Financial difficulties - Slovakia
Updated 04. 2010
Financial problems are part of life in business. Handling financial difficulties and stabilising the business is mainly a matter of anticipating the difficulties and reacting to them swiftly. The EU also provides businesses with financial support and with improved access to standard commercial investments and capital, or co-financing for projects.
EU funds are administered by various ministerial departments:
The provisions of the Commercial Code make it possible to prevent financial difficulties and stabilise a business.
Stabilising a business
If an entrepreneur does not have the equity capital to increase the capital base, they can get the necessary capital from a so-called silent partner. Silent partnerships are regulated under the provisions of Sections 673 - 681 of the Commercial Code.
When a silent partnership agreement is concluded, this does not create a new entity. Basically, a silent partnership agreement involves a business being provided with a specific financial or non-financial investment, in exchange for which the business undertakes to pay back a proportion of the profit earned from the silent partner's contribution to the trading results.
Credit agreements are regulated by the provisions of Paragraphs 497 - 507 of the Commercial Code.
Under a credit agreement, the creditor provides funds to the debtor, who pays back the funds with interest.
If credit provision forms part of the creditor's business operations, a fee can be agreed for the creditor's undertaking to provide funds.
Banks holding banking licences, should, in the main, provide credit to commercial enterprises under credit agreements.
Loan agreements are regulated by Paragraphs 657 - 658 of the Commercial Code.
Under loan agreements, creditors provide certain items to debtors, for example money. The debtor returns the items at the end of an agreed period.
If the loan is financial, the parties may agree on interest. If the loan is non-financial, the parties may, instead of interest, agree on the items returned being of a greater quantity or better quality. The items returned are generally of the same kind.
If a company gets into financial difficulties, an in-depth analysis (audit) needs to be conducted and restructuring measures adopted on the basis of that analysis. The audit is performed by an auditor, who is an individual registered in the List of Auditors and who has a licence to perform audits.
Factoring is the purchase of short-term receivables resulting primarily from the supply of general consumer goods and general manufacturing supplies.
Forfaiting is a form of financing for export receivables.
Leasing can be defined as follows:
- in practical terms - an asset is leased out for a period shorter than the life of the asset. At the end of the lease period, ownership of the asset does not transfer to the lessee;
- in financial terms - the leased asset may have an agreed purchase option at the end of the lease. Under the terms of the Act on Income Tax, the term of the lease must be at least 60% of the normal depreciation period. None of the parties to a lease agreement can terminate it unilaterally.
The Association of Leasing Companies of the Slovak Republic is an organisation bringing together companies doing business in the long-term leasing of assets, and activities connected with leasing.
Commercial credit involves a customer paying a supplier for goods or services at the end of a term as specified in an agreement.
Access to different sources of finance can help overcome financial difficulties.
When filing for bankruptcy is the only option left for a business owner, it pays to cut your losses, initiate proceedings sooner rather than later, and move on to a new project.
Order for payment
An Order for Payment is a form of judicial ruling in civil law proceedings which involves the payment of a sum of money. When issuing an Order for Payment, the court operates on the basis of so-called accelerated proceedings.
The conditions for issuing such an Order are governed by:
- Civil Court Rules - OSP,
- Within the EU framework, proceedings on Orders for Payment are governed by the regulations of the European Parliament and the Council (EC).
Applications to issue an Order for Payment must include:
- the exact names of the beneficiary and the party under obligation,
- a clear statement of the content and scope of performance,
- the actual deadline for fulfilling the payment obligation,
If the conditions laid down by the law are fulfilled and the court fee is paid, the court will issue an Order for Payment at the latest within ten working days of the date on which these conditions are fulfilled. The defendant must fulfil the obligation imposed within a deadline of not less than 15 days and pay the costs of the proceedings, or submit an appeal to the court within 15 days.
If you become insolvent and cannot pay the claims of your employees, they will have a claim to guarantee insurance benefits. These are provided in respect of up to three months out of the previous 18 months of an employment law relationship.
Applications for the acknowledgement of guarantee insurance benefits are submitted by employees to a branch of the Social Insurance Agency within 60 days of the employer becoming insolvent.
Administration of the process of bankruptcy and restructuring is carried out by the Slovak Ministry of Justice, and bankruptcy proposals are published in the Trade Journal (Obchodný vestník).
There are many programmes, funds and forms of credit which can help your business and financial stability. These include financial instruments in the public and private sectors.
The greatest contribution to increased financing has come from the Structural Funds (European Regional Development Fund - ERDF, and the European Social Fund - ESF) and the Cohesion Fund.
Slovakia also participates in the so-called community programmes, which focus on objectives such as tax policy, greater competitiveness and other areas.
Check also the legislation on this topic in: