2 APRIL 2024
2 APRIL 2024
Author of the article
Junior Associate
Associate
A few days ago, Act no. 309/2023 Coll. on the conversions of commercial companies
and cooperatives and on amendments to certain acts (hereinafter referred to as
the "Conversion Act") entered into force. The
following article summarises the news it brings in the field of “moving” a
company abroad, including issues related to the change of a registered seat of
a company and the related necessary change of the legal form.
The cross-border change of legal form changes the legal form of a company
to the legal form of the state to which the company relocates its registered seat.
For this topic, the following terms will be useful:
The legal regulation of the cross-border change of legal form in the Conversion
Act is transposed from Directive (EU) 2017/1132 concerning certain aspects of
company law (hereinafter referred to as the "Directive") in
its consolidated version (in particular, as amended by directive 2019/2121 dated
27 November 2019 amending directive (EU) 2017/1132 with regard to cross-border
conversions, mergers, acquisitions and divisions). Thus, we now have a more
specific regulation which contains uniform procedures and conditions at the
European Union level.
The adoption of the Directive leads to a
general unification of the legislation in individual member states. From
the point of view of business practice, this step is welcomed, as previously, the
freedom of legal entities to establish themselves in member states was based
only on the EU Founding Agreements (in particular, articles 49 and 54 of the
Treaty on the Functioning of the European Union) and its actual application was
mainly ensured by several pioneers and the following case law of the Court of
Justice of the EU (specifically, the decisions of the CJEU in case C-210/06
Cartesio Oktató és Szolgáltató bt. and case C-378/10 VALE Építségi Kft).
A cross-border change of the legal form of companies is only possible for limited liability companies (“LLC”) and joint-stock companies (“JSC”). The change can only be performed if:
Another condition is a company’s eligibility for a cross-border
change of legal form. A Slovak company can only carry out its cross-border conversion
into a foreign converted company that has a similar legal form to the
respective LLC or JSC in Slovakia.
However, a similar legal form does not necessarily mean an identical
legal form. For the sake of simplicity, in Annex II of the directive, the
European legislator summarizes all commercial companies that are considered to
be similar and therefore eligible for a cross-border change of legal form. A consolidated
version of the directive, including its annexes, is available HERE.
1. Report
of the statutory body. If a Slovak company decides on a cross-border change
of its legal form, its statutory body must first prepare the "report of
the company's statutory body". This is a fundamental document
explaining the reasons for and implications of the conversion for shareholders and
company employees, who may then comment on the report.
The Conversion Act
also stipulates the cases in which the report does not need to be drawn up.
These are cases where the shareholders have waived the right to submit a report
and there are no employees in the company or if the company has a sole
shareholder.
2. Project
proposal for a cross-border change of legal form. The most
important document for a planned cross-border conversion is the project
proposal for a cross-border change of legal form, upon which the entire conversion
process is based.
In addition to the identification of the participating entities and the proposed business name, the new registered office and the proposed legal form, the project proposal for a cross-border change of legal form must contain the following:
A draft of
the new Memorandum of Association and Articles of Association of the converted
company must be attached to the project proposal.
3. Review
of the project proposal by the supervisory board and auditor. The
project proposal is also reviewed by the supervisory board (if
established) and the auditor, unless the shareholders agree otherwise.
They shall prepare a written report containing the results of their review.
4. Notification
of the tax authority. The notification of the prepared cross-border conversion
project must be delivered to the relevant tax authority (tax or customs
office), no later than 60 days before the date of the General Meeting at
which the cross-border change of legal form is to be approved.
5. Making documentation available at the registered office. No later than six weeks before the General Meeting's vote on the project proposal for the cross-border conversion, the company is obliged to make the following documents available to the shareholders and employees at the company's registered office, as well as on its website (if one exists):
6. Disclosure. Before
the General Meeting decides on a cross-border change of legal form, the project
proposal together with the annexes must be published in the collection of
documents of the relevant Commercial Register or in the Slovak Commercial
Gazette. Information about the possibility to comment on this proposal
must also be published for creditors, shareholders and other authorized
entities ("authorized persons").
The notification
together with the project proposal must be published at least one month
before the General Meeting at which the decision on the cross-border change
of legal form will be discussed. Authorized persons must submit their comments
no later than five working days before the date of the General Meeting.
7. Approval
of the cross-border change of legal form by the General Meeting. Following
the mentioned steps and the lapse of the mandatory time limits, the company's General
Meeting can proceed with approving the cross-border change of legal form. The
decision of the General Meeting must be approved by a two-thirds majority of
all shareholders. In the case of a JSC in which several types of shares have
been issued, the approval of a two-thirds majority of the shareholders present
from each type of shares is required.
8. The fulfilment of the conditions for a successful cross-border conversion is reviewed by a notary on the basis of an application. The attachments to the application include:
If all of the
requirements have been met, the notary will issue a certificate of
fulfilment of the conditions in the form of notarial minutes. This must be issued within 3 months
after the submission of the application.
The Directive provides shareholders with the possibility to withdraw
from the company before the cross-border conversion takes place. This regime
was also reflected in the Conversion Act. These are situations in which the converted
company is to be governed by laws other than Slovak law, the shareholder voted
against the approval of the project proposal for the cross-border change of legal
form and thus requested the payment of a compensatory share/buyout of shares no
later than 14 days before the holding of the General Meeting at which the decision
on the conversion is to be approved.
The new legislation provides creditors with protection against the possible
failure to satisfy their payable claims. If the Creditors do not consider the security
to protect their claims stated in the project proposal for the cross-border
change of legal form to be sufficient, the new legislation provides them with the
right to request an adequate security of these claims (e.g. by
depositing the appropriate amount of cash in notary escrow).
If the company and the creditor do not reach an agreement
on security, the court will decide on adequate security upon request of the
creditor. However, the creditor must prove that due to the cross-border change
of legal form, its claim is at risk. The creditor is entitled to
exercise this right and petition the court within three months from the
publication of the proposal of the cross-border conversion project.
Once a cross-border conversion of legal form has been registered in the relevant Commercial Register, it cannot be declared invalid. The validity of the cross-border conversion of legal form could possibly be challenged before the relevant Commercial Register has decided on the approval of the proposal of the registration of the cross border legal change of legal form; however, considering the standard duration of court proceedings, it remains questionable whether the court would be able to decide on the invalidity of the cross-border conversion of legal form before its registration in the relevant Commercial Register.
Junior Associate specialising in civil law, employment law, real estate and litigation.
Associate and our expert in corporate and M&A law.
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