This Article was prepared by the Arzinger& Partner Bratislava Law Office and was translated by the Law Firm Öngören
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CORPORATE PRESENCE
Business activities (systematic activities, which are independently conducted for the purpose of making profit by an entrepreneur in his own name and at his own responsibility) are in the Slovak republic governed especially by the following legislative acts and laws:
- the Parliamentary Act No. 513/1991 Coll. Commercial Code as amended (herein referred to as the "Commercial Code")
- the Parliamentary Act No. 530/2003 Coll. on the Commercial Register as amended
- the Parliamentary Act No. 455/1991 Coll. on the Trade (Trading Code) as amended
- the Parliamentary Act No. 562/2004 Coll. on the European company as amended
- the Parliamentary Act. No. 91/2007 Coll. on the European co-operative society as amended
- the Parliamentary Act. No. 566/2001 Coll. on the Securities as amended
- the Council Regulation (EEC) No 2137/85 on the European Economic Interest Grouping (EEIG)
Here is a list of various legal forms of the legal entities established under the Slovak system of law for the purpose of carrying out business:
- commercial partnership
- limited partnership
- limited liability company
- joint-stock company
- co-operative society
- branch office/organizational part of the non-resident entrepreneurs
- European companies (European public limited liability company, European Economic Interest grouping, European co-operative society)
Since in the Slovak republic, the most frequent legal form of an entrepreneur is a limited liability company and since a branch office is used by a number of non-resident entrepreneurs, these two entities are briefly described in the following text.
2. LIMITED LIABILITY COMPANY (herein referred to as the "s.r.o.")
General description of s.r.o
An s.r.o. is a company which is recognised and separately adjusted by the Slovak law (Art. 105 ff. of the Commercial Code). An s.r.o. does not have shares (as a joint stock company does) but instead it has one or more "business shares - participation interests" which reflect the amount of contribution to the registered capital of the s.r.o. by the shareholder (participant). The ownership relations are determined by the Memorandum of Association (herein referred to as the "MoA") and they are evidenced in the Commercial Register of the competent district court. The ownership relations are reflected in extracts from the Commercial Register.
Participation - business share
Pursuant to the Slovak law a shareholder can hold only one business share in an s.r.o. The size of the business share may be different for each shareholder. A business share represents the participation of the shareholder in rights and obligations related to the company, including voting rights and rights to participate in the distribution of profit. Usually, the proportions of the business share of the shareholders are equal to the proportions of the amounts of their contributions to the registered capital, though MoA may alter this rule. The amount of any shareholder's contribution to the registered capital must be in an amount of at least SKK 30,000 and must be a multiple of SKK 1.000,-.
Capital
Registered capital
The minimum registered capital of an s.r.o. (the sum of the shareholders´ contributions) is SKK 200.000.-.
Reserve fund
An s.r.o. is obliged to establish a Reserve Fund. The Reserve Fund may be created at any time, but must be created, at the latest, within one year of the company recording a profit. The first contribution to the Reserve Fund must be at least 5 % of the first annual profit and must be repeated annually thereafter; however, the total contribution to the reserve fund need not exceed 10 % of its registered capital.
Corporate bodies
An s.r.o. has only two mandatory corporate bodies, General Meeting and Managing Director/s. Facultative corporate body of an s.r.o. is the Supervisory Board. The General Meeting is the supreme governing body of an s.r.o. and the Managing Director is the supreme executive body of the company. Rights and duties of both of these corporate bodies are stipulated in the Commercial Code and in the MoA.
Liability of parties in s.r.o.
Shareholders
The liability of a shareholder in an s.r.o. is limited to the amount of his unpaid contribution to the registered capital of the company. Third parties are entitled to demand satisfaction of their rights from a shareholder only up to the amount of the unpaid contribution.
Managing Directors - executives
The company is represented by one or more Managing Directors. Managing Directors who breach their duties are jointly and severally liable to compensate the company for any damage caused to the company as a result. However, if they can prove that their actions were bona fide and taken with professional care, executives will be exempted from any liability. In addition to the mentioned civil law liability of the Managing Directors, the Managing Directors are holders of the criminal liability in particular cases recognised by the Slovak criminal law.
Formation of s.r.o
Formation of an s.r.o. is divided into two steps - foundation and incorporation.
Foundation
An s.r.o. may be set up by a single founder, by a natural or by a legal entity as well. The maximum number of shareholders is 50. An s.r.o. owned by a single shareholder may not found, or become a sole shareholder in another s.r.o. The foundation document of an s.r.o. is known as the Memorandum of Association. If there is only one shareholder, this document is called a Foundation Deed.
Incorporation
After foundation (execution of the MoA) the company has to be registered in the Commercial Register to become a legal entity. The application for registration of an s.r.o. must be submitted to the Commercial Register not later than 90 days after the foundation of the company. Prior to the submission of the application for registration, each shareholder must pay not less than 30 % of its contribution to the registered capital. The total amount of paid contributions must not be less than SKK 100.000,-. If there is a sole founder - shareholder, the total amount of the registered capital (the minimum of SKK 200.000,-) must be fully paid up before registration. The company is incorporated as of the day of its registration in the Commercial Register.
3. BRANCH OFFICE
General description of branch office
A branch office registered in the Slovak republic is deemed to be a part of a foreign legal entity which established it. It does not itself have any legal personality and is entitled to act only with respect to the matters relating to that foreign entity's activity in the Slovak republic.
The legal effects of having a branch office registered in the Slovak republic are broadly as follows:
- As of the moment of the branch's registration in the Commercial Register, branch office can start carrying out business activities on behalf of a foreign legal entity on the territory of the Slovak republic.
- A branch office, represented by its head (an individual), is entitled to enter into agreements and legal obligations on behalf of a foreign legal entity, but only with respect to the activities of the foreign legal entity in the Slovak republic. The head's scope of authority and signatory powers can be limited by the foreign legal entity, however such limitation can not be effectively argued against third persons who in good faith entered into a transaction with the branch office.
- The foreign legal entity can be sued in the Slovak republic in relation to any cause of action which falls under the scope of the branch office's activity.
- The foreign legal entity acquires a local tax presence, but the extent to which it would be liable to pay any tax (income/tax liability allocation) shall be discussed with local tax advisors. Generally, the branch office is subject to corporate income tax at a flat rate of 19 %.
An important note is that the legal capacity of a foreign legal entity (non-resident) shall, under the Slovak law, correspond to the law under which the foreign legal entity was established. The law, under which the foreign legal entity was established, shall also govern its internal relations and the liability of its partners, members or shareholders for the foreign legal entity obligations.
RESIDENCE OF FOREIGNERS IN THE TERRITORY OF THE SLOVAK REPUBLIC
The residence of foreigners is in the Slovak republic (herein referred to as the "SR") governed especially by the following legislative acts and laws:
- the Parliamentary Act No. 48/2002 Coll. on the Residence of Foreigners as amended (herein referred to as the "RoF Act")
- the Parliamentary Act No. 480/2002 Coll. on the Asylum as amended
- the Parliamentary Act No. 171/1993 Coll. on the Police Force as amended
- the Parliamentary Act No. 381/1997 Coll. on the Travel Documents as amended
- the Parliamentary Act No. 270/1995 Coll. on the National Language of the SR as amended
3. ENTRY TO THE TERRITORY OF THE SR
Entry of an European Economic Area member state citizen
A European Economic Area (EU, Iceland, Lichtenstein, Norway; herein referred to as the "EEA") member state citizen and his family member can be denied to enter to the territory of the SR only if:
- he is an undesirable person,
- there is a reasonable suspicion that he could endanger the national security, public order or public health,
- he has no travel document or visa (if required).
It is not possible to deny entry to a foreigner whom was granted a residence authorization (see the point 2 below).
Entry of a foreigner
A foreigner may enter to the territory of the SR only upon granting
- airport transit visa (entitles foreigner to stay during waiting for an air connection mentioned in the air ticket in the transit area of a public airport on the territory of the SR),
- transit visa (entitles foreigner to transit the territory of the SR at his passage from one country to the territory of a third country. The transit must not exceed five days),
- short term visa (entitles foreigner to one or several entries and for a duration of stay determined in the visa; neither a continuous stay nor the aggregate of days of several stays must exceed 90 days in one half-year),
- long term visa (entitles foreigner to entry and stay for a period longer than 90 days in one half-year, if it is necessary for the meeting of obligations of the SR resulting from international treaties or it is in the interest of the SR).
Foreigner shall submit a visa application in person, on an official form at the diplomatic mission or consulate office of the SR abroad unless otherwise provided by the law.
A Police unit on the border is authorized to grant visa pursuant to the Council Regulation (EC) No 415/2003 on the issue of visas at the border, including the issue of such visas to seamen in transit.
A diplomatic mission or consulate office of another European Union member state abroad is also authorized to grant visa if stipulated in an international agreement.
4. RESIDENCE IN THE TERRITORY OF THE SR
The residence of foreigners in the territory of the SR shall be under the Slovak law in the following form:
Temporary residence
Permanent residence
Tolerated residence
Residence of citizens of the European Economic Area member states (EU, Iceland, Norway, Lichtenstein),
3.1 Temporary residence
Temporary residence authorisation /permission to temporary residence/ authorises a foreigner to stay in the territory of the SR and to journeys abroad and back to the territory of the SR for a period of time which is stated in the temporary residence authorisation granted by the police unit.
Purpose of a temporary residence shall be as follows:
- carrying out business (based on authorisation to entrepreneur issued under a special rule, e.g. the Parliamentary Act No. 513/1991 Coll. Commercial Code as amended, the Parliamentary Act No. 455/1991 Coll. on Trade /Trading Code/ as amended),
- employment (based on employment authorisation unless stated otherwise by international agreement or if the employment authorisation is not required under the Parliamentary Act No. 5/2004 Coll. on Employment Services as amended),
- study (provided a foreigner is a pupil of primary school, a student of secondary school, secondary vocational school, secondary vocational training institution or university),
- activities under special programmes (related to research, scientific, sport activities, artistic work or if it is necessary to fulfilment of a commitment of the SR resulting from an international agreement or to fulfilment of a governmental program),
- family reunification (if foreigner is a husband of a foreigner with temporary residence authorisation or permanent residence authorisation provided the husband and wife are both at least 18 years old; if foreigner is an underage child of foreigners with temporary residence authorisation or of a foreigner with temporary residence authorisation or his married partner or of an asylum seeker or his married partner, who is bringing the child up under the law; if foreigner is an unprovided child older than 18 years of a foreigner with temporary residence authorisation or his married partner, if foreigner is a direct ascendant relative of an asylum seeker younger than 18 years; if foreigner is a lonely parent who is dependent on the care of a foreigner with temporary or permanent residence authorisation; if foreigner is a dependant person under an international agreement),
- civil service duties of the foreign military forces.
A foreigner has to submit the application for granting permit for temporary residence in person, abroad, at the foreign mission in that country, which issued his passport/travel permit, or at a foreign mission in a country, where he has his residence, unless otherwise provided by the RoF Act. If there is no such foreign mission, he shall submit the application at a foreign mission determined by the Ministry of Foreign Affairs of the SR in agreement with the Ministry of Interior of the SR.
A foreigner representing or employed in a foreign investor in the SR who is a citizen of an OECD member state, husband or a child under the age of 18 of such foreigner, can submit the application for granting permit for temporary residence in person at a police unit in the SR.
3.2 Permanent residence
Permanent residence authorisation /permission to permanent residence/ authorises a foreigner to stay in the territory of the SR and to journeys abroad and back to the territory of the SR for a period of time which is stated in the permanent residence authorisation granted by the police unit.
The first permanent residence authorisation may be granted to a foreigner:
- who is a husband or a direct relative entrusted to the care of the Slovak national with permanent residence authorisation in the territory of the SR,
- who is a an underage child entrusted to the care of a foreigner who is a husband of the Slovak national with permanent residence authorisation in the territory of the SR,
- who is an underage child of a foreigner with permanent residence authorisation or is an underage child entrusted to the care of a foreigner with permanent residence authorisation,
- who is an unprovided child older than 18 of a foreigner with permanent residence authorisation,
Based on an application for granting permit for permanent residence, the first authorisation is to be granted for a time period of five years. The next authorisation is to be granted (based on another application) for an indefinite time period.
3.3 Tolerated residence
Tolerated residence will be granted to a foreigner by the police unit:
- if it is obstacle of his administrative expulsion (pursuant to the RoF Act),
- whom temporary asylum was provided to,
- if his leaving the country is not possible and there is no reason for his detention,
- if he is an underage child found in the territory of the SR,
- if he is a victim of a human dealing crime and is at least of 18 years,
- if it is necessary with respect to his private and family life (pursuant to the European Convention for the Protection of Human Rights and Fundamental Freedoms).
3.4 Residence of citizens of the EEA member states
The RoF Act implies special provisions for residence of the EEA member states citizens in the SR.
The EEA member state citizen does not need any residence authorisation. His stay in the SR longer than 3 months is deemed to be a permanent residence (first authorisation, see the point 2.2 above) under the law if:
- he is employed in the SR,
- he carries out business in the SR,
- he is studying in the SR and has enough financial means for stay in the SR,
- he has enough financial means for permanent residence in the SR,
- he is supposed to be employed.
Slovak police unit will grant foreigner, who is not an EEA member state citizen, a permanent residence authorisation (first authorisation) if he shall stay in the territory if the SR for more than 3 months if he:
- is a family member of an EEA member state citizen mentioned above (a married partner and a child under the age of 21 or an unprovided child of the married partner; a child under the age of 21 or unprovided child; a dependant direct relative; a dependant direct relative of a married partner; other dependant family member or dependant household member) and
- is not an economic burden for the health and social care system of the SR.
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