New rules for funding political parties and election campaigns
The National Council of the Slovak Republic approved an amendment to the Act on Election Campaigns and the Act on Political Parties which will mainly affect the financing of campaigns before the elections to the National Council in March 2020.
The bill has provoked a great deal of controversy, first of all because it was presented by Members of the National Council, and thus it did not have to go through the interdepartmental comment procedure. In fact, only proposals which are submitted by the Government are subject to the interdepartmental comment procedure where the most important state authorities are permitted to express their opinions. Critics argue that the bill heavily interferes in election campaign conditions and that it would be more appropriate for the Government to submit it and have it undergo the comment procedure.
Furthermore, the petitioners asked the Government to submit a proposal for an accelerated legislative procedure in which standard procedural time limits for approval are waived. It should be noted that only the Government may submit a proposal for an accelerated legislative procedure.
The Government approved this request and the National Council approved the Government proposal at the next vote on the same day. This step also seemed problematic because it was not clear if the conditions for accelerated legislative procedure had been fulfilled; such procedure should only be applied under exceptional circumstances, such as when fundamental rights and freedoms, state security or significant economic damage are at risk.
The content of the Act itself is also controversial as it will prohibit the participation of so-called third parties in election campaigns. This relates to people who supported a party or candidate in an election but were not members of a party or a candidate. At the same time, the membership contribution that a party may receive from a single member is limited to EUR 10,000 per year. The amendment also introduces an overall financial ceiling of EUR 3,500,000 per one term of the National Council, (i.e., four years) from membership contributions, donations and loans granted to a party. Exceeding this limit will result in the automatic dissolution of the party.
The law has also caused an outcry as it places parties that have not yet stood for election to the National Council at a disadvantage. As opposed to parties that have been elected to the National Council, they cannot fund their election campaigns from financial resources provided by the State (A party that gains at least 5% of the votes in National Council elections gains seats in the National Council and receives State funding). These newly created parties will only be able to fund their campaigns from contributions from members or other entities, with the new rules limiting the amount of these contributions.
The law is effective from the date of its submission to the Collection of Laws. However, this may be prevented if the president vetoes the law and the National Council does not have enough votes to override the veto.
New rules for the use of external legal services by state authorities
The Government of the Slovak Republic approved new rules for the use of external legal services by state authorities, which should bring more transparency and economic efficiency.
On April 17, 2019, the Government of the Slovak Republic approved the rules governing the principles of the transparent and economically effective use of the services of external lawyers by state authorities, in particular concerning their selection and remuneration and the publication of related information. The rules will apply to all Ministries, central government authorities and companies exclusively owned by the State (while the Government of the Slovak Republic may also recommend that the rules apply to other state bodies), regarding all legal services, irrespective of whether they involve litigation or other non-litigation related legal services.
Under these rules, a state authority will only be able to use external legal services in cases where its own legal staff lacks the necessary manpower or expertise, and the subject of legal services is significant. Furthermore, the essence of the legal service to be provided by external lawyers cannot be directly related to the decision making or legislative activity of the relevant state authority.
The newly adopted rules impose the obligation on state authorities to follow a precisely defined procedure when choosing a lawyer to provide external legal services. The state authority will always be obliged to contact at least five lawyers, the Slovak Bar Association and the Ministry of Finance of the Slovak Republic when choosing a provider of external legal services. When choosing a lawyer, the state authority will have to pay particular attention to its expertise, professional experience and fees. It is important to point out the possibility of imposing specifying conditions, for example, for a statutory body or lawyer’s staff. The state authority will only be able to avoid this rather complicated procedure for selecting an external legal service provider in cases where it can prove time constraints. It can be assumed that the application of this exemption will be closely monitored to prevent the abuse and circumvention of the rules.
The new rules also stipulate the possibility of choosing the form of remuneration for a lawyer; in other words, both contingent fees and hourly fees may be agreed. In the case of a contingent fee, the rules specify the percentage of the fee depending on the value of the legal matter. In the case of hourly remuneration, the amount of hourly remuneration may not be higher than the hourly remuneration stated in the future cost overview, which the lawyer applying for external legal services submits to the state authority during the selection process.
A state authority using external legal services will also be obliged to publish on its website the minutes of the evaluation of the tenders, the concluded contract and any amendments. Also pursuant to these rules, the Ministry of Finance of the Slovak Republic must be informed.
A state authority that concludes a contract on the provision of legal services before June 1, 2019 shall be obliged to inform the Ministry of Finance of the Slovak Republic of this situation by July 1, 2019. State authorities shall also be obliged to inform the Ministry of Finance of the Slovak Republic of the termination of contracts on the provision of the legal services concluded before June 1, 2019, on the amount of the remuneration provided to the lawyer and on the results of the provided services.
These rules are expected to become effective on June 1, 2019.
Law firm Hamala Kluch Viglasky defends its position as leader in mergers and acquisitions
The weekly magazine TREND in cooperation with EPRAVO.SK announced the winners of the Law Firm of the Year competition for 2019. The aim of the competition was to provide the local market with an overview of law firms engaged in the key areas of law. Hamala Kluch Víglaský was selected as Law Firm of the Year in the Mergers & Acquisitions category, thus defending its excellence in this category from the previous year. The award ceremony took place on 16 April 2019 in Bratislava.
In 2018, Hamala Kluch Víglaský successfully executed outstanding transactions and confirmed that mergers and acquisitions is a key area for them. In addition, HKV ranked among the top ranked firms in other fields.
It recorded excellent results in the following categories: Corporate Law, Property Development and Real Estate Projects and Banking & Finance, where it was ranked among highly recommended law firms. “2019 is a year of changes for us and we will soon introduce them. We are very pleased with the excellent results of the competition; they are an incentive to work harder. We appreciate it so much,” stated Roman Hamala, one of the founding partners.
The lawyers from Hamala Kluch Víglaský are constantly ranked by international rating agencies as among the best Slovak lawyers in virtually every key area of law, including banking and financial transactions, construction and real estate, energy, purchases and sales, business and corporate law, capital markets and greenfield projects.
Lukáš Michálik, a partner at HKV stated, “We would like to thank our clients for our successful results in the Law Firm of the Year competition. They entrust us with responsibility for strategic solutions that often go beyond purely legal work. Last but not least, we highly appreciate our reliable team for their dedication and professionalism.”
Peter Víglaský, another Founding Partner of HKV, added, “Winning the award for mergers and acquisitions reflects the appreciation of our experience, innovation and time flexibility by our clients.”
Founding Partner Martin Kluch also summed up the work of the law firm and commented on its success as follows: “Our goal is to offer our clients a business-oriented approach, effective communication and individual attention. We believe that in this way we will continue to build a long-standing relationship of trust with all our clients.”
About the firm:
Hamala Kluch Víglaský is a dynamic independent Slovak law firm. We provide legal and consultancy services to domestic and foreign clients in all important areas of modern business law, both in the Slovak Republic and abroad. HKV’s lawyers are known for their legal skills, friendly approach and excellent knowledge of the Slovak business environment. As experts on the domestic market, they offer comprehensive advice based on international experience.
HKV’s lawyers have exceptional experience from previous positions in leading Slovak and foreign law firms. They have a modern outlook and apply a business-oriented and proactive approach for efficient and successful transaction management. They constantly make every effort to provide the best legal service at a reasonable price.
New rules for public joint-stock companies
Newest amendment of the Commercial Code should bring an extension of shareholder rights in public joint-stock companies.
The National Council of the Slovak Republic approved the draft amendment to the Commercial Code Amendment in the first reading. The draft, submitted by the Government of the Slovak Republic, transposes an amendment to the European Directive on the incentivizing of long-term shareholder engagement. Although the original Directive eased operations of shareholders, including shareholders, who due to their distance cannot physically attend general meetings, this amendment should grant even more powers to the general meeting.
Shareholders will now have the right to receive information about voting and the counting of the votes on each agenda item of the general meeting from the company. Shareholders who vote electronically will receive a vote confirmation from the company.
Another change relates to the approval of remuneration rules for company organs. According to the current rules, this authority can be transferred from the general meeting to the supervisory board; however, pursuant to the new rules, only the general meeting of a joint-stock company which publicly sells its shares has this authority.
These joint-stock companies will have to draw up these rules according to criteria set by the law; in other words, they will have to be composed of all of the provisions established by the law and they will have to be published on the company’s website. The rules can be in force for up to 4 years, after which the general meeting will have to adopt new remuneration rules. Also, the board of directors will have to submit a remuneration report to the general meeting each year.
In addition, joint-stock companies will be required to have legally defined material commercial transactions approved by the general meeting. Notifications of these transactions will have to be submitted to the Collection of documents.
The amendment should enter into force on June 1, 2019.
Simplified use of certain public documents in the EU
As of February of this year, the process of using certain public documents within the countries of the European Union has been simplified by new European regulation.
On 16 February, 2019, Regulation (EU) 2016/1191 of the European Parliament and of the Council of 6 July 2016 on promoting the free movement of citizens by simplifying the requirements for presenting certain public documents in the European Union, and amending Regulation (EU) No 1024/2012, repealing the obligation to obtain apostilles for certain public documents issued by the EU Member States for their further use in the European Union, enters into effect.
The use of public documents (decisions, certificates and other documents issued by state authorities) abroad is often subject to apostillization or superlegalization. Apostillization, which is effective for countries that are parties to the relevant international convention (including all EU Member States), means that all official documents needto be submitted for verification to a superior state authority (in principle, the competent ministry in the Slovak Republic) and only then may it be used abroad (accompanied by a translation). If the documents are used in a country that is not a party to the convention (e.g., Canada), superlegalization is required, followed by verification at the Ministry of Foreign and European Affairs of the Slovak Republic and at the representation office of the recipient country in addition to the superior state authority.
The above European regulation relieves European citizens of the obligation to obtain an apostille for some of the documents issued by EU Member States’ authorities for their further use in the European Union. For example, this applies to a document from the Slovak Republic used in Germany or vice versa).
The regulation mainly concerns registry documents, court decisions regarding family matters (divorce, invalidity of marriage, parenting, adoption), permanent residence certificates, nationality certificates and clean criminal records (records with offences remain subject to apostillization). These documents can be used after their translation in another EU Member State ipso iure.
In addition, registry documents, residence permits and criminal records to be used in another EU Member State do not need to be accompanied by a translation. Instead, a multilingual form must be requested together with the document in which the necessary data labels are translated into the official languages of all EU Member States.
Functionality of the Constitutional Court in limited mode
On February 13, 2019, at a non-public session, the Constitutional Court adopted Amendment No. 1 to the Work Schedule of the Constitutional Court, which regulates the manner of its operation during the period in which there is a limited number of its judges.
On February 14, 2019, the National Council of the Slovak Republic failed for the second time to elect the constitutional judge candidates to be submitted to the President for assessment and appointment. The Constitutional Court has reacted to such development by adopting Amendment No. 1 to the Work Schedule of the Constitutional Court, which regulates the operation of the Constitutional Court after February 16, 2019, when the term of office of nine of the thirteen constitutional judges ended.
The Constitutional Court had assigned 685 submissions to the abovementioned nine judges before their term of office ended; 257 of these submissions were subsequently assigned to the judges whose terms of office continue. At the same time, 27 petitions of the total number are to be decided by the plenum of the Constitutional Court.
During the period from February 17, 2019 until the time when new judges are elected, the Constitutional Court will only be allowed to decide on senate submissions, while it will have only one senate composed by Jana Baricová – chairman of the senate, Miroslav Duriš, Jana Laššáková and Mojmír Mamojka. Until the adoption of a new work schedule, one thirteenth of the new submissions shall be randomly assigned to each of the abovementioned four judges.
Beyond the abovementioned scope, urgent submissions that cannot be postponed (e.g., decisions on complaints of juveniles and persons in custody) will be assigned to the judges. A judge of the Constitutional Court, which under the law is entitled to represent the chairman and vice-chairman of the Constitutional Court, shall decide on such assignment. According to article 4(3) of Act No. 314/2018 Coll. on the Constitutional Court of the Slovak Republic as amended, which entered into effect on March 1, 2019, if the chairman or vice-chairman of the Constitutional Court is not present or is not elected, the urgent tasks of the chairman of the Constitutional Court shall be performed by the oldest judge of the Constitutional Court.
Until the appointment of at least three judges, the Constitutional Court shall not be entitled to decide on matters that must be decided by the plenum; these include matters on the compliance of acts with the constitution, the constitutionality and legality of the election of the President of Slovak Republic and the interpretation of the constitution or constitutional acts.
The next round of submissions of applications for judges of the Constitutional Court is planned for March 5, 2019 with the subsequent hearings to take place on March 21-23, 2019. According to the Chairman of the National Council of the Slovak Republic, the election of the candidates by the National Council of the Slovak Republic is scheduled for March 26, 2019.
Amendment to the Act on the use of electronic cash registers
The National Council of the Slovak Republic approved an amendment to the Act on the use of electronic cash registers, the e-kasa system.
On December 4, 2018, the National Council of the Slovak Republic approved the amendment to Act No. 289/2008 Coll. on the use of electronic cash registers, which brings several changes that will have a significant impact on entrepreneurs. The Government of the Slovak Republic, as the proposer, promises to reduce the administrative burden and expenses for entrepreneurs. At the same time, the supervision of the financial authority should be simplified and more efficient, thereby eliminating the unlawful reduction of revenues.
The e-kasa system will connect cash registers with the financial authority’s system, allowing the real-time tracking of sales and bills, as the financial authority will be immediately informed of each purchase / transaction.
The entrepreneurs will have to convert their current cash registers to online cash registers between April 1, 2019 and June 30, 2019; however, they will be able to use a computer or a tablet instead of a cash register.
A zone for entrepreneurs will be created on the financial authority’s official web site. After logging in, an entrepreneur will, among other things, gain an overview of his cash register and be able to create reports on all of its revenues registered in the e-kasa system. An e-kasa zone for buyers is also planned.
During trouble-free service, the e-kasa system will send real time data from the cash register to the financial authority’s system. However, if communication between the cash register and the financial authority system is not possible, the e-kasa system also allows an offline service during which all data will be stored in the cash register; the entrepreneur will then be obliged to send the data to the financial authority within 48 hours.
Exemptions to the above-mentioned obligation will be possible for cash registers used in areas without an Internet connection. In such cases, upon the Internet provider’s certification, an entrepreneur will be granted an exemption based on which it will be able to use the cash register in an offline mode. However, the entrepreneur will be obliged to connect the cash register to the Internet at least once every 30 days and send the collected financial data from it via the e-kasa system to the financial authority.
The amendment will come into force on January 1, 2019, April 1, 2019 and finally on October 1, 2019.
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.