Transfer of a majority business interest

Imagine the following situation:

You have a company with two shareholders – each shareholder has a 50% business interest and one of the shareholders wishes to transfer their 50% business interest to a third party. This person is not a shareholder in the company. All parties involved are Slovak persons.

But how do you do that, counselor? you ask. Simply:

First of all, it is important to realize that a 50% business interest in an s.r.o. constitutes a majority business interest for the purposes of certain provisions of the Commercial Code. This is a business interest which, in view of the ratio of the shareholder’s contribution to the amount of the registered capital of the s.r.o., grants that shareholder at least half of all votes (or the articles of association associate at least half of all votes with it).

Why does it matter whether it is a majority or minority business interest?

Because the sequence of steps, the submission of selected documents and the regime governing the effectiveness of the transfer of the business interest will differ from the transfer of a minority business interest. If you need to transfer / acquire a minority business interest, read here (click):  Transfer of a minority business interest.

What are the steps?

1. the attorney checks whether the articles of association: (i) permit the transfer of the business interest to a third party and (ii) require the consent of the general meeting for the transfer of the business interest to another person
2. if so, the general meeting of the s.r.o.’s shareholders adopts a resolution approving the transfer of the 50% business interest to a third party; if not, the provisions of the articles of association must be amended
3. ideally, the shareholders should also resolve at the general meeting all necessary amendments to the articles of association, which will take effect on the date the transfer of the business interest becomes effective, or, where applicable, resolve the appointment of a new managing director (if the new shareholder, who is a natural person, is also to be the managing director of the relevant s.r.o.) and the removal of the former managing director (if the transferring shareholder, who is a natural person, is no longer to be a managing director). Read more about managing directors here (click):  CEO
4. you draw up an agreement on the transfer of the business interest – note that, since this is a transfer of a majority business interest, its effects arise only upon registration of the change in the Commercial Register
5. you draw up a power of attorney for the attorney to file an application for registration of the changes in the Commercial Register, which she will file on behalf of the s.r.o.

What should we not forget, counselor?

1. File an application to register changes to the registered information, including the information on the UBO (Ultimate Beneficial Owner)
2. At present, it is important to check whether the s.r.o. has all the necessary information registered pursuant to the Commercial Register Act, so that you do not find that certain information is missing (such as the birth numbers of the s.r.o.’s shareholders), because the Commercial Register will not register the changes unless this information is already registered (do not worry, it can be registered together with your transfer)
3. Consent from the tax administrator – and now pay attention: if either the shareholder transferring the business interest or the acquirer who is to acquire the business interest is listed in the register of tax debtors, then, because a majority business interest is being transferred, the s.r.o. must submit the tax administrator’s consent concerning these persons, pursuant to a special regulation. Ideally, request this consent before proceeding with the transaction.
4. As to who else may not transfer/acquire this business interest – if the shareholder or acquirer is listed as an obligated party in the register of issued authorizations for the enforcement of execution proceedings under a special law, they may not transfer or acquire the business interest in the s.r.o.
5. Whether there are obstacles to the transfer under Section 115(3) of the Commercial Code that apply to the s.r.o. – A shareholder may not transfer their business interest to another person if proceedings for the company’s dissolution are pending, if the company has been dissolved by a court or pursuant to a court decision, or if the effects of a declaration of bankruptcy or authorization of restructuring apply to the company.

A final tip

Are you married and have community property (BSM)? Obtain your spouse’s consent to all steps, actions and measures you plan to take in connection with the transfer of the business interest.

Do you need advice on transferring a business interest? Do you need documentation drawn up?

Click here and write to us: skypalova@skylex.sk

05.04.2022, JUDr. Zuzana Skýpalová, attorney and owner (SKYLEX Attorneys)