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Payment and repayment of shareholders loans and capital surplus

Changes in corporate law

From 01.01.2016 a company will be deemed “in crisis” when insolvent or when the rate between its equity and its liabilities is below 4:100. This ratio will increase to 6:100 in 2017 and to 8:100 in 2018 and later. Any repayment made by the company “in crisis” will be strictly scrutinized. Especially, repayments of any financial performance made by the shareholders or managing directors, e.g. repayment of shareholders loan during crisis, will be illegal. If a company in crisis pays back any financial performance to the shareholders, managing directors or any other related person, or by making such payment would enter “in crisis”, such payments will have to be paid back. Also, when such repayment has been made, the company’s managing directors will automatically guarantee the claw-back of the money. What’s more, the managing directors will be personally liable to the company’s creditors for said money.

Another interesting issue is whether is it possible to refund capital surplus paid by shareholders after acquisition of shares. The current Slovak Commercial Code enables shareholders, after acquisition of shares, to make payments to the company. Such increases are frequently favored by investors. To date, the never-ending question regarding capital surplus was whether such contribution could be paid back to the shareholders. As of 2015, April 29th regulations regarding ltds in Slovakia clearly state that the repayment of any shareholders contributions is forbidden; with an exception of decrease in share capital. Since payment of capital surplus is a contribution, we are of the opinion that the repayment of capital surplus is therefore forbidden also. The situation is different in a joint stock company and in limited partnership.

Finally a third issue exists. The newest amendment to the Slovak Commercial Code states that shareholders in an ltd cannot directly lend cash to the company. Should a shareholder violate this provision, the shareholder’s cash lending will be regarded as company’s unjustified contribution. Money lending transfers via a bank are allowed. Again, the situation is different in a joint stock company and in limited partnership. This regulation is already effective, too.