Foreign Direct Investments in Eslovaquia

In general, a foreign person or entity may establish a Slovak company (as a founder), or it can also acquire shares (or ownership interests or other types of shareholdings) in a Slovak company from existing owners of the Slovak company, and thus participate in its business as a shareholder or another partner. It can participate in a Slovak company as a sole shareholder (however, certain forms of legal entities require a participation of at least two shareholders or partners) or can form a joint venture with other partners. A foreign legal entity can also establish a branch (not having its own legal capacity) in Slovakia.

Regulation (EU) 2019/452 of the European Parliament and of the Council establishing a framework for the screening of foreign direct investments into the Union (the “Regulation”) will be directly applicable in Slovakia from 11 October 2020. At the time being, there is no separate or specific mechanism for foreign direct investments screening or review of acquisitions of local targets by foreign investors on the grounds of security or public order in Slovakia. In this respect, the Ministry of Economy of the Slovak Republic proposed to establish a contact point for the verification of investments to ensure compliance with requirements of the Regulation. According to the current proposal, the contact point should be established within the Ministry of Economy of the Slovak Republic.

Although there is no general foreign investment control mechanism in Slovakia, in certain business sectors acquisitions of shares or increase of existing shareholdings in Slovak companies require an approval from the respective regulatory authority, or other restrictions apply to such acquisitions. However, these do not necessarily apply solely to the foreign investments, but also to acquisitions by Slovak investors.

These regulations apply e.g. in the following sectors:

• Banking. Acquisition or an increase of a qualifying holding in a bank having its registered seat in Slovakia so that the share in the bank’s share capital or voting rights reaches or exceeds 20%, 30% or 50%, or so that the bank becomes a subsidiary of a person that acquires such holding in one or more transactions, whether directly or by acting in concert, is subject to prior approval by the National Bank of Slovakia;
  
  
• Insurance. Acquisition or an increase of a qualifying holding in an insurance company having its registered seat in Slovakia or reinsurance company having its registered seat in Slovakia so that the share in the insurance or reinsurance company’s share capital or voting rights reaches or exceeds 20%, 30% or 50%, or so that the insurance or reinsurance company becomes a subsidiary of a person that acquires such a holding in one or more transactions, whether directly or by acting in concert, is subject to prior approval by the National Bank of Slovakia;
  
  
• Investment services. Acquisition or an increase of a qualifying holding in an investment firm having its registered seat in Slovakia so that the share in the investment firm’s share capital or voting rights reaches or exceeds 20%, 30% or 50%, or so that the investment firm becomes a subsidiary of a person that acquires such a holding in one or more transactions, whether directly or by acting in concert, is subject to prior approval by the National Bank of Slovakia;
  
  
• Gambling. Foreign ownership interest in a legal entity having the registered seat in Slovakia and holding a gambling licence may be held only by a natural person or legal entity having registered seat in an EU or EEA member state or an OECD member state;
  
  
• Mining. The mining license may be issued to a foreign person or entity only if the foreign natural person has his/her permanent residence in an EEA member state, or if the foreign legal entity has its registered seat or branch in an EEA member state, or if it has a branch in Slovakia; etc.
  

As already mentioned above, at the time being there are no separate or specific mandatory mechanisms for foreign direct investments screening or review of acquisitions of local targets by foreign investors on the grounds of security or public order in Slovakia. There are sector-specific control mechanisms as mentioned above, but these do not necessarily concern foreign investments.

In general, in respect of doing business, foreign persons or legal entities shall have the same rights and obligations as Slovak persons or legal entities.

In connection with acquisitions of businesses, similarly as in other countries, also in Slovakia antitrust legal regulations apply:

Antitrust clearances

A concentration (i.e. a merger or amalgamation of two or more previously independent undertakings or an acquisition of direct or indirect control by one or more undertakings over another undertaking or part of it or over more undertakings or parts of them) may be subject to merger clearance provided that the statutory requirements are met. Control of all mergers meeting the notification criteria is conducted by the Antimonopoly Office of the Slovak Republic (the “Office”).

A concentration has to be notified to the Office if the following turnover thresholds are met:

• the combined aggregate (group consolidated) turnover of the undertakings concerned for the last financial year preceding the concentration in the Slovak Republic was at least €46 million, and at least two of the undertakings concerned have generated in the Slovak Republic each an aggregate turnover of at least €14 million for the last financial year preceding the concentration, or
  
  
• the aggregate turnover for the last financial year preceding the concentration in the Slovak Republic was
• (i) in the case of concentration by merger or amalgamation of two or more independent undertakings – at least €14 million generated by at least one undertaking concerned and the worldwide aggregate turnover generated for the last financial year preceding the con-centration generated by another undertaking concerned was at least €46 million,
• (ii) in the case of concentration by acquisition of control – at least €14 million generated by at least one target undertaking and the worldwide aggregate turnover for the last financial year preceding the concentration generated by another undertaking concerned was at least €46 million,
• (iii) in the case of concentration by creation of a full-function joint venture – at least €14 million generated by at least one of the undertakings creating the joint venture and the world-wide aggregate turnover for the last financial year preceding the concentration generated by another undertaking concerned was at least €46 million.

All domestic and international transactions which meet the above notification thresholds are subject to review by the Office.

As Slovakia is an EU Member State, certain categories of concentrations are subject to control of the Commission. Should the turnovers of undertakings concerned meet the notification thresholds stipulated in Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings, the concentration will be regarded as being of community dimension. In such case, exclusive competence of the Commission to deal with a concentration having community dimension is established and the Office is competent to act only in cases specified in the EU Merger Regulation.

Register of Public Sector Partners

In addition to mandatory registration of ultimate beneficial owners (“UBO”) of a company with the Slovak commercial register, which results from the EU legislation (and hence this requirement is similar as in other EU countries), in Slovakia there applies yet another specific regulation concerning the UBOs.

In general, all legal entities or individuals (both local and foreign) making business with the state, state-owned enterprises and companies, or with other public entities, or otherwise receiving money or assets from public funds, must be registered in a Register of Public Sector Partners (certain exceptions apply). In the register – which is public – they must register and disclose their UBOs. Only specific persons and entities (such as attorneys-at-law, notaries, etc.) are entitled to make the registration on behalf of the registered person, hence the registered person cannot make the registration on its/his/her own.

Lengthy court proceedings

One of the main challenges not only for foreign investors, but also for local entrepreneurs, is the length of court proceedings, and hence difficulties to efficiently and quickly enforce one’s rights. The court proceedings can take several years.