Economic situation of companies

Economic situation of companies

obligations and solutions

Dated: 12.11.2020

The amendment to the so-called act “Lex Corona“ effective from 12.05.2020 was introduced an institute of temporary protection of business entities. Its purpose is to create a time-limited framework with tools to support the effective management of the negative effects of the spread of Covid-19 disease on business entities operating the enterprises.

However, the effects of the temporary protection of business entities expire on 31.12.2020. After this date, the protected business entities will be obliged again to file an application for the declaration of bankruptcy on their assets (in case of their indebtment), interrupted enforcement proceedings will continue against them, or it will be possible again to begin exercising the pledge on their assets.

Business entities whose temporary protection did not help get out of the adverse economic situation and ultimately only delayed their problems can solve their situation by several more or less formal means: 

- it is often enough to appropriately communicate with creditors, to enter into negotiations with them, which can lead to considerable concessions;

- it is important to properly re-evaluate internal processes, whether it is a business, employment, or other agenda; 

- if such steps do not have the desired effect, the law gives business entities the possibility of restructuring as a recovery process that protects them from creditors and can bring them a reduction in liabilities of up to 50%; 

- if they nevertheless fail to overcome their adverse economic situation, they are most likely to meet the conditions for the declaration of bankruptcy, as a complex process leading to the demise of the business entity, which entails a number of obligations, as well as pitfalls.

More information on these topics, as well as others, can be found in these articles: 

Adverse economic situation of companies – obligations and solutions possibilities of debtors.

In this regard, it is needed to say that the institute of temporary protection of viable business entities is currently being negotiated at the Ministry of Justice of the Slovak Republic. Its purpose should be to create a time-limited framework for protection against creditors and with tools to support business entities in difficult financial situation, which should enable them to continue their business and thus prevent, in particular, the losses of jobs, know-how and bring a higher level of satisfaction of creditors' claims. Unlike the temporary protection of business entities mentioned above, it should be an institution permanently enshrined in law (not just to bridge the period during which the negative effects of the spread of Covid-19 are manifested).

We will closely monitor the process of introducing this institute and then we will inform you in more detail.

Author:

JUDr. Martin Jacko, managing partner and attorney at law
Mgr. Martin Holý, associate