SLOVAKIA Law and Practice Contributed by: Lukáš Michálik, Peter Makýš and Šimon Hora, Ments s.r.o.
2.5 Venture Capital Documentation There are several initiatives in Slovakia that aim to standardise transaction documentation for the purposes of investing in start-ups. Although the Slovak start-up environment is young, a number of initiatives have emerged to standardise the documentation and processes for investing in start-ups. The great advantage of these initia- tives is that they involve top-tier advisors from the fields of finance, law and tax who have great experience and whose can make a vital contri- bution. One important initiative that targeted preparation of a unified term sheet for start-ups was backed by the Slovak Venture Capital & Private Equity Association (see 2.3 Early-Stage Financing ). 2.6 Change of Corporate Form or Migration In the initial phases of a business, founders most often choose the form of a limited liabil- ity company for their start-up for its quick and straightforward incorporation, simple corporate governance processes and low initial capital requirements. Over time, however, with the grad- ual expansion and growth of the company, there may be a need for more structure, particularly in terms of setting up internal processes, control mechanisms, and opening the entity up to inves- tors. For this reason, the founders may decide to change the legal form of their company from a limited liability company to a joint-stock com- pany. A joint-stock company is a more suitable legal form for larger companies. Compared to a lim- ited liability company, it is slightly more complex to set up and operate, and also has higher capi- tal requirements. It also has many advantages, which start-up founders often evaluate as suit- able for their business and company growth.
ecosystem, and this is then localised to the Slo- vak legal environment. Several initiatives in Slovakia have aimed to standardise transaction documentation for the purpose of investing in start-ups. One of these was to prepare a unified term sheet, and was backed by the Slovak Venture Capital & Private Equity Association, the most prestigious asso- ciation on the Slovak PE and VC market. It was supported by several renowned attorneys at law and tax advisors and resulted in the first stand- ardised term sheet now used for many start-up investments in the Slovak ecosystem. 2.4 Venture Capital There are several VC funds active in Slovakia that focus on potential investments in start-ups. Some of the sources of VC funds are private investors and some are public funds (eg, EU funds). There are a number of smaller VC funds in Slo- vakia. There are also several active VC funds from neighbouring countries for which Slovakia is attractive and whose presence on the market proves that the Slovak start-up environment is expanding, improving, and moving in the right direction. There are a few very active state- or semi-state- owned investment companies in Slovakia. The most significant share of public money flowing into the Slovak start-up ecosystem is from Slo- vak Investment Holding, a subsidiary of a Slovak state-owned bank, which has a highly stimulat- ing effect in the start-up ecosystem, providing founders with more money and allowing public resources to be used in an innovative and mod- ern way.
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