Establishment of joint stock company in Slovakia

The process of establishment and creation of joint stock company in Slovakia is unlike other forms of business companies more complex and exhibits a number of deviations from the general scheme. In the process of setting up and creating a company are interlinked many legal facts from which creating one makes the emergence of another and shift of the whole process of the next process step. At the beginning of the process is an expression of will of:

Neither the deed of foundation nor the memorandum leads to the establishment of the company. These are legal actions in which is only expressed the will of founders to establish company and contained modification of the further procedure necessary for establishment of the company.

In the establishment and formation of the company, it is necessary to distinguish these two concepts, ie. date of establishment and date of formation. This distinction has implications for the proper application of the tax and accounting rules (in particular compliance with the statutory deadline for opening account books, correct assessment of the time of the accounting transaction, correct determination of the date of taxable fulfillment for value added tax, determination of the correct time of repayment of deposits to the company, transition of ownership of the subject deposit, etc.).

Joint stock company whose registered office as a legal entity statutory seat is to be in the Slovak Republic and thus be entered in the Commercial Register can be established under Slovak law or European law.

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The legislation of joint stock company does not define special classes of persons that may establish a joint stock company. Here applies the general provisions on joint stock companies, which show that the founders of the joint stock company may be both natural persons and legal persons. The founder of the joint stock company may therefore be a state, since under the prov. of § 21 of the Civil Code in private law relationships has the status of a legal person.

Only entities which themselves have legal personality can be founders of a joint stock company as a legal entity established by the contract. The founders of joint stock company are those persons, whose name was signed the memorandum of foundation, in the case of establishment of joint stock company by one person the deed of foundation. On the formation of a joint stock company may be involved in the preparatory work also the persons who subsequently do not become parties to the memorandum of foundation or draw up the deed of foundation. It is quite necessary to distinguish the founders from other interacting persons, because only the founders are obliged, for example, to draw a list of all acts performed in the name of the company prior to its establishment and only the founders are required to submit that list for the approval to the General Assembly. The founders also have an obligation to return without delay to subscribers repaid part together with interest if the subscription is ineffective and they are also obliged to convene the Constituent General Meeting within the statutory deadline.

The concept of company implies that there must be at least two companions who concluded the memorandum of foundation. The exception is in the case when the founder is the only legal person who is also the only shareholder. In this case, it is implicitly ruled out as the sole founder a natural person resp. other entity than natural person (under § 22) without legal capacity. Joint stock company established by a sole founder will have the status of corporation sui generis.

The founder – legal person shall also be considered a civic association which, according to the judgement of the Supreme Court of the Slovak Republic dated 31. January 1996, file no. CC 5/95, may alone or together with someone establish a commercial company or cooperative or in other way property-participate in the activities of such business entities.

Individual, natural person could become only the sole shareholder of an existing company by acquiring the shares from existing shareholders. Under these circumstances, there may be so. one man company, ie. the company of the sole shareholder.

„According to Art. 5 of Capital Directive establishing the joint stock company by more founders ex ante can not implicitly express prohibition of concentrating all the shares in the hands of a single shareholder and the associated ipso iure dissolution of the company. Result of winding up a company in this case would have to result explicitly from the legislation, the decision to dissolve the company would have to take the form of a judicial decision and the judge would be obliged to provide a time limit for removing the cause of dissolution of the company. In the Commercial Code such explicit regulation is not provided, ie. concentration of shares in the hands of a single shareholder does not constitute a ground for the dissolution of the company, it is linked to an obligation of publicity, as well as with the sole founder [compare § 2 sec. 2 let. d) ZOR].“

The founder of the joint stock company in Slovakia can also be a foreign person. „If the founder of a joint stock company is a foreign person, status of a joint stock company as entrepreneur ipso iure shall prevail in case of establishment of the company (wholly or partly) for purposes other than business. Using the legal standard expressed in provisions of § 2 sec. 2 let. a) and § 56 sec. 1 as a stronger rule of law (by afortiori argument) we arrive to the elimination of standard set out in the provisions of par. § 24 sec. 1 in the case of a legal person in a legal norm of joint stock company.“ Although the CC explicitly acknowledges the possibility that a foreign person involves in the establishment of Slovak legal entity for the purpose of business, allowing that a foreign person may be a founder of joint stock companies, regardless of whether they are established for the business or private purpose.

Joint stock companies with a single shareholder are often used in building conglomerates, ie. groups of legally separate entities, mostly companies, that are controlled from one center. Generally applies, that companies in which the “leader” of the concern has 100% of the shares, can be managed more efficiently, thus with less costs and time delays caused by the need to convene the General Assembly, to fulfill the information and other obligations towards minority shareholders and the need to face shareholding actions which can block important changes in the company. Therefore, the leader of the conglomerate after dominating companies (generally when it obtains the amount of their shares associated with decisive voting share) strives to make the remaining minority shareholders to leave. The legislation has responded to this fact practically in all developed countries, in allowing – under strict conditions – forced termination of the participation of minority shareholders in the form of compulsory sale of their shares. Given that this is such an infringement of the rights of minority shareholders that it is legitimate to question about its clash with traditional principles of corporate law, were legislative changes that allowed “forced trade” of minority shareholders generally carried out by extensive discussion and their word said also constitutional courts. They declared the forced sale of shares in its conclusions as constitutionally conformal. However, it should be stressed that the forced sale is not viewed as a general institute of company´s law allowing to terminate participation of minority shareholders in each company. This is an exception in the stock rights and also very narrow, as in most national laws it is permitted only in joint stock companies with listed shares, as majority shareholder acquired his shares as a result of public takeover offer. It is thus an institute of capital markets. In doing so, the reasons for creation of one-man companies through the forced sale of shares of minority shareholders are pragmatic. Country which opens the space for such procedure is logically more interesting for strong capital investors than for countries that cling to respect the classical legal principles so that access to the requirements of practice with less willingness. The adjustment of one-man company and in particular opening the possibility of its forced creation shows a clear trend of strengthening pragmatic approach to commercial law institutes.

For legal action, establishing a joint stock company (with the simultaneous establishment) resp. which conditions the formation of established legal facts of establishing joint stock company (with the successive method of establishment) is required form of a notarial deed on a legal act. Notarial deed on a legal act is by its nature solemnization activity in which the notary affects the content of the legal act in the sense that he takes into account the law and requirements for validity of the act, ie. takes into account not only the requirements of the Notarial Code but also other relevant legislation. Of the requirements for public deed in which is performed constituent document of joint stock company as a whole (as opposed to the legalization of signature at which the public deed is the mere legalization clause) implies the conclusion that this document must be issued by a notary authorized to practice in the Slovak Republic according to Act no. 323/1992 Coll., as amended.

Due to a public document as an obligatory form of legal act of establishment of joint stock company, in the process of registering a joint stock company in Slovakia are not controlled other factors than the business name and line of business. For the fulfillment of the other terms of applicable founding of the company are responsible the founders themselves, resp. a notary (under the Notarial Code) and under the Act on Commercial Register board members as proposers. Under the terms of the valid establishment of the company we understand to formation of the company all the relevant legal provisions for establishment of the company lége artis. After the formation of the company are understood the terms whose failure may lead to the nulity of the company.

The problem of one-man joint stock company may be postponed even further, at first glance illogical question of whether there may be a joint stock company without shareholders. Even such a situation could occur if the company itself would acquire all of its own shares (e.g. by donation). It is fundamentally limited to the acquisition of own shares. This does not apply, inter alia, if it acquires its shares free of charge. With such a situation, the legislator expressly does not associate dissolution of the company. If this acquisition will be valid, there will be an obligation for the company to dispose of the shares so acquired by the deadline. If the company fails to meet this obligation, the court may cancel it and order its liquidation. Joint stock company in this case will be so much closer to the foundation, despite the fact that it will not be subject to its legal regime.