Unconstitutionality of certain provisions of the law concerning the acquisition of agricultural land
After almost 4 years, the Constitutional Court of the Slovak Republic decided that some provisions of the law concerning the acquisition of agricultural land, specifically those related to the transfer of ownership of agricultural land, are unconstitutional.
On 14 November 2018, the Constitutional Court of the Slovak Republic issued a decision, based on the joint initiative of two groups of members of the Slovak National Parliament in 2014, in the case of the unconstitutionality of some provisions of Act No. 140/2014 on the Acquisition of Agricultural Land and Amending Certain Other Acts, as amended. The unconstitutionality was specifically related to the wording of Sections 4, 5 and 6 of this law, which were deemed incompatible with Articles 1 (1), 13 (4) and 20 (1) of the Slovak Constitution.
These Sections govern the procedure for the transfer of agricultural land via public bids (not directly), and specify the persons for whom the law permits an exemption (for example, close relatives or persons which have engaged in agricultural production as a business for the last 3 years before the signing of a ownership transfer agreement related to the land on which they had previously worked), and as a result of which a public bid is not required.
As of the date of publication of this decision of the Constitutional Court in the Bulletin of Acts and Decrees, the aforementioned Sections are no longer enforceable (which means that a public bid will not be necessary when selling agricultural land). The national legislature will have a period of six months to amend these Sections to bring them in compliance with the Slovak Constitution. If it fails to do so within this six-month period, the aforementioned Sections shall also lose their validity.
Amendment to the Act on the Ownership of Apartments and Non-Residential Premises
The Slovak Parliament approved an amendment to the Act on the Ownership of Apartments and Non-Residential Premises in order to simplify and clarify the legislation concerning the decision-making process of owners of apartments and non-residential buildings and to eliminate interpretational ambiguities and practical complications related to the administration of residential buildings.
Effective as of November 1, 2018, the Amendment to Act. No. 182/1993 Coll. on the Ownership of Apartments and Non-Residential Premises and on the Amendment and Supplementation of Certain Acts, as amended, introduced new definitions of the terms garage in a building, garage stand, storage and related new rules.
The amendment clarifies that the obligation of owners of apartments and non-residential premises in a building to ensure its administration (by an owners’ community based on a community contract or by an external administrator based on a management contract) applies from the day of the first transfer of ownership of an apartment or non-residential premises in a building. In the event that, as of November, several management contracts or community contracts have been concluded, only the contract which was entered into first shall remain valid; the other contracts shall be deemed invalid by operation of law.
The method of entering into a community contract was also affected by the Amendment. The contract is to be signed only by the person elected as the president of the owners’ community and another person authorized by the owners of the apartments and non-residential premises (their signatures must be officially verified). The signatures of other owners are not required. Any other new (co)owner of an apartment or non-residential premises in a building will accede to the community contract by operation of law at the moment of acquisition of the (co)ownership right without the need to perform any other legal act. A community contract may not be terminated by any owner. A similar approach was also established for management contracts.
The communication of owners of apartments and non-residential premises with an administrator is ensured by the elected representative who must be an owner of some apartment or non-residential premises in the building. Already-elected representatives that are not owners must be replaced by June 30, 2019.
The Amendment also specifies that the responsibility of an administrator or a community for liabilities incurred in relation to the administration is limited to the amount of the owners´ contributions paid in connection with the use of apartments or non-residential premises or to the amount of the balance of funds collected for the operation, maintenance and repairs in a building. The responsibility for any amount above this limit is transferred to the owners of the apartments or non-residential premises to the extent of their co-ownership share in the building.
As of November 1, 2018, the rights and obligations from liabilities for defects and damage towards the builder of the building are transferred to the owners of the apartments and non-residential premises in the building.
Last but not least, the amendment also covers the matter of owners´ meetings. For instance, the amendment stipulates that a power of attorney granted for representation and voting at a meeting must also include an order on how the representative should vote on specific questions to be dealt with at the meeting (unless a general power of attorney applies). It also stipulates that a valid decision and approved contract or amendment to an existing contract is binding on all owners, even if not signed by all owners.
Modification of the squeeze-out process
The Government of the Slovak Republic has approved a draft law amending, among others, the Securities Act, which should enable the more efficient buyout of shares of minority shareholders, the so called squeeze-out.
On September 26, 2018, the Government of the Slovak Republic approved a draft law amending, among others, Act No. 566/2001 Coll. on Securities and Investment Services and on Amendments to Certain Laws (Securities Act), as amended; the intended changes should simplify the squeeze-out process.
The right to buyout means the right of a shareholder who owns shares whose aggregate nominal value represents at least 95% of the target company’s share capital with at least 95 % of the voting rights attached, to request the acquisition of shares of all the remaining minority shareholders of the target company.
According to the current wording, the purchase of shares of minority shareholders is carried out in a contractual form with the participation of both parties. The aim of the draft amendment being discussed is to switch to a system of transfer of the ownership right to shares of minority shareholders based on the decision of the general meeting of the target company. To approve a share-transfer decision, at least 95 % of the votes of all the shareholders of the target company would have to vote in favour of the squeeze-out. The adoption of the decision would then be registered in the Commercial Register and, after 30 days from the date of registration in the Commercial Register, the shares of the minority shareholders would automatically be transferred to the majority shareholder.
As according to the current wording, also in the sense of the amendment, a majority shareholder who decides to exercise the right to buyout is obligated to notify the National Bank of Slovakia of this decision, because the squeeze-out shall only become effective with the prior approval of the National Bank of Slovakia. The majority shareholder will have to wait before taking any further steps until the prior approval of the National Bank of the Slovakia is granted, because only after obtaining the approval will it be possible to request that the board of directors of the target company convene a general meeting in order to adopt a decision on the transfer of shares of the minority shareholders to the majority shareholder.
In order to ensure that the majority shareholder pays a consideration to the minority shareholders after the transfer of shares, the amendment proposes that the majority shareholders will be obligated to deposit the financial means necessary to pay all of the consideration to the minority shareholder with an authorized person (e.g., a bank, the central depository) before filing an application for the approval of the National Bank of the Slovakia. The consideration should be paid by the authorized person no later than three days after the transfer of shares of the target company.
The draft amendment does not affect the method of determination of the amount of the offered consideration, which must be determined adequately. According to the amendment, the right of shareholders to ask the court to review the adequacy of the consideration would remain, but it should not have any impact on the process and completion of the squeeze-out.
If this amendment to the Securities Act is approved by the National Council of the Slovak Republic, the buyout of minority shareholders will have reached the standard European level, and it is expected that this adjustment will be positively assessed, as the current wording does not allow for an effective realization of a squeeze-out, complicates the functioning of joint-stock companies with a majority shareholder and increases the operating costs of such companies.
If approved, the amendment shall come into force on January 1, 2019.
Amendment to the Cadastral Act
An amendment to the Cadastral Act which, based on our experience, will accelerate and improve the functioning of the Cadastral Register, will come into effect on October 1, 2018.
On June 19, 2018, the National Council of the Slovak Republic approved an amendment to Act No. 162/1995 Coll. on the Cadastral Register and on the Registration of Ownership and Other Real Estate Rights (the Cadastral Act), as amended (hereinafter referred to as the Amendment), which aims to respond to the demand for accelerating and improving the functioning of the Cadastral Register by eliminating the deficiencies resulting from the previous practice or through the gradual computerization of processes related to the operation of the Cadastral Register.
In addition to changes such as the change in the decision-making power of property registration in the Cadastral Register, which passes from the district office – cadastral department directly to the central level, i.e., the Office of Geodesy, Cartography and Cadastral Register of the Slovak Republic, the Amendment brings a number of fundamental changes that will have an impact on the daily operations related to the Cadastral Register.
The amendment brings the following major changes:
1. A proposal for the commencement of a cadastral proceeding must include, among other things:
- an indication of the nationality of the person who submits the proposal;
- the subject of the proposal;
- an indication of the legal act by which the real estate right is to be incurred, removed or changed;
- the designation of the property to which the proposal relates;
- a verified geometric plan number – as of the effectiveness of the Amendment, it will not be necessary to attach a geometric plan; the reference to its identification number assigned after its verification will be sufficient; and
- an indication of the attachments.
2. The proposal for a cadastral deposit must contain, inter alia, the following annexes which were not required under the previous legislation:
- a power of attorney if the party to the proceedings is represented by a representative; the signature of the person who grants the power of attorney must be certified if the granter of the power of attorney is a transferor obliged by a pre-emptive right, obliged in the event of the establishment of an easement or entitled in the event of the extinction of an easement, co-owners in a contract for the cancellation or settlement of joint ownership or in the settlement of marital property;
- an affidavit of the fulfilment of the conditions pursuant to Section 59a of the Commercial Code (i.e., in cases where a joint stock company acquires assets under a contract concluded with its founder or a shareholder in the amount of at least 10% of the value of the share capital, the value of the subject of the contract must be determined by an expert assessment) or an affidavit that these terms do not apply to that company;
- a legal person’s authorization granted to its employee, if the legal person who is a party to the application for a cadastral deposit instructs its employee in writing to submit a cadastral deposit application within the scope of its business.
3. The price of the property will be registered in the Cadastral Register. According to the current legislation, only the price of agricultural and forest land was registered in the Cadastral Register. The price of the property will be registered in the Cadastral Register as of the date of effectiveness of the Amendment; the price will not be ascertained or registered retroactively.
4. Only those structures and small buildings that have a perimeter wall and that are enclosed by a roof structure will be registered in the Cadastral
5. For the purposes of the Amendment, all legal acts contained in a contract and all properties related to the legal acts involved in the contract will be subject to a cadastral deposit proceeding. In the future, it will not be possible to delete some of the property that was listed in the legal act (contract) on the basis of which the deposit proceeding was filed in the cadastral deposit proposal.
6. Buildings, and residential and non-residential premises shall be subject to registration in the Cadastral Register even during their construction phases.
7. The adjustment of conditions for the cancellation of a building that has ceased to exist.
The amended provisions will come into effect on October 1, 2018.
New Government Regulation on the Conditions for Granting Regional Investment Aid
The recently adopted Government Regulation specifies new conditions for granting regional investment aid and establishes the maximum intensity and amount of investment aid in the regions of the Slovak Republic.
The Government of the Slovak Republic has approved a regulation which, with effect from July 1, 2018, determines the details of the conditions for granting regional investment aid under new Act No. 57/2018 Coll. on Regional Investment Aid and on the Amendment and Supplementation of Certain Laws, as amended (hereinafter the Act), effective from April 1, 2018. Investment aid within the meaning of the Act means aid to support the implementation of an investment project in industrial production, a technology center or a business services center.
For the purposes of setting the minimum conditions for granting regional investment aid in the form of a contribution to newly created jobs and industrial production, the Regulation introduces the classification of the districts of the regions of the Slovak Republic into four zones A through D. The districts are divided into zones according to the comparison of the unemployment rate in the district of the principal place of realization of the investment project for a specified period with the weighted average of the unemployment rate in the district of the principal place of realization of the investment project for a specified period and the unemployment rates in the neighboring districts for the same period. Each district is ranked in zones A through D according to the higher of the values compared.
The regulation further defines the priority areas of supported investment projects. For example, investment projects implemented in priority areas of enterprise service centers include investment projects that are exclusively and directly aimed at providing centralized corporate, finance and IT support services and creating knowledgeable job positions with higher added value and for which there is a low risk of automation. Some forms of investment aid are provided only for investment projects in priority areas.
Pursuant to the Act, one of the conditions for granting regional investment aid is the realization of the investment plan in the principal place of implementation of the investment project, i.e., the place where the establishment of the recipient of investment aid is situated. However, the regulation permits exemptions from the above-mentioned condition in the case of an investment project carried out in industrial production where the recipient of investment aid is entitled to locate part of the procured machinery, devices and equipment in a supplementary site of realization of an investment project, which is specified in the Act.
Last but not least, the Regulation specifies the maximum intensity and amount of investment aid for a given investment project, depending on the amount of eligible costs.
Amended provisions of the Commercial Code from last year will soon come into force
New provisions of the Commercial Code on the establishment of a limited liability company, on the transfer of interest in a limited liability company and on the deletion of a company from the commercial register will become effective on September 1, 2018.
The amendment to Act No. 513/1991 Coll., the Commercial Code, as amended, adopted in October 2017, brought about a number of changes, the last of which will enter into force on September 1, 2018.
The ownership interest holder of a limited liability company will not be able to transfer interest to another ownership interest holder or another person if the company is in liquidation proceedings, if the company is dissolved by court or by court order or if bankruptcy or a restructuring proceedings against the company are commenced.
In the event of a proposal for the registration of a change in the ownership interest holder of a limited liability company in the relevant commercial register, the company will be required to obtain the consent of the tax administrator only in cases when a majority interest is transferred and either the transferor or the acquirer of the interest is a local person or entity on the list of tax debtors.
The process of setting up a limited liability company will be simplified by not always having to obtain consent in relation to tax arrears vis-à-vis the state, but only in cases in which the company is to be established by persons on the list of tax debtors or the list of debtors of the Social Insurance Company.
As of September 1, 2018, a proposal for the deletion from the commercial register of a company which is not cancelled without liquidation with a legal successor must be accompanied by the consent of the relevant tax administrator and the approval of the Social Insurance Company with the deletion of the company. However, this obligation will only exist if the company is on the list of debtors of the Social Insurance Company.
Slovak Government approves Amendment to Trademark Act
The Government of the Slovak Republic has approved an amendment to the Trademark Act, which, if approved by the National Council of the Slovak Republic, will introduce several significant changes. The amendment needs to be seen in the global context of the EU trademark system.
The amendment to Act No. 506/2009 Coll. on Trademarks as amended, approved on May 9, 2018 by the Government of the Slovak Republic, is about to be sent to the National Council of the Slovak Republic for approval. The Amendment aims to transpose into Slovak law Directive (EU) 2015/2436 of the European Parliament and of the Council of December 16, 2015 to approximate the laws of the Member States relating to trademarks.
One of the fundamental changes introduced by the Amendment concerns the definition of a sign capable of forming a trademark. Currently, a sign must be distinguishable; however, in the event of the approval of the amendment, a sign will also have to be capable of being represented on a register in a clear and precise manner. The introduction of such condition relates to the proposal to abandon the requirement to represent a trademark graphically and to accept a sound trademark.
The Amendment also introduces the requirement of the genuine use of a trademark, which is based on one of the fundamental principles of the Directive, namely the application of protection only to trademarks that are genuinely used. If, within a period of five years following the date of registration of a trademark, the proprietor has not put the trademark into genuine use in connection with the goods or services for which it is registered, or if such use is interrupted during a continuous period of five years, the trademark will be subject to possible revocation.
Last but not least, the amendment introduces the right of the proprietor of a registered trademark to prevent all third parties from bringing goods, in the course of trade, into the Slovak Republic (without being released for free circulation in the Slovak Republic), if such goods, including the packaging from a third country, bear an unauthorized trademark which is identical to the trademark registered in respect of such goods, or which cannot be distinguished in its essential aspects from that trademark.
The proposed date of effectiveness of the amendment is January 14, 2019.
General Data Protection Regulation (GDPR)
Regulation (EU) 2016/679 of the European Parliament and of the Council on the protection of natural persons with regard to the processing of personal data and on the free movement of such data (the General Data Protection Regulation) which aims to set a unified and directly applicable system of rules for personal data protection within the European Union, will enter into force on May 25, 2018.
Under the new harmonized European legislation, the obligation requiring the preparation of a security project is eliminated, however controllers will be obliged to implement appropriate technical and organisational measures to ensure and to be able to demonstrate that processing is performed in accordance with the Regulation.
The Regulation also introduces the obligation to carry out an assessment of the impact of the envisaged processing operations if the type of personal data processing is likely to result in a high risk to the rights and freedoms of natural persons, as well as the obligation to contact the supervisory authority with a request for a consultation if such data protection impact assessment indicates that the personal data processing would result in a high risk.
One of the essential changes concerns the request for valid consent to the processing of personal data, which according to the Regulation, must be presented in a manner which is clearly distinguishable from other matters, in an intelligible and easily accessible form. As a result, the consent to the processing of personal data may not be incorporated into another, un-related declaration.
Moreover, the Regulation introduces a new obligation to report any security incidents related to any event of personal data breach, including but not limited to any loss, theft or abuse of personal data.
Last but not least, the right of the data subject to be forgotten is to be strengthened in cases where the processed personal data are no longer necessary in relation to the purpose for which they were collected and the data subject requests their permanent deletion. Unless there are statutory reasons for the further processing of such data, the controller will be obligated to permanently erase such personal data without undue delay.
Once the Regulation comes into force, the system of fines for infringement of personal data protection rules will also change. Under the Regulation, a fine of up to € 20 million or 4% of a company’s worldwide turnover (whichever is higher), may be imposed.
Hamala Kluch Víglaský is the best Slovak law firm in the field of M&A
The weekly magazine TREND in cooperation with the publishing house EPRAVO Group s.r.o. announced the 2018 winners of the 6th year of the Law Firm of the Year competition from among law firms active on the Slovak market. The current year was attended by 57 law firms competing in two major categories and 13 categories divided by sectors.
The law firm Hamala Kluch Viglasky s.r.o., operating on the market since 2006, was once again among the top ranked law firms, this time in six categories, while in the category Mergers & Acquisitions the law firm became the absolute winner. In the categories Corporate Law, Real Estate, and Banking and Finance, the law firm was ranked among the highly recommended law firms, and in the categories Competition and Restructuring & Insolvency, the law firm has been recognised as recommended.
“Successfully completed transactions and our customers’ satisfaction is the greatest reward for our team. We also highly appreciate the recognition by peers and professionals, that motivate us and we genuinely enjoy such recognition for our work. In the legal services sector, knowledge of the law should be given; however, what is not obvious and what we strive to continuously improve, is to apply the law so that our clients can successfully develop their business and consequently achieve excellent results, thanks to our legal advice and innovative solutions offered by our law firm,” said Roman Hamala, Partner of the law firm Hamala Kluch Viglasky s.r.o.
The objective of the competition “Law Firm of the Year” was, as in the previous years, ranking experts providing legal services in various areas of law in Slovakia, and thus contributing to increasing awareness and legal certainty. The law firms registered for the competition are evaluated by people acting outside the legal industry, and in particular the representatives of large clients, investment banks, audit firm and etc., who assessed the declared transactions from various points of view, such as legal complexity, the overall difficulty, the presence of an international element or societal impact.
Law Firm Hamala Kluch Víglaský s.r.o.
Hamala Kluch Víglaský s.r.o. (HKV) is an independent Slovak law firm providing, already for 12 years, comprehensive legal and consultancy services to both domestic and foreign clients in all important areas of modern business law, both in the Slovak Republic and abroad.
The lawyers of the law firm have experience at both local and international levels, allowing thus the law firm to offer its clients comprehensive and coordinated advice taking into account their needs It focuses its commercial business approach on the successful and effective management and makes every effort to provide services of matching quality.
The law firm Hamala Kluch Víglaský is regularly ranked by both international and local rating organizations (Chambers Global, Chambers Europe, Legal 500, IFLR1000) among the TOP Slovak law firms in all major areas of law, including corporate law, M&A, banking and finance, construction and real estate law.
Preliminary Possession in the Case of Environmental Burden Remediation
The National Council of the Slovak Republic has approved a law introducing the possibility of expropriation and preliminary possession in cases of environmental burden remediation in the public interest.
The governmental proposal amending Act No. 409/2011 Coll. on Certain Measures in the Field of Environmental Burden and on the Amendment and Supplementation of Certain Acts and amending certain other acts was adopted by the National Council of the Slovak Republic in an accelerated legislative procedure.
In addition to changes of a legislative and technical nature, the approved material also introduces new provisions of the Geological Act. The new rules on expropriation and preliminary possession in connection with environmental burden remediation in the public interest are effective as of February 28, 2018.
Preliminary possession is aimed at ensuring that a constructor may perform certain work on land in connection with environmental burden remediation despite the fact that such land is still subject to expropriation proceedings. Thus, preliminary possession may only be applied in cases where there is an ongoing expropriation process with respect to environmental burden remediation; it is especially likely to be applied when there is a need to protect the life and health of the population and/or the environment.