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Slovakia: Financial indicators to watch during the COVID-19 pandemic

When can and when must insolvency proceedings be opened? What outgoing payments must be scrutinized?

It is especially important to pay attention to the financial situation in the company during the current economic consequences of the COVID-19 pandemic. In particular, we recommend monitoring whether and under what circumstances the company can make certain payments, for example, whether it can repay a shareholder loan. This payment can be considered repayment of a benefit that replaces equity, which is prohibited.

If the situation in the company is serious and the company is insolvent, it is necessary to file for insolvency and preserve the statutory time limits. Failure to observe the time limits or leaving the company with very low assets may result in the personal liability of the company's the managing director.

If the company cannot meet its liabilities, a creditor may file an insolvency petition against the company.

Whether insolvency is imminent, or the company is already insolvent, we also recommend that you consider the possibility of restructuring the company. However, in case of a restructuring it should be noted in advance that the court will only approve the restructuring if the unsecured creditors receive at least 50% of their claims in the next 5 years.

If you have any questions, we are ready to analyze the situation and propose a tailor-made solution that will minimize all possible risks.

Problem

What to watch

Consequence

Company in crisis

The ratio between the equity and the liabilities is less than 8 to 100

Prohibition to repay benefits that replace equity capital.

Violation: personal liability of the managing director!

Insolvency (overindebtedness)

More than one creditor and the liabilities’ amount exceeds the assets’ value.

Obligation to file for bankruptcy within 30 days. If the overindebtedness occurred between 12 March 2020 and 30 April 2020, the deadline is 60 days.

Violation: personal liability of the managing director!

Insolvency

(illiquidity, inability to pay)

Inability to pay at least two monetary obligations to more than one creditor within 30 days after due date.

Risk that a creditor will initiate involuntary bankruptcy on the debtor.