Under the amended Slovak Commercial Code, which has been brought into harmony with European Union (EU) standards, Slovak entrepreneurs have had to follow new rules from January 1, 2002. However, the deadline for following some of these rules is the end of this year or in 2003. They are mainly as follows:
Entering documents into the Collection of Documents
Entities registered with the Commercial Register have to submit the documents required by law to the Collection of Documents, mainly: memoranda of the association, the founder's deed or founder's deed of a partnership, articles of the association, each amendment of these documents and the full wording of these documents if any change is made. Documents stating the appointment or termination of an individual authorized to act on behalf of an entrepreneur, financial statements, annual reports and audit reports (if required by the law) also have to be entered into the Collection of Documents.
In addition, branches of foreign entities, except for branches of foreign banks, have to report financial statements that shall be prepared and made public according to foreign laws, founder's deeds, and articles of association, and documents proving the registration of foreign entities for business purposes according to foreign laws.
The documents have to be entered into the Collection of Documents within 30 days of their execution, unless the law stipulates otherwise. Otherwise, the statutory representatives of companies can be fined up to Sk100,000 ($2,380). This year, entrepreneurs have to enter the full wording of their memoranda of associations/founder's deeds and articles of association into the Collection of Documents by December 31, 2002.
I believe that the Collection of Documents that is available to the public could be useful for entrepreneurs, as it could help them find out more information about their business partners or potential business partners.
Amending memoranda of association and articles of association
Generally, the new law requires entrepreneurs to amend their memoranda of association and articles of association and include additional details (for example, benefits provided to individuals participating in the foundation of a company or activities leading to the acquisition of licenses for its business activities, the amount of the reserve fund if the company forms a reserve fund upon its establishment, and the amount up to which the company is obliged to supplement the reserve fund and the way it is supplemented) by January 1, 2003. Otherwise, the courts can wind up the company, without petition, and order liquidation.
As under the previous wording of the Slovak Commercial Code, the court can wind up a company and order its liquidation if a general meeting has not been held for a period longer than one year. One of responsibilities of general meetings is to approve financial statements and decide on the distribution of profits. Financial statements have to be entered into the Collection of Documents within 30 days of their approval. Companies whose financial statements have to be audited cannot make their financial statements public before they have been approved by an auditor.
A company can distribute to its shareholders profits that have been reduced by a contribution to a reserve fund or other mandatory funds and by the amount of the previous period's loss. The profits can be increased by undivided profits from past periods and funds from profits whose usage is not bound by law. In addition, the company cannot pay its shareholders any interest on shareholder's contributions to the company or advances for profits.
Limited-liability companies owned by one shareholder
According to the amended Commercial Code, a limited-liability company with one shareholder cannot be the sole founder of another company. In addition, an individual can be the sole shareholder of three companies at most.
Entities currently breaching these rules have to harmonize their legal status by December 31, 2003. Otherwise, the court can wind up companies and order their liquidation to bring their legal status and the legal status of their shareholders into harmony with the Commercial Code.
Obligation to change business names
An individual who is an entrepreneur and has the same business name as another entrepreneur in the same place who obtained the trade license sooner is obliged to amend his business name and register it with the Commercial Register by January 1, 2003, so that the entrepreneurs can be distinguished.
Ingrid Jalčová, ACCA, is a chartered accountant and licensed tax advisor with five years of experience with global advisory firms. She invites comments and questions at email: email@example.com.
2. Dec 2002 at 0:00 | Ingrid Jalčová