respective electronic chip (e.g. a Slovak ID card) connected with the required certificates pertaining to the electronic card.

Employment

The most common type of a labour law relation is employment. The employment is established based on an employment contract, and can be established for indefinite term or definite term, although restrictions apply with respect to employment with a definite term. Unless the employment is terminated within the probation period, an employer may terminate the employment only for specific statutory reasons, either based on a termination notice (with the applicable termination notice period) or a notice of immediate dismissal of an employee with immediate effect (in very special situations), or based on an agreement with the employee. An employee is, in general, entitled to terminate the employment anytime upon serving a termination notice (and can terminate the employment with immediate effect in very special situations). In case of employment related litigation, Slovak courts are, in general, protective of the rights and interests of employees, although we have noticed a slight increase of a more business-minded approach in court decisions the recent years.

In certain cases, in addition to the individual employment contract, an employer may also be bound by a collective bargaining agreement. This may occur in the following cases:

• the employer, and trade unions operating under the employer, enter into an individual (business) collective bargaining agreement applicable to the particular employer, and the employees of that particular employer;
• the employer is a member of a particular employer’s association that has entered into a collective bargaining agreement (of a higher level) on behalf of the employer (with the employer’s consent) with a higher trade unions body (uniting more trade unions operating at various employers usually carrying out business in the same or similar industry);
• the employer, with consent of other contractual parties, accedes to the collective bargaining agreement (of a higher level);
• the employer’s core business belongs to a specific industry sector, for which there exists a collective bargaining agreement (of a higher level) between an employers’ association and a higher trade unions body, and such collective bargaining agreement was declared as being “representative” for the particular industry sector by the Ministry for Labour, Social Affairs and Family of the Slovak Republic; the collective bargaining agreement can be declared as being “representative” only under certain conditions, and exceptions can apply with respect to the applicability of the representative collective bargaining agreement to employers operating in the specific industry for which the agreement was concluded.

The maximum number of working hours for an employee is 40 hours per week (38.75 hours in case of two-shifts, and 37.5 hours in case of three-shifts or uninterrupted operation). The weekly working hours for individual weeks can, however, slightly vary from week to week. The level of flexibility depends on whether the working hours are scheduled evenly or unevenly (which requires the consent of the employee or of the employees’ representative). The maximum average weekly working hours including overtime work is 48 hours.
The minimum monthly salary for an employee working 40 hours a week shall be EUR 623 in 2021 (and the minimum hourly wage shall be EUR 3.580). Depending on the difficulty of work, the stated minimum wage is increased based on particular coefficients applicable to particular levels of work difficulty.

Employees participate in mandatory social and health insurance, and both employees and employers must pay the statutory contributions to the social and health insurance. Social allowances payable from the social insurance include sick-leave allowance, pension (retirement pension, disability pension, widow(er) pension, etc.), unemployment allowance, compensation and payments related to work accidents and occupational diseases, maternity allowance, caring allowance, etc.

A general simplified overview of the amounts of the mandatory social and health insurance contributions (in 2020) is outlined below:

Social insurance
Health insurance

Employee
9.4%
4%

Max. assessment base (EUR) per month (determined based on salary)
7,091
None

Max. contribution per month (EUR)
666.55
None

Employer
25.2%
10%

Max. assessment base (EUR) per month (determined based on salary)
7,091 (none for work injury insurance)
None

Max. contribution per month (EUR)
1,730.19
None

Also self-employed persons participate in mandatory social and health insurance and must pay the relevant statutory insurance contributions to the social and health insurance.

Apart from the employment contract, labour law relations can also be established on the basis of the following agreements:

• agreement for performance of work;
• agreement for part-time student work;
• agreement for work activity.

However, certain restrictions are applicable on the maximum working hours under these agreements, and in some cases, restrictions concerning parties to the agreement also apply.Top 5 biggest employers (excluding financial companies) in 2019 were:

• • Volkswagen Bratislava, a.s.
  • Železnice Slovenske republiky (Railways of the Slovak Republic)
  • Slovenská pošta, a.s. (Slovak Post)
  • Schaeffer Slovensko, s.r.o.
  • US. Steel Košice, s.r.o.5

Over the past nine years, the rate of unemployment in Slovakia has been continuously decreasing from year to year. This long-term trend was interrupted in the first quarter of 2020, when the unemployment rate reached 6.0%, followed by 6.6% in the second quarter, meaning that the unemployment rate for the first half of 2020 was 6.3%.6 These results obviously reflect the adverse effect of the current COVID-19 pandemic on the economy in general.

The average monthly salary in the second half of 2020 was EUR 1088.7 The highest average salary is achieved in banking and insurance sectors.

Čechová & Partners is an independent Slovak law firm with a 30-year history. Since our establishment in 1990, we have been solving our clients’ legal issues in the areas of Slovak and European law. Our skills are reflected in our work and the satisfaction of our clients, as well as by our top ratings in numerous international and Slovak legal rankings every year.

Our primary focus is on corporate clientele. Our clients include foreign companies (often multinational organisations and their subsidiaries), as well as large international law firms and local businesses. We are delighted that many of our clients return to us and have sought our advice on a regular basis for many years. With some of our clients, we cooperate almost on a daily basis. With others, we work on specific individual projects.

Our attorneys speak many different languages – Slovak, Czech, English, French, German, Italian, Russian. Therefore, we are able to communicate with our clients better and also understand their requests from their perspective. This is part of our first value – Professionalism. We view our clients as our partners. We are able to bring together a comprehensive team of experts, enabling us to provide clients with advice on different types of agenda.

Our second value is – Flexibility. We know that only having good knowledge of the law is no longer enough if we want to be among the best. We aim to identify and adapt to unique and changing requirements as rapidly as possible.

And last, but not the least, our main value – Integrity. We value the trust that our clients place in us. We work in line with the principles of decency and honesty, which we put first in the relationship between our law firm and clients. In recognition of these values, we advocate the principles of the fight against corruption, and apply the principles of internal compliance. We encourage all of our employees to adopt the same approach.

Managing Partner: Katarína Čechová
Number of partners worldwide: 6
Number of other lawyers worldwide: 19
Languages: Slovak, Czech, English, French, German, Russian
Membership: Slovak Bar Association, Lex Mundi, World Services Group, IBA, AIJA.

For the Slovakian Government's COVID-19 measures see https://www.cechova.sk/en/category/covid-19-en/.

Footnotes

1. https://www.trend.sk/trend-archiv/trend-top-200-najvacsie-nefinancne-podniky-slovenska-2
2. https://www.mfsr.sk/sk/financie/institut-financnej-politiky/ekonomicke-prognozy/makroekonomicke-prognozy/53-zasadnutie-vyboru-makroekonomicke-prognozy-september-2020.html
3. https://ec.europa.eu/info/business-economy-euro/economic-performance-and-forecasts/economic-performance-country/slovakia/economic-forecast-slovakia_en
4. https://www.cechova.sk/en/consultation-on-new-competition-act/
5. https://www.trend.sk/trend-archiv/najvacsi-zamestnavatelia-slovenska
6. www.statistics.sk; Katalóg informatívnych správ, Nezamestnanosť v 2. štvrťroku 2020
7. www.statistics.sk; Katalóg informatívnych správ Priemerná mesačná mzda zamestnanca národného hospodárstva v 2. štvrťroku 2020