Updated 04. 2010
Contracts on selling a business are governed by the Commercial Code.
The necessary particulars for registering merged companies in the Commercial Register are governed by the Act on the Commercial Register.
Types of merger
- the combining of two equivalent businesses, where one of the businesses retains its name and identity and acquires all of the assets and liabilities of the acquired business. The other firm ceases to have an independent existence,
- amalgamation of two firms into one new firm by combining their share capital based on the prior consent of shareholders.
It is also considered a merger when a new company swaps its shares under favourable terms for the shares of companies that are closing down. Mergers usually take place on a voluntary basis.
A horizontal merger involves combining firms that are active in the same field. A circular combination is when products are distributed via the same distribution channels.
A vertical merger is a combination of firms where each one is involved in a different stage in the same production process. A firm gains control over its suppliers or customers.
Vertical diversification may be based on:
- field of operations - combinations of firms from mutually unconnected fields,
- function - production of a different product range, which, however, serves the same purpose,
- conglomerate - no functional dependence between individual types of production (may be done for financial or speculative investment reasons).
Acquisition is usually of an involuntary, forced nature, involving the absorption up of a smaller or financially weaker company by a larger or financially stronger company.
Absorption involves purchasing 51% or more of shares. It may be carried out by buying up the shares of the target firm for cash, an offer of bonds or a new share issue.
Division involves winding up a company and transferring its assets to other, already-existing companies. The other companies become the legal successors to the company that is being wound up, or newly-established companies become, through their establishment, the legal successors to companies that are being wound up.
Each of the successor companies guarantees the liabilities with all of their assets; they are liable jointly and severally for the liabilities.
A creditor may demand full payment of a liability from any of them. If one of them discharges the liability, the obligation of the other companies shall lapse.
The partners in the company being wound up become partners in the successor company.
The amalgamation or merger of companies requires a draft amalgamation agreement or merger agreement for the companies, which contains in particular:
- trade name, registered address and identification number of the amalgamating or merging companies; also their legal form, where appropriate ,
- the shares of the company partners in the successor company, or the size of the contribution made by the partners in the successor company,
- draft Articles of Association or Deed of Establishment, and the articles of the company being created through the merger,
- the date from which the acts of the company being wound up shall be considered from an accounting perspective to be acts performed on the account of the successor company,
- the time when the partners in the company being would up will acquire rights to a share of profits as partners in the successor company,
- members of the statutory body or supervisory board.
The consent of all partners in the companies being wound up shall be required for the draft agreement, and in the case of a merger the partners in the successor company as well.
The division of a company requires the approval of a division plan for the company.
The division plan must contain the following:
- description and designation of the commercial assets and liabilities which are to be transferred to the various successor companies,
- rules on the distribution of shares between the partners.
Cross-border mergers or cross-border amalgamations are understood as follows:
- EU Member State or member of the European Economic Area,
- a "Slovak company" means a company with a registered address in the Slovak Republic,
- "foreign participant company" means a company with a registered office in another Member State,
- a Slovak company or a company with foreign ownership,
- of one or more Slovak companies with one or more foreign companies; all of the companies being wound up and the successor companies must have the same legal form.
Buying an existing company, with an already established structure, can be a good way of expanding your business.
The Anti-monopoly Office authorises company mergers by monitoring market concentrations.
In the interests of maintaining competition, the Office implements corrections on the basis of the Competition Act.
Proceedings on market concentrations may be initiated only at the request of a business - through a notice of concentration. The business must submit the notice to the Office within 30 working days of :
- the date of signing the agreement which has led to the concentration,
- the date of notifying acceptance of a bid in a public tender,
- date of delivery of a government body decision to a business,
- date when the European Commission announced that the Office would act in the matter,
- date on which other factors occurred which led to the creation of a concentration.
Together with the application for the start of proceedings, the business must pay an administrative fee, in accordance with the Act on Administrative Fees.
The time period for the Office to decide on a concentration is 60 working days, although the president of the office may extend this by up to 90 days in complex cases.
Mergers, amalgamations or divisions of companies shall become effective through an entry in the Commercial Register, by which :
- the assets of the company being wound up are transferred to the successor company,
- the partners in the company being wound up become partners in the successor company,
- the companies being wound up through a merger, amalgamation or break-up cease to exist,
- in the case of merger or division, the successor companies come into existence.
Registration in a Commercial Register
In the case of a merger, amalgamation or division of a company, information is entered into the Commercial Register as to whether :
- it has been wound up through merger, amalgamation or division, stating the trade name, registered office and identification number of the successor company or successor companies,
- it has been created through merger, amalgamation or division, stating the trade name, registered office and identification number of all the companies being wound up through merger or division,
- the legal successor of all the companies being wound up through a merger or being divided through a merger.
Applications for registration of the company in the Commercial Register shall be submitted simultaneously by all of the companies being wound up and the successor companies. The members of the statutory bodies of the newly-established companies shall submit these applications and are entitled to act in all matters connected with their establishment.
Tax obligations of merged companies
Legal entities are obliged to apply to the tax authority for registration within 30 days of obtaining a permit or licence to do business.
Mergers, amalgamations or divisions of commercial companies or cooperatives in real values are handled by Section 17c of the Income Tax Act.
Mergers, amalgamations or divisions of commercial companies or cooperatives in original values are handled by Section 17e of the Income Tax Act.
The date of acquisition is considered to be the date of permission to begin doing business.
Registration with the Social Insurance Agency
The registration (or de-registration) of a company with (or from) the Social Insurance Agency must be done within eight days of employing at least one employee, or respectively from the day on which no employees are employed any longer.
The relevant National Labour Office must be informed about transformations to the company.