SLOVAKIA Law and Practice Contributed by: Lukáš Michálik, Peter Makýš and Šimon Hora, Ments s.r.o.
dictions, this form of consideration will become more common and more acceptable by sellers. 4.4 Liquidity Event: Certain Transaction Terms It is not uncommon for the position of found- ers and VC investors to differ when it comes to indemnification in respect of representations and warranties. VC investors are naturally keen to limit indemnification to a greater extent than founders, and are able to do so to a certain degree. Within the Slovak legal environment and in Slo- vak transactional practice, transactional repre- sentations and warranties are a standard part of transaction documentation. The traditional mechanism is indemnification combined with purchase-price discount, due to the technicality of Slovak laws. Escrow or holdback are not really customary in Slovakia to the extent that can be seen in other bigger jurisdictions. W&I insurance is used in the Slovak market, but usually for only the bigger- ticket deals, which are not that frequent. As of March 2024, the new Act on the Transfor- mation of Business Companies and Coopera- tives came into force, clarifying the various forms of company transformations. Until its adoption, there was no specific legislative basis in Slova- kia for spin-offs, but there were other ways that were practically possible for spin-offs to take place. However, according to the new Act, it is possible to use, in practice, the following forms of company division, in particular. 5. Spin-Offs 5.1 Trends: Spin-Offs
• Splitting by merger – a procedure in which the company being split is dissolved and its assets are transferred to other existing companies, which thereby become the legal successors of the disappearing company. • Splitting by fusion – a procedure in which the company being split is dissolved and its assets are transferred to newly established companies which, by their formation, become the legal successors of the dissolving com- pany. • Spin-off by merger – a procedure whereby the company being divided is not dissolved, and part of the assets of the company specified in the conversion project are transferred to one or more existing companies. • Spin-off by fusion – a procedure whereby the company being divided is not dissolved, and the part of the company’s assets specified in the conversion project are transferred to one or more newly created companies. In addition to making the legislation more precise and increasing legal certainty, one of the aims of this new legislation is to make these company transformations more attractive. It will be inter- esting to see from a longer-term perspective whether this legislation has led to an increase in the number of company transformations. 5.2 Tax Consequences Along with the new Act on the Transformation of Business Companies and Cooperatives, addi- tional provisions were also adopted into Slovak tax legislation, according to which the following applies in relation to company transformations, in particular: • income derived from the acquisition of new and stocks and shares, as well as income derived from their exchange in the case of the transformation of companies or coopera-
333 CHAMBERS.COM
Powered by FlippingBook