Introduction

In the recent years many foreign companies found it increasingly convenient to establish themselves in Slovakia. They are attracted to the country by low taxes, Transport links to other European countries, cheaper labour etc. However, many businesses find it hard to establish themselves as they have no proper establishment or a person that would help them to find their perfect locality and help to sort out the legal issues too. Many investors found themselves cheated by some of these ‘middle men’ as they either lacked sufficient qualifications or they lingual skills were very poor. The following pages should help you in opening your company in Slovakia, the country of opportunities 

Your Guide in Setting up Business Legislations

The legal climate for foreign investment has continued to improve in Slovakia. EU Accession on 1st May, 2004 opened up many opportunities for foreign investors and Slovak companies alike. The new, and for some unfamiliar, legal environment represented by EU law present some challenges.  While the ongoing programme of privatisation of the large state monopolies has now more or less come to an end, inward investment of various sizes and the development of overseas business ties continues to grow. The legal framework for business in Slovakia is being rapidly developed to encourage economic activity and further Slovakia’s integration with the EU. At the beginning of 2002 a new Securities Act, Banking Act and a substantial amendment to the Commercial Code were introduced in a further shake-up of the existing legal regime. In addition, a long-awaited and much needed reform of the law relating to security was enacted in 2003, bringing into force a highly sophisticated legislative framework designed to enable a much greater degree of flexibility in the way in which secured transactions can be structured.  There have also been major changes to the Labour Code, the tax codes, an Arbitration Act has been introduced, and an overhaul of the bankruptcy legislation is underway.  Such changes are designed to lead in the medium term to increased flexibility and commercial certainty, but they also mean that up to the minute legal advice is required to do business in Slovakia.Setting yourself up to do business in Slovakia is a complex (but perfectly achievable) undertaking requiring plenty of planning and forward thinking. Obtaining the necessary permits and papers and setting up appropriate entities in Slovakia takes time, and people considering doing business in Slovakia should allow adequate time to be ready by their desired deadlines. Always check the legal, tax and accountancy regime well in advance, but get regular updates as the law can change frequently.

Advice The nature of the advice you will need depends on whether you are merely exporting to or trading with persons in Slovakia or whether you are intending to establish a permanent presence or purchase a business or company there. You will need to find out what permits or licences are required, which may include work/residency permits, trade licences and industry-specific permits relating to financial services regulations or environmental regulations, for example.

Legal Formalities
Choosing the appropriate legal advisor to help you with this at an early stage is very important. Larger international firms have the depth of experience to manage transactions to their successful conclusion according to the standards that international investors require, but also have the local knowledge to help you avoid the legal (and cultural) pitfalls. In some cases, however, advice on smaller issues may be more efficiently dealt with by local boutique firms who specialise in your industry. However, you need to make sure that this company/person has an adequate experience and his/her English as well as Slovakian speaking skills are satisfactory.

Investment

There are many ways in which to invest directly in Slovakia, but each of them requires careful due diligence to assess the status and value of the enterprise involved. Previous business practices are not always of a standard that international investors expect, due to the relatively recent transformation of the Slovak economy into a free market. The regulation of business activity is rapidly being brought into line with EU norms, but care is required with respect to many issues in the past, and professional advice should be sought at an early stage. Consideration needs to be given not just to identifying problems, but also to identifying and implementing solutions with the help of your advisors. 

Ways of Investing 

1.Asset Purchase
This method allows a buyer simply to acquire those assets needed to run a business from an existing business: it significantly reduces the exposure of inheriting hidden liabilities or having to carry out an extensive due diligence of the seller. It is therefore relatively less risky, but care is needed on VAT issues and on the need to avoid the purchase being deemed to be the sale of a business by the authorities. The investor/buyer has to act through a Slovak-established entity and this will need to acquire a trade licence and other permits, as appropriate. 
2.Business Purchase 
This method involves the acquisition of all the assets and liabilities of a company or a distinct part of it as a going concern. The transfer of all the staff, intellectual property and equipment is automatic and thus involves less time, but there is a limited ability to cherry pick assets. All liabilities of the business transferred pass with it, requiring detailed due diligence on the target business. The buyer has to act through a Slovak-established entity and this will need to acquire a trade licence and other permits, as appropriate. 
3.Share Purchase
This method allows the purchase of a company without the need to set up a separate Slovak entity for the acquisition. It also allows the transfer of the target company with significantly less registration requirements than a business or asset sale. The target company will be acquired together with all its liabilities, and although these liabilities would not generally pass directly to the purchaser, a detailed due diligence is still however, advisable to minimise the risk of hidden liabilities emerging in the acquired target company.
 It should be noted that certain forms of companies in Slovakia do not divide the capital of the company by shares, but by participation interests representing percentage proportions of ownership. If such a company is to be purchased the transaction requires a slightly different approach to the process and its documentation. 

Conclusion

Due to many positive changes, Slovakia has become a haven for foreign investment. Successful government policies as well as changes in the Constitution attracted many foreign investors. There are stories of success as well as failure. This failure is not because of the countries’ policies but because the investor failed to measure to the set norms, or his representation/advisor was not qualified enough. Over the last two years Slovakia became known as the ‘Tiger’ of modern economies and is a number one example of a successful economical revival. The opportunities in Slovakia are endless. So why wait?   

The information above had been taken from the following links:British Chambers of Commerce in the Slovak Republic www.britcham.sk, Slovakian Travel www.slovakiantravel.co.uk, Slovakian Chamber of Commerce www.scci.sk