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Slovakia: Temporary protection for entrepreneurs

Slovakia is to allow temporary protection for entrepreneurs affected by the corona virus. 

Temporary protection is a special institute, which aims to help all Slovak entrepreneurs affected by the negative impact of the spread of COVID-19 that have difficulties with paying loans and invoices.

An entrepreneur can apply for temporary protection electronically to a court specified by law if it suffers an increased volume of unpaid invoices after the due date. The law, however, does not concern those who had been in trouble before the pandemic.

During the temporary protection period, requests for bankruptcy filed by creditors after 12 March 2020 will be suspended. In addition, an entrepreneur under temporary protection and its statutory bodies need not apply for bankruptcy.

Enforcement proceedings initiated after 12 March 2020 against a temporarily protected entity for satisfaction of a business claim will be suspended for the entire duration of the temporary protection period.

A creditor cannot enforce liens on the business, property, rights or any asset belonging to an entrepreneur under temporary protection.

Claims that originated against an entrepreneur after it was granted temporary protection cannot be set off with earlier receivables.

After grant of temporary protection, a counterparty may not terminate or withdraw from a contract or refuse performance under the contract due to non-performance by an entrepreneur under temporary protection if the non-performance arose between 12 March 2020 and 12 May and was caused by COVID -19.

The time limits for exercising rights against an entrepreneur under temporary protection, including the time limits for challenging a transaction, will be suspended for the duration of the temporary protection period.

During the temporary protection period, the entrepreneur is obliged to prioritize the common interest of creditors over his own interests, must not distribute profit or other equity and is obliged to refrain from disposing of assets.

Loans or similar payments granted to the entrepreneur during the temporary protection are subject to a special regime.

Temporary protection is to last until 1 October 2020 at the latest, but the Slovak Government may extend this period until 31 December 2020.

The court can cancel an entrepreneur’s temporary protection based on reasoned request.