General Data Protection Regulation, approaching effectiveness and its practical impact
New 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 (hereinafter the Regulation) shall come into force on May 25th 2018.
The current legislation in the form of Directive 95/46/EC of the European Parliament and of the Council of 24 October 1995 on the protection of individuals with regard to the processing of personal data and on the free movement of such data has been implemented inconsistently by individual Member States. As a result, there is an unclear fragmentation of personal data protection rules consisting in total of 28 different data protection laws, each of which has its own specificities, and some even contradict each other. Fragile legislation in the area of personal data protection has thus created an obstacle for entrepreneurs to use actively all available technological means and expand to the markets of other Member States and, last but not least, has seriously undermined the confidence of the citizens of the European Union in strict protection of their personal data.
The long-awaited reform of the Personal Data Protection system in the form of the adopted Regulation has a clearly defined objective – to set up a uniform and directly applicable system of rules on the protection of personal data across the whole European Union, thus to accompany Europe on the road to the digital age that it has already embarked upon.
Harmonized legislation introduces, in addition to a number of positive changes in the form of easier access to foreign markets, also several new, obligations for entrepreneurs that are not known yet. An unusually strict system of high sanctions, mandatory reporting of security incidents, the right to be forgotten and the right to data portability are just some of the news that will undoubtedly transform the European business environment.
New Law on Register of Public Sector Partners
On February 1st, 2017, new Act No. 315/2016 Coll., on Register of Public Sector Partners came into force. By adopting this new law, the legislator seeks to uncover the ownership and management structures of the entities that are interested in trading with the public sector as well as to bring more transparency to the public procurement sector.
The Register of Public Sector Partners is a substitute for the already existing register of ultimate beneficiaries introduced by Act No. 343/2015 Coll., on public procurement. In contrast to its predecessor, the Register of Public Sector Partners clearly goes beyond public procurement and covers a much wider range of transactions between entrepreneurs and the public sector. The Ministry of Justice of the Slovak Republic will be the administrator of the Register and the District Court of Žilina will be the registration authority.
In general, any legal or natural person that is not itself part of the public sector and
receives payments from any public budget; or
accepts a fulfilment in the form of property or property rights of the state or other public institutions; or
concludes an agreement pursuant to Act No. 343/2015 Coll., on public procurement; or
is a healthcare provider that concluded an agreement on the provision of healthcare services with a health insurance company; or
is obligatorily registered in accordance with Act No. 581/2004 Coll., on health insurance companies
is considered a public-sector partner.
A public-sector partner must strictly fulfil a wide range of duties. One of the most important obligations of the public-sector partners is the obligation to be registered in the Register of Public Sector Partners, as such registration is a necessary precondition for conducting business with the public sector.
Public sector partners are not authorized to register themselves with the Register of Public Sector Partners without the involvement of an independent subject. Such registration requires the co-operation of the so-called authorized person with whom the public-sector partner concerned has to conclude a special agreement. The law strictly stipulates that the authorized person may only be a lawyer, a notary, a bank, a branch of a foreign bank, an auditor or a tax advisor whose place of business or registered office is in the territory of the Slovak Republic. The authorized person acts on behalf of such public-sector partner towards the registration authority, arranges for the identification and verification of the ultimate beneficiary and, at the same time, fulfils a wide range of other statutory obligations.
A business entity interested in trading with the public sector may choose an authorized person at its own discretion. However, due to the fact that such authorized person will represent the public-sector partner before public authorities, the public-sector partner should assess the professional and material potentials of the authorized person.
Any breach of newly established obligations (including the breach of obligation to register with the Register of Public Sector Partners) may result in serious sanctions that may be imposed on the public-sector partner concerned, members of its statutory body, the authorized person or the ultimate beneficiary. In addition to the imposition of a fine, one of the most serious sanctions is the possibility for the public-sector entity to withdraw from the agreement with the public-sector partner concerned with an immediate effect or a restriction on trading with the public sector.
New Partner – Lukáš Michálik
In January 2017, Lukáš Michálik was promoted as partner of the law firm Hamala Kluch Víglaský, joining founding partners Roman Hamala, Martin Kluch and Peter Víglaský. Expansion of the pool of partners reflects the growth of the Firm’s business and its readiness for new challenges.
Lukáš Michálik joined the firm in 2006 as one of its first members. Since then, he has demonstrated remarkable personal and professional qualities that quickly turned him into a most valuable member of the Hamala Kluch Víglaský team.
“The steady growth of the firm has required us to grow and re-shape the structure of our team. The expansion of our partnership pool sends a signal to the market that HKV is prepared for further growth and challenges.” Roman Hamala, founding partner of Hamala Kluch Víglaský.
Lukáš Michálik obtained his law degree at Univerzita Karlova, Prague, Czech Republic before going on to receive his LL.M. degree and Business Law Certificate from University of California, Berkeley Law, one of the world’s best universities.
He has 10 years of experience and specializes in corporate law, M&A, banking & finance and real estate law. Throughout his practice, he has been involved in many complex cross-border transactions including some of the largest and most high-profile deals in the Slovak Republic. He is regularly involved in the legal and business structuring of clients’ deals upon their creation as well as during their execution and implementation.
“The strength of our firm has always been in providing highly professional legal services, while preserving our flexible and solution-oriented approach that both our international and domestic clients value so much. Lukáš has grown with the firm and has helped to shape the future of our business. He is a strong lawyer with extraordinary business-sense, combined with impeccable personal and management skills. These assets make him a partner of our firm that we are lucky to have.” Roman Hamala
On 12 July 2016, the European Council adopted new directive laying down rules against tax avoidance practices that directly affect the functioning of the internal market of the European Union (the Directive). It is part of a package of European Commission proposals designed to strengthen rules against corporate tax avoidance based on OECD recommendations.
The Directive addresses situations where corporations, mostly multinational groups, take advantage of disparities between national tax systems in order to reduce their tax payments. It responds to the perception of many taxpayers and small and medium-sized enterprises that some multinationals do not pay their fair share of tax, thereby distorting tax competition within the European Union´s single market. The Directive covers all taxpayers that are subject to corporate tax in member states, including subsidiaries of companies based in third countries. It contains anti-tax-avoidance rules for situations that may arise in the field of interest limitation rules, exit taxation rules, general anti-abuse rules, controlled foreign company rules (CFC) and rules for hybrid mismatches. The Directive will ensure that the OECD anti-BEPS (base erosion and profit shifting) measures are implemented in a coordinated manner in the European Union by which three of the five areas covered by the Directive implement OECD recommendations (the interest limitation rules, the CFC rules and the rules on hybrid mismatches). The member states will have until 31 December 2018 to transpose it into their national laws and regulations, except for the exit taxation rules, which must be transposed by 31 December 2019. Member states that have targeted rules that are as effective as the interest limitation rules may apply them until the OECD reaches an agreement on a minimum standard, or until 1 January 2024 at the latest.
Trade Secret Protection
On June 8, 2016, the European Parliament approved the Directive on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use or disclosure, ensuring progressive harmonization in the field of trade secrets and laying down common measures regarding the protection of trade secrets.
Since Companies invest in acquiring, developing and applying know-how and information, such investments have an impact on their competitiveness and innovative performance in the market and therefore on the motivation to continue to innovate. However, there is great diversity of systems and definitions in member states regarding the treatment and protection of trade secrets. The new Directive 2016/943 of the European Parliament and of the Council of 8 June 2016 on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use or disclosure (the Directive), therefore aims at ensuring the smooth functioning of the internal market. The Directive shall bring legal clarity and help increase interest in the development of research and innovation activities. In accordance with the new legal framework, EU member states will have to ensure that trade secret holders are entitled to apply for measures, procedures and remedies provided for in the Directive in order to prevent or obtain redress for the unlawful acquisition, use or disclosure of their trade secrets. While the directive provides for measures preventing the disclosure of information to protect the confidentiality of trade secrets, the new measures fully ensure that investigative journalism may be pursued without any new limitations. The directive will not impose any restrictions on workers in their employment contracts where national law will continue to apply. There will be no limitation to an employee´s use of experience and skills honestly acquired in the normal course of their employment. Persons acting in good faith who reveal trade secrets for the purpose of protecting the general public interest, commonly known as ‘whistle-blowers’, will also enjoy appropriate protection. According to the Directive, an application for measures and remedies must be dismissed where the alleged acquisition, use or disclosure of a trade secret was carried out in the act of exercising the right to freedom of expression and information, revealing misconduct, wrongdoing or illegal activity, provided that the respondent acted for the purpose of protecting the general public interest (whistle-blowing); in disclosure by workers to their representatives as part of their legitimate exercising of their functions in accordance with EU or national law, provided that such disclosure was necessary for such exercise; and for the purpose of protecting a legitimate interest recognized by EU or national law.
The Directive was published in the EU Official Journal on June 15, 2016. It will enter into force 20 days after its publication and member states will have a maximum of two years to incorporate the new provisions into domestic law.
New Public Procurement Act
The National Council of the Slovak Republic approved the all new Public Procurement Act replacing the existing regulation, which had been amended several times. The new Act is based on newly adopted directives of the European Union that comprehensively regulate the field of public procurement and respond to the trend of pervasive electronisation in public administration.
On January 15, 2014, new European Union directives governing public procurement were approved by the European Parliament with a 24-month transposition period for member states (36 months for central procurement and 54 months for obligatory electronisation). The Slovak Republic fulfilled its transposition duty by the new Act effective from April 18, 2016. The main objectives of the new Act are to promote efficiency and generally speed up the procurement through mandatory electronisation, better flexibility, reduction of administrative difficulties, better access of SMEs to the market and the introduction of greater legal certainty. The new Act introduces new institutes such as a new procurement procedure called innovative partnership, in-house exceptions, direct payments to sub-contractors, joint procurement of contracting authorities, the introduction of legal grounds for withdrawal from contracts and the European Single Procurement Document for the manifestation of the fulfillment of conditions set for candidates during procurement.
The new Regulation shall ensure that citizens have more control over their private information. It will introduce the right to be “forgotten” and thus the deletion of personal data by the service provider, conditions for the expression of consent to the processing of private data which must be provided and expressed clearly and which must allow the concerned person to revoke such consent, the right to transfer personal data to another service provider, and the right to know about the violation of protected personal data and privacy protection policies which must be presented to the customer in a clear and understandable form. The new Regulation also strengthens the enforcement of rules and sanctions which may reach up to 4% of the total global annual turnover of the relevant company for the previous fiscal year.
The new Directive on data transfers for police and judicial use concerns the cross-border transfer of data within the EU and lays down minimum standards for the processing and exchange of data by police and judicial authorities in each member state.
The Regulation will enter into force 20 days after its publication in the EU Official Journal. Its provisions will be directly applicable in all member states two years after this date. Member states will have two years to transpose the provisions of the Directive into national law.
Investment funds with variable registered capital
The National Council of the Slovak Republic approved an amendment of the Collective Investment Act and Commercial Code introducing investment fund organized as an investment company with variable registered capital.
The amendment introduces new type of investment fund – SICAV (from French: Société d’Investissement à Capital Variable). The new type of investment fund will be organized as a separate legal entity in new legal form of a joint stock company with variable registered capital and will be established independently from a management company. The amendment requires SICAV to register only the minimum capital with the commercial register (at least EUR 125.000) and not the actual capital of the fund raised by shares and thus providing flexibility in issuing new shares. The amendment is effective from March 18, 2016.
Simple joint stock company & shareholders’ agreements
The National Council of the Slovak Republic approved an amendment of the Commercial Code introducing simple joint stock company and finally officially introduces widely-used shareholders’ agreements into the Slovak legislation including legislation about tag-along, drag-along or shootout rights between shareholders.
The amendment introduces new type of company – simple joint stock company (j.s.a.). This type of company will combine certain features of limited liability company and joint stock company. The capital of j.s.a. will be divided into a number of shares with a certain nominal value with the minimum capital at least EUR 1. j.s.a. will be liable for its obligation with all its assets. Combination of features of other company types will create suitable solution particularly for investments into startups. The amendment also expressly introduces possibility for shareholders to enter into shareholders’ agreements that have been until now widely-used without specific legislation in place. The amendment also specifically introduces known mechanisms of tag-along, drag-along or shootout rights. Such rights will be for the first time expressly stated in Commercial code and, moreover, the Amendment establishes possibility to register rights in question in public registers specifically conducted for such purpose by Central Securities Depositary of the Slovak Republic. The amendment will be effective from January 1, 2017.
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Criminal liability of legal entities
The Government of the Slovak Republic approved a new bill proposal introducing direct criminal liability of legal entities into Slovak law.
The proposal significantly changes the current legal doctrine which recognizes only indirect criminal liability of legal entities. The bill contains an exhaustive list of criminal offences which might be committed by a legal entity, e.g. human trafficking, tax evasion, forgery, or unauthorized handling of waste. The crime would be committed by the legal entity if it were committed by its statutory body or an employee on behalf or in the interest of the legal entity. The criminally liable legal entity might be sentenced to a monetary fine, forfeiture of property, ban on business activities, or even to be winded up.
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