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Ineffective enforcement and out-of-the-box option

Slovakia: Does unsuccessful enforcement mean no money? Is the debtor’s management liable for no money in the company?

In many cases enforcement against a Slovak company is ineffective. When the enforcement officer starts banging on the debtor’s door, it finds no door at all. The debtor – usually a Slovak company – disappears with all its assets. It does not matter that the company is still registered in the Companies Register ‒ a court order proving a creditor’s right is utterly useless. An indebted company has nothing to sell. So, what now? Most of our clients do not want to pursue the case further – they do not want to “throw money out of the window”. However, there is still a chance.

The out-of-the-box option presented here is that each managing director is obliged to initiate bankruptcy in due time. If they fail to do so, they may be held liable.

Under the Slovak Bankruptcy and Restructuring Act, a managing director not fulfilling their obligation to file for bankruptcy in time may be held accountable for damage suffered by creditors. The law also states that bankruptcy is not initiated in time if bankruptcy is not declared or is stopped due to lack of debtor’s assets, or enforcement was stopped for the same reason. If no other damage is proven it is assumed that the damage occurred amounted to the amount of the unsatisfied claim.

These rules allow creditor(s) to claim the amount unsatisfied via enforcement from the debtor company’s managing director personally (management liability). However, certain conditions must be met, too. To initiate a lawsuit against the managing director after unsuccessful enforcement requires the formal end of enforcement proceedings against the company. The exact legal ground for ending the enforcement proceedings against the company is vital. We are of the opinion that enforcement proceedings that end and simultaneously lead to deletion of the company from the Companies Registry allows a creditor to assert an unsatisfied claim against the debtor company’s managing director personally. But this requires a new lawsuit where the claimant is the creditor and the defendant the debtor company’s managing director.

Besides, other issues must also be considered. We know from experience that each case is unique and requires at least a rundown analysis of the case facts. Our dispute resolution team experts are ready to discuss each potential case with you.