Updated 04. 2010
If an individual or company decides to sell a business they are regulated by:
Types of business transfer
Ownership of an item may be acquired:
- without payment,
- in return for a payment
With a payment-free transfer ownership is acquired:
- by donation or by another form of agreement - ownership comes into being with the taking over of the item, unless the participants agree otherwise. Ownership of real estate is acquired through an entry in the Land Registry,
- by inheritance,
- by a decision of a government body - ownership is not acquired on the day specified in the decision or on the day the decision enters into force.
- on the basis of other factors laid down by the law.
In paid transfer ownership may be acquired:
- by purchase:
- contract on selling a business - has the nature of an absolute transaction, i.e. the legal relationships arising from it will always be governed by the provisions of the Commercial Code, regardless of the nature of the parties to the agreement,
- contract on selling and leasing back - a supplier sells equipment and then leases it back,
- silent partnership agreement - the silent partner undertakes to make a specific contribution, in return for a share of the net profits.
Business transfers: a step-by-step guide
Limited partnership (Komanditná spoločnosť - k.s.) - a transfer of ownership contract is used to transfer a limited partner's share. In general, the other partners must approve this, however the Memorandum of Association (spoločenská zmluva) may veto such an agreement. A change of general partner (komplementár) involves an agreed amendment to the Memorandum of Association.
If the involvement of all the limited partners is terminated, the general partners may agree that the limited partnership will be transformed without liquidation into a general partnership.
From the perspective of guarantees, general partners guarantee with all of their assets while limited partners guarantee for the liabilities of the partnership up to the level of their own unpaid contribution, as recorded in the Commercial Register.
In a general partnership (Verejná obchodná spoločnosť - v.o.s.), a minimum of two partners must remain in the partnership and this must be recorded in the Memorandum of Association.
If only one partner remains in the partnership, he may take over the assets of the terminated partnership as the legal successor, without liquidation. The decision must be taken within one month.
The partners are jointly and severally liable for the liabilities of the partnership to the extent of their entire assets.
If a partnership does not lapse with the death of a partner, the heir may register his participation in the partnership within one month of the end of the inheritance proceedings. Registration must be in writing and the signature of the heir must be officially verified.
The share of a deceased partner shall be divided between his heirs in relation to the share they take in the estate. An heir who registers for participation shall become a partner with the share that falls to him in the inheritance.
In a joint stock company (Akciová spoločnosť - a.s.) the ownership structure is changed through the buying and selling of shares. If the shares are publicly traded on the stock exchange, a share transfer agreement is used between the seller and buyer.
The AGM of the company may decide on:
- dissolving the company and amending its legal form,
- ending trading in the shares of the company on the stock exchange and deciding that the company will cease to be a public joint-stock company,
- approving agreements on the transfer of the company or agreements on the transfer of part of the company.
Limited liability company
A change of partner involves transferring the partner's business share or amending the Memorandum of Association, with the agreement of all partners. The transfer of a business share is approved by the AGM. Transfers are governed by the Memorandum of Association.
A transfer agreement must be in writing and the signatures on the agreement must be verified. The purchaser must declare that he is acceding to the Memorandum of Association and the statutes thereof, where appropriate. The transferor guarantees the share for the purchaser in return for the payment of a contribution.
Business shares may be inherited. A Memorandum of Association may rule out the inheritance of a business share, if the partnership has more than one partner.
The dividing up of a business share is possible only through transfer or through passing on to an heir or a legal successor to a partner. The dividing up of a share requires the approval of the AGM.
A cooperative (Družstvo) must have a minimum five members. This does not apply where its members include at least two legal entities. The transfer of an ownership share is possible by transferring membership rights and obligations, unless this is precluded by the articles of the cooperative. The articles may specify more precise conditions for joining the cooperative. It is responsible for breaches of obligation to the extent of its entire assets. The members do not guarantee the liabilities of the cooperative.
The following are not subject to income tax:
- income acquired by donation or by inheritance,
- profit shares paid out after tax by a commercial company or cooperative, or by a similar legal entity abroad,
- settlement shares and shares in the liquidated surplus assets of a commercial company or cooperative,
- income resulting from the acquisition of new shares through the dissolution of a taxpayer without liquidation, including swaps, even in cases where the merger, amalgamation or division of a company includes assets of a company with a registered office in a Member State of the European Union.
Taking over an existing company is a worthwhile alternative to setting up a new business.
Business transfer procedures
Following a company transfer, the Commercial Register, must be contacted to register the changes.
Prior to registering a general partnership the Registering Court shall check whether:
- the partnership agreement includes the particulars required under specific Acts,
- the partnership agreement mentions at least two partners,
- the partnership agreement has been signed by all partners and the signatures have been verified.
Applications for registering changes to limited liability companies must include the following attachments:
- Memorandum of Association (spoločenská zmluva), statutes or deed demonstrating authorisation to perform the business activities to be entered in the Commercial Register as the area of business
When registering a limited partnership the Registering Court will verify whether:
- the partnership agreement contains all the necessary particulars
- there is at least one general partner and one limited partner
- the agreement has been signed by all of the partners
- the level of contributions of each limited partner comply with the specific legislation
Before registering a cooperative, the Registering Court will verify whether:
- the statutes of the cooperative comply with the law
- there is a full complement of cooperative members
- the amount of the capital base is stated in the statutes of the cooperative
After checking the documents, an entry is made in the Commercial Register within five days. At the same time the Court issues or sends out, immediately after completing registration, an excerpt from the Commercial Register, and publishes the contents of the excerpt in the Trade Journal.