The most important impact of the Amendment in relation to the Slovak Commercial Code consists in introduction of new obligation in course of establishing of limited liability company and as well in course of transfer and division of majority share in limited liability company. In all the above cases the petitioner shall be at registration in the Commercial Register obliged to submit consent of the tax office with such entry into the Commercial Register. Accordingly, the said consent will always be required at registration of limited liability company in the Commercial Register in course of its establishment and also at such registration of change of data registered in the Commercial Register which will consist in transfer or division of majority share in a limited liability company.
Under new Section 105b of the Commercial Code a limited liability company cannot be established by a person who has tax arrears. In the event that the tax office (which also includes customs office) has vis-à-vis certain person records of tax arrears in the amount surpassing EUR 170, than such person will not be granted consent of the tax office with registration of limited liability company in the Commercial Register, thusly, such person may not become shareholder of limited liability company. Under the Act No. 563/2009 Coll. on Tax Administration (Tax Code), as amended, the tax office shall issue its consent on the basis of petition within 3 business days as of receipt of such petition. A separate written legal act vis-à-vis the tax office is, therefore, anticipated (no official form for such petition exists yet).
Similarly as in case of establishing limited liability company, consent of the tax office shall be required also at transfer of majority share and division of majority share in limited liability company by transfer. A majority share is considered share which grants to the shareholder at least 50% of all votes, either due to size of the shareholder´s contribution to the registered capital of the company (e.g. share corresponding to contribution to the registered capital of the company in the amount of EUR 7,000 in the company which has registered capital amounting to EUR 10,000, i.e. 70% share) or due to specific provision of the Articles of Incorporation (e.g. share corresponding to contribution to the registered capital of the company in the amount of EUR 3,000 in the company which has registered capital amounting to EUR 10,000, whereas the Articles of Incorporation grant the respective shareholder 51% of votes, and thusly, control over the company).
With respect to the above definition of majority share (Section 115(7) of the Commercial Code) it needs to be pointed out that certain questions arise in cases when the Articles of Incorporation grant majority votes to minority share (minority share in terms of the ration between contribution to the registered capital of the company and the registered capital) and the transferred share shall be the majority share (majority share in terms of the ration between contribution to the registered capital of the company and the registered capital) to which, however, the Articles of Incorporation grant only minority votes. It is only logical that each limited liability company may have only one majority share. Applying this undeniable logic one has necessarily come to conclusion that even if the share is major from the point of view of ration between contribution to the registered capital and the registered capital, however, under the Articles of Incorporation only minority of votes would pertain to such share, than such share shall be considered as minority share, therefore, no consent of the tax office will be required.
ABC s.r.o, a limited liability company, has 3 shareholders:
- ALFA s.r.o. with 80% share but pursuant to the Articles of Incorporation only with 10% of votes,
- BETA s.r.o. with 10% share and pursuant to the Articles of Incorporation with 10% of votes; and
- BETA s.r.o. with 10% share but pursuant to the Articles of Incorporation with 80% of votes.
In case of transfer of ALFA´s 80% share such transfer should not be considered transfer of majority share, as ALFA has under the Articles of Incorporation on 10% of votes, therefore, no consent of tax office shall be required. In this relation it should be noted that change of the Article of Incorporation is no sophisticated process and can be performed solely for the purpose of avoiding of the necessity to procure consent of the tax office.
If we illustrate the above situation on an example, it is possible that if ALFA, BETA and GAMA had common majority shareholder (ergo they would be controlled by the same person) and provided that ALFA had majority share in the company with majority of votes and at the same time certain tax arrears, than ALFA could avoid the obligation to procure consent of the tax office (and thusly the eminent obligation to pay the tax arrears) by amending the Articles of Incorporation in the manner set forth above (i.e. control over the company would pass (perhaps only temporarily) to GAMA). Consequently, upon completion of the transfer there would be no hindrance to reinstate to previous state, i.e. the number of votes would correspond to the size of ALFA´s share. Accordingly, not even the new shareholder (who would at the end gain control over the company) would have to acquire consent of the tax office with transfer/acquisition of the share.
The consent of the tax office shall be submitted by the company with respect to transferor as well as transferee. On the other hand, the obligation to submit consent of the tax office does not apply to any foreign entity (natural person or company), regardless of whether such foreign entity is the transferor or transferee. In cases where a foreign entity is party to the transaction, instead of consent of the tax office, an affidavit of transferor and transferee (the explanatory memorandum to the Amendment uses the correct term “affidavit of transferor or transferee” instead) shall be issued stating that there exists no obligation to submit consent of the tax office. In relation to the above it should be noted that such formulation raises certain questions. In particular there arises a question why should the transferor and the transferee issue an affidavit that there exists no obligation to acquire consent of the tax office cumulatively, especially taking into account that transferee or transferor (as the case may be) may not be in certain cases able to relevantly ascertain whether the other contractual party is or is not subject to obligation to acquire consent of the tax office, e.g. transferor or transferee may in the meantime acquire citizenship of the Slovak Republic (thusly loose the status of foreign entity). Given the above, it cannot be excluded that in certain cases one of the above persons will issue an affidavit about facts that it cannot relevantly verify.
Another relevant change brought about the Amendment relates to effectiveness of the transfer and division of a majority share, which pursuant to the Amendment shall take place only upon registration of the transfer or division in the Commercial Register, contrary to previous legislation where effectiveness of the transfer and division took place (i) between the contractual parties as of the day of conclusion of the Share Purchase Agreement (provided that the contractual parties have not greed otherwise), (ii) vis-à-vis the company as of the day of delivery of the Share Purchase Agreement and (iii) vis-à-vis third parties as of the day of registration of the transfer or division of the majority share in the Commercial Register. At first glance an inconspicuous change, however, capable of considerable complications in practice. In practice it is customary (almost a rule) that the new shareholder acquiring control over the company on the day of conclusion of the Share Purchase Agreement removes executives appointed by the transferor and appoints new executives (due to loyalty, personal qualities and skills, etc.). The Amendment, however, makes such action in course of transfer or division of the majority share impossible. Until registration of the transfer or division of the majority share in the Commercial Register the transferor will be entitled to control and change (even repeatedly) the person of executive (a person becomes an executive effectively as of the person´s appointment – not only upon registration in the Commercial Register). As a result of the above, the transferee is in the time period between conclusion of the Share Purchase Agreement and registration of the transfer or division in the Commercial Register on the basis of the same in state of legal uncertainty. From the practical point of view a scenario cannot be excluded where in the time period between conclusion of the Share Purchase Agreement and registration of the transfer or division in the Commercial Register an executive loyal to transferor engages on behalf of the company in business advantageous for the transferor and disadvantageous for the company/transferee.
In general the changes brought about by the Amendment No. 246/2012 may be considered as a complication to establishing of new limited liability companies and transfers and division of majority shares in limited liability companies. According to the legislator, the Amendment is aimed to prevent tax evasions and improve tax discipline of the tax subjects, however, with respect to fulfillment of this aim we remain skeptical. In relation to the Amendment it should above all be noted that these obligations to acquire new documents will have to be taken into account especially when planning and timing respective transaction.