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Legal aspects of the coronavirus

Legal aspects of the coronavirus

The COVID-19 disease has brought to all new challenges not only for the protection of life and health but also for business. The current situation raises a number of legal issues (even those we do not normally meet), and also gives rise to also rapid changes in the field of law and economy, which are difficult to capture and to orientate on a daily basis.

Therefore, we have decided to create this portal containing answers to the most frequently asked questions that we, as a law firm, have been confronted with in recent days and thus contribute to raising legal overview in this difficult situation.

We will be happy if you provide us with your feedback or suggest other model cases that we will seek to consider.

Measures aimed at Jobs Sustainability Support

The Government of the Slovak Republic (government) on 31st March 2020 adopted the following conditions for supporting the maintenance of employment during the extraordinary situation or state of emergency and the removal of their consequences. In comparison to previously adopted measures of the government dated 14th April 2020 it is a matter of their modification, specification of conditions as well as the extension of support to mitigate the effects of extraordinary situation declared with respect to the spread of COVID-19 disease on the employment and the labor market. 

MEASURE 1: State contribution to the employers whose operations are mandatory closed on the basis of decision of Public Health Authority:

Entitled Applicant for Measure 1:

Employer (including self-employed person as employer) with the exemption of the public administration entities, whose operations are mandatory closed on the basis of decision of Public Health Authority and who will maintain jobs also during the interruption or restriction of their operation on the basis of Public Health Authorities Measure during the declared extraordinary situation or state of emergency.

Amount of Support:

Support in the amount of 80% of the average salary of the employee or in the amount set out by the collective agreement or other written agreement with the representatives of employees throughout the period of provision of the contribution under the condition that the employment relationships will continue to exist. Maximum support for one employee in the amount of EUR 1.100.

Based on the notification of the Ministry of Labor and Social Affairs on the possibility of submitting an application for a financial contribution, the total amount of aid for one self-employed applicant (SZČO) may not exceed EUR 800.000 (EUR 120.000 for fisheries and aquaculture applicants, EUR 100.000 for applicant in primary agricultural production). As to other enterprises, the limit in the amount of 800.000 EUR for one applicant was canceled, i.e. that also the large enterprises may apply for same contribution of the state as other entities.

MEASURE 2: State contribution to self-employed persons whose operations were mandatory closed or limited their operations on the basis of decision of Public Health Authority

Entitled Applicant for Measure 2:

Self-employed person which cumulatively meets the following conditions:

  • Person who has interrupted or restricted performance or operation of business activity on the basis of Public Health Authorities Measure or whose revenues have decreased during the period of declared extraordinary situation or state of emergency at least by 20% (10% in March),
  • Person who has been insured with respect to healthcare and social insurance (mandatorily or voluntarily) in the period up to 31st March 2020 and the insurance lasts after this date or who draws so-called insurance contributions holiday pursuant to the Act No. 461/2003 Coll on social insurance, as amended,
  • Person who has not concurrent employment agreement,
  • Person who has not cancelled or suspended its trade license

Amount of Support:

The state contribution shall compensate the decrease of revenues during March 2020 with an amount 90 – 270 EUR depending on the decrease of revenues from 10% and more and during April and May 2020 with the amount 180 – 540 EUR depending on the decrease of revenues from 20% and more.

Revenues will be compared to the same period last year.

MEASURE 3: State contribution to employers affected by the extraordinary situation or state of emergency

Entitled Applicant for Measure 3:

The employer with exemption of the public administration entities, who maintain jobs also during the interruption or restriction of its operation activity during the period of declared extraordinary situation or state of emergency.

Amount of Support:

The applicant may decide between the following forms of the contribution for the employee, who does not draw the social security benefits (sick leave benefit, nursing leave benefit) or is not on holiday:

  • payment of compensation of salary of employee in the maximum amount of 80 % of the average salary of each employee, with a maximum of EUR 880 per month, or
  • flat-rate contribution for the compensation of the part of salary expenses for each employee depending on the decrease of the revenues in the amount mentioned in Measure 2.

The employer can choose only one of the options for the entire period of the contribution.
The allowance cannot be provided for employees who receive social security benefits or take leave.

MEASURE 4: State contribution to the selected groups of natural persons which during the declared extraordinary situation or state of emergency do not have any income

Entitled Applicant for Measure 4:

A natural person who from 13.03.2020 does not have any other income (from business, non-business and employment activity), who is

  • self-employed person and who has interrupted or restricted the performance or operation of his activity, or
  • self-employed person who has suspended his trade license as of 13.03.2020, or
  • in the employment relationship on the basis of an alternative employment agreement which is valid in 2020, even during the declared extraordinary situation or status of emergency.

For this purpose, as income shall be considered also: retirement pension, early retirement pension, invalidity pension, service pension.

Amount of Support:

The applicant may apply a flat-rate contribution for compensation of loss of income from employment and other gainful activity in the amount of 105 EUR for March 2020 and in amount of 210 EUR for April and May 2020.

Undertaking in difficulty

One of the conditions relating to the above-mentioned measures is that the applicant shall not to be an undertaking in difficulty.

For the determination of this status of the applicant is the basic rule that if a company is in liquidation, restructuring or bankruptcy, it is automatically an undertaking in difficulty. 

If an undertaking has been in existence for less than three years, it is not considered to be in difficulty unless it is in liquidation, restructuring or bankruptcy.

If the company has existed for more than three years, the entrepreneur must further investigate the financial situation of the company.

At the request of the Ministry of Labor and Social Affairs, this condition was deleted in relation to employers who will apply for employee wage contributions. However, the European Commission did not accept another request that the self-employed person in difficulty could also apply for a contribution, so at present the existence of a company in difficulty is only examined in the case of measures no. 2 and 4.

Author:

JUDr. Radoslav Varešinský, LL.M., advokát
JUDr. Mária Porubská Tökölyová, associate

Further economic measures

Deferment of payment of contributions

On 6th April 2020 has come into effect the amendment to act on social insurance which allows the employers and self-employed persons deferment of the maturity of the social contributions payment. 

The possibility of deferment relates to:

  • employers in the part of their contributions paid for the employer, the possibility of deferment of contributions does not include the part of the contributions which the employer pays for the employee where the original maturity dates are preserved,
  • mandatory insured self-employed persons.

The deferment of maturity of contributions shall relate to the employers and self-employed persons that were affected by the decrease of net revenue or revenue from business or other self-employment activity by 40 % and more with respect to the extraordinary situation.

Deferment of payment of income tax advances

This measure shall relate to all taxpayers, that have been in the respective month affected by the decrease of revenues (or income or turnover) by more than 40% in comparison to the same month of the previous year and notify this fact to the financial administration in the form of affidavit.

This measure shall be effective from April 2020. The unpaid advances shall be settled in the tax return for year 2020, i.e. by March 2020.

Offsetting of loss not yet applied

The entrepreneurs will be able to set-off their loses which they did not applied for yet. This measure from the first wave of aid will relate to those entrepreneurs which submit the tax return for year 2019 within the period from 01.01.2020 until 31.12.2020. The procedure for such set-off shall be that the statutory regime for applying for pass lost shall stay in effect, however such part of the loss which pursuant to the law could not been applied for due to the amount of tax base in the previous years, is now possible to be tax amortized in one-shot.

The companies and self-employed persons may deduct the unapplied tax losses for the tax periods ended in the years from 2015 until 2018. The loss deduction is limited by the loss deduction amount of one million EUR.

Returning of tax overpayment

The Ministry of Finance regulates the situation when the taxpayer who has submitted the 2019 tax return until 31.03 would, according to some opinions, have right for the returning of overpayment only after the end of corona crisis.

According to new measure, if the income tax declaration of the natural person for the tax period of 2019 will be submitted during the pandemics, e.g. on 15th April, and there would be calculated the tax overpayment in amount of 400 EUR, the tax administrator shall return the overpayment within the 40 days from the end of the month during which the tax return was submitted. However, not later than until 10th June.

To the person who has submitted the income tax declaration of the legal person for the tax period of 2019 even before the pandemics, e.g. on 10th March, the tax authority shall return the overpayment within the 40 days from the 31st March, i.e. not later than until 10th May. 

Motor vehicles tax

The entrepreneur will be not obliged during the pandemics to pay from the April 2020 the tax advances for motor vehicles. The entrepreneur should pay them by the date of submission of tax return for motor vehicles, therefore by the end of January next year. 

This concerns the monthly, quarterly tax advances and also the taxpayer-request based tax advances, if the prospected tax did not exceed 700 EUR or if the tax obligation of taxpayer has arisen during the tax period and also the tax advances set out by the tax administrator. 

Deferment of submission of tax return and payment of tax

The deferment of tax declarations and payment of income taxes for previous year shall be by the end of pandemics of new coronavirus. The legislation provides the postponement of submission of tax return by the end of the month succeeding the end of pandemics period. In the same period the tax pay shall pay the income tax. The law also postpones the other periods which corresponds to the deferment of tax return, e.g. the period for the submission of declaration of transfer of portion of paid tax, etc.

Author:

JUDr. Radoslav Varešinský, LL.M., advokát

Measures of indirect financial aid

Postponement of payment of credit, mortgage and the principal for employees and self-employed persons

The entitled applicants for the postponement of payment of credits are self-employed natural persons and business companies, who are meeting criteria on small and mid-enterprise.

The postponement of payment is free of charge and it is prohibited to increase the debt due to the postponement as well as subject the postponement by the further securitization of the credit. The postponement of the payment of credit is for the purposes of the credit register not considered as delay and it does not decrease the credit quality of the debtor. 

The postponement does not apply on the credits in the form of bank account overdraft and credit cards.

The creditors are obliged to publish on their web site and in their operations the information relating to the postponement of credit payment. The requirements for the form of applications are also laid down (in writing and online).

Bank guarantees

The respective measure is in the form of the guarantee for the credit provided by the bank and/or payment of the interests for credit provided by the bank.

The provider of financial aid is the Ministry of Finance of SR and the intermediators of aid are EXIMBANKA (state-owned export-import bank) and Slovenská záručná a rozvojová banka, a. s. (in English: Slovak guarantee and development bank, state-owned), and the recipients of the aid are small and mid-enterprises.

The guarantee for credit provided by the bank is the obligation of the Ministry of Finance towards the small employer that it will perform its obligation from the credit agreement entered into between the bank and small employer if such small employer fails to fulfill.

The Ministry of Finance of SR currently intensively negotiate with the banks on  drawing as quickly as possible of these types of the credits to help the entrepreneurs in this difficult situation. We will provide the up-to-date information soon.

Interest rate subsidies

The interest rate subsidies may be provided to the small entrepreneur from the state budget if the small employer will sustain the level of the employment provided for in the credit agreement and at the end of the assessed period it would not have unpaid obligations with respect to social contributions, and health contributions towards the Social Insurance Company or Healthcare Insurance Company exceeding the amount provided for in the credit agreement.

Slovak Investment Holding (SIH) 

The banks which are members of the SIH program will provide the credits to the small and mid-enterprises with so-called SIH anti-corona guarantee.

The guarantee will be in the amount of 80 % of credit (for bank maximum to 50% of portfolio), the credit will be supported by interest subsidy maximum to 4% p. a. The small and mid-enterprises therefore will get the credits with the interest rate ca. from 0% to 2 %.

The company may apply for the credit with instalments in the maximum for three to four years (including the postponement of payment at the beginning for the 12 months) or credit in the form of account overdraft for one to three years. The credit may be in the maximum amount of 1,18 million EUR. For the application for credits with guarantee will be entitled the small and mid-enterprises, i.e. those which employ the maximum of 250 people and have turnover up to 50 million EUR or assets up to 43 million EUR and which are active in Slovakia.

The credits shall relate to the sustaining or increase of the jobs while those have to be newcreated, the credit shall not be used for the refinance or restructure the existing credits.

SZRB and EXIMBANKA

The entrepreneurs may apply for the concessionary credits from the Slovak guarantee and development bank (SZRB). The financial aid will be provided in the form of guarantee for credit and payment of the credit interests. From 27th April 2020 the Eximbanka (EXIM) starts the special project for the aid to the entrepreneurs.

The recipients of the financial aid will be small and mid-enterprises as well as self-employed natural persons. The aim is to provide them with the possibility to receive the sufficient financial means for the overcoming the difficult period of pandemics. For the getting of the non-interest credit the entrepreneurs shall meet various conditions. Minimally for the one year sustain their business activity, sustain the employment and at the end of the period they shall not have debts with respect to social and healthcare contributions.

General conditions of SZRB and EXIM: 

  • amount of credit shall not exceed 50% of the turnover in 2019
  • entrepreneurs shall perform its activity in minimum of one or two accounting periods
  • SZRB will provide the credits from 10.000 EUR until 350.000 EUR and Eximbanka from 100.000 until 500.000 EUR
  • maturity period of credit for 3 years
  • postponement of payment of credit and interest will be 1 year while the credit will be paid-off during the remaining 24 months,
  • amount of individual guarantee in amount of 80% of remaining principal of credit,
  • interest rate of the credit will be 4,00% p.a. as fixed rate for the whole period of maturity of credit,
  • the whole interest rate will be subsidized (therefore the credit will be interest-less subject to meeting the criteria),
  • interest rate subsidies will be paid only after the one-year postponement of the credit if entrepreneur:
    • during this one-year postponement sustain the employment,
    • after the expiry of such one-year postponement of the credit will not have any obligations after the maturity period for more than 1 month with respect to the social and healthcare contributions,
    • Besides the mentioned products, SZRB and EXMIBANKA offer possibilities for postponement or decrease of installments.

 

 

 

 

 

 

 

 

 

Author:

JUDr. Radoslav Varešinský, LL.M., advokát

Investment Incentives

Support of creation of new jobs is also related with the support to business entities in the form of investment incentives. Although the aid scheme and conditions for granting of incentives have already been regulated by law, the Ministry of Economy of Slovak Republic recently came up with a call addressed to the business entities which plan to implement their investment in the least developed regions to submit their investment plans.

During the following period, the Ministry of Economy of the Slovak Republic plans to direct investment incentives to these regions, in particular in the form of tax relief. In the case of direct subsidies for salaries or for the purchase of fixed investment assets it will be strictly assessed whether it is reasonable. The important criteria shall not only be the number of new created jobs but also their added value. The Ministry of Economy of the Slovak Republic has promised flexibility in the assessment of the applications for investment aid.

Author:

JUDr. Mária Porubská Tökölyová, associate

Temporary protection of the business entities

The current situation has prompted the government to adopt several measures to eliminate economic and other impacts associated with the spread of Covid-19 disease. One of the results of these measures is also the amendment to the so-called act “Lex Corona“ effective from 12.05.2020.

This amendment introduces 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.

The business entity (legal entity, as well as natural person-entrepreneur) is entitled to apply to the court for temporary protection provided that fulfils following formal pre-conditions:

  • seat or business place is in the territory of the Slovak Republic,
  • authorization to do business originated before 12.03.2020,
  • entity is not a bank, insurance company, broker or other in law excluded entity

and declares fulfilment of following conditions (sorted from rather easy to prove/formal ones up to more challenging ones):

  • maintains proper accounting,
  • pursues the purpose of temporary protection,
  • does not breach the obligation to deposit the financial statement in the collection of deeds within the statutory period.
  • no enforcement proceedings were pending against it as per 12.03.2020 in order to satisfy the claim from its business activities,
  • in relation to its enterprise, asset, right or other property belongs to the enterprise, the exercise of the pledge was not commenced as per 12.03.2020,
  • as per the date of submission of the application, there are no grounds for its termination and effects of bankruptcy declaration or restructuring permit towards the entity,
  • submits application due to significant increase of overdue receivables or significant decrease of revenues compared to the same period in 2019, which significantly jeopardize the operation of the enterprise,
  • in the calendar year 2020 did not distribute profit or other own resources, or did eliminate the consequences of such acts,
  • in the calendar year 2020, except for measures aimed to mitigate effects of Covid-19 disease spread, did not take any other measure to jeopardize its financial stability or did remove such consequences,
  • was not bankrupted as per 12.03.2020.

In this regard, bankrupt means:

  • insolvency – the company is not able to fulfill 30 days after the maturity period at least two financial obligations to more than one creditor or
  • indebtment – the company is obliged to keep accounts pursuant to the Accounting Act and it has more than one creditor and the value of its debts exceeds the value of its equity.

Upon court acceptance of such an application, it shall grant the business entity temporary protection by issuing a certificate. The court shall immediately publish the information in the Business Journal, that the applicant has been granted temporary protection.

The temporary protection of the entity has, in particular the following effects:

  • proceeding on creditor's application for the declaration of bankruptcy on the entity’s assets filed after 12.03.2020 is interrupted,
  • the entity (including the obliged persons on its behalf) is not obliged to file an application for the declaration of bankruptcy on its assets for the duration of the temporary protection,
  • the enforcement proceeding began after 12.03.2020 against the entity to satisfy a claim from its business activity is interrupted for the duration of the temporary protection,
  • the pledge cannot be exercised against the entity in respect of the enterprise, property, right or other assets belonging to the enterprise,
  • against a receivable of the business entity arising after the provision of temporary protection, it is not possible to set off a receivable towards the business entity arising before the provision of temporary protection if it is a receivable that belongs to or belonged to the affiliated person,
  • other contractual party may not terminate the contract concluded with the entity by notice, withdraw from contract or refuse performance under such a contract due to the entity’s delay in the period from 12.03.2020 to 12.05.2020 caused by the spread of the disease Covid-19, unless the other contractual party directly endangered the operation of its enterprise,
  • time limits for right exercising against the entity (including time limits for exercising the claims from disputable legal acts) do not elapse during the period of temporary protection,
  • the entity (including its statutory body) may not distribute profits or other own funds and it shall refrain from disposing of the assets of the enterprise and any assets that may belong to them if there are substantial changes in the composition, use or designation of those assets or its not insignificant reduction,
  • the obligations immediately related to maintaining the operation of the enterprise which arose after the granting of the temporary protection, the business entity shall be entitled to pay preferentially over the previously due liabilities for the duration of the temporary protection.

Temporary protection expires:

  • on 01.10.2020 (however, the duration may be extended by the government up to 31.12.2020),
  • at the business entity's own request,
  • by a court decision if there were no preconditions for temporary protection, the preconditions for granting ceased or the business entity under temporary protection has breached the obligations under temporary protection.

Having in mind the practice of liabilities settlement in Slovakia, potential proving of declared fulfilment of conditions (especially non-existence of insolvency status) may in many cases depend on profound constructive interpretation of entity’s financial relationships. Proper evaluation of conditions fulfilment may be crucial for entity defending within court proceedings considering termination of temporary protection.

At the same time, we state that even if an entity does not meet the requirements for granting temporary protection, it still has the opportunity to solve its situation by negotiation with creditors and business partners, as well as by restructuring, bankruptcy proceeding or debt relief (in this regard we refer to our other articles on these themes).

Authors:

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

Company in crisis

The current spread of the disease Covid-19 brings serious risk of adverse economic situation in many companies, while the result of such risk could be the situation when such companies may get into so-called crisis.

In compliance with the Act No. 513/1991 Coll. Commercial Code, as amended (“Commercial Code”) the company is in crisis, if it is bankrupt or bankruptcy is imminent. For this purpose, it shall be as a company considered only Limited Liability Company, joint-stock company, simple shares company and limited partnership, the general partner of which shall not be any natural person.

The company is bankrupt if it is:

  • insolvent – the company is not able to fulfill 30 days after the maturity period at least two financial obligations to more than one creditor or
  • indebted – the company is obliged to keep accounts pursuant to the Accounting Act and it has more than one creditor and the value of its debts exceeds the value of its equity.

If the legal person, as well as its statutory body, liquidator or legal representative becomes aware of the fact that it is indebted, it/he is obliged to file an application for bankruptcy proceedings generally within 30 days after it/he becomes or may become aware of such fact. We do point out that pursuant to the current legislation adopted with respect to the spread of Covid-19 disease such period has been extended to 60 days if the indebtment has become within the period from 12.03.2020 to 30.04.2020. The breach of such obligation is penalized by the sanction in the amount of EUR 12.500,- payable by the obliged person.

A company’s bankruptcy is imminent if the ratio of its own assets (own financing resources) to its liabilities (external financing resources) is less than 8 to 100.

The statutory body of a company which found out or with regard to all circumstances should have found out that such company is in crisis, is obliged in accordance with the requirements of professional care to do everything that any other reasonably careful person would do in a similar situation to overcome such crisis.

The Commercial Code protects the common creditors of the company, and that in a way setting out the conditions on financing of the company. If the company needs to raise additional capital for its development, often it is not provided by the assets (additional contributions), but by the debt (e.g. by the credits, or other similar forms). The aim of the legislation is not to prevent such financing, but for the case, if the development of business activities as a result of failure to bear the business risk would not be successful, to requalify it as the so-called performance replacing a company’s own resources, which will be satisfied after overcoming the crisis by the company.

Performance replacing a company’s own resources means a loan or a similar performance for a corresponding economic purpose provided to a company in crisis. This applies accordingly to a contribution made to the company before the crisis, the maturity of which was deferred, or extended during the crisis.

During a crisis, performance shall be considered as replacing a company’s own resources only if at the time it was provided:

  • such circumstance arose from the last annual financial statements or extraordinary financial statements of the company,
  • such circumstance would have arisen from the financial statements of the company if they had been was prepared on time, or
  • the person who provided such performance knew or, taking into account all the circumstances, could have known that such circumstance would have arisen from the interim financial statements of the company if they had been prepared.

Performance provided by:

  1. a member of the statutory body, employee falling within the direct control of the statutory body, authorized signatory, head of a branch of an enterprise, member of the supervisory board,
  2. a person who holds a direct or indirect share representing at least 5% of the company’s registered capital or voting rights in the company, or has the ability to exercise influence over the management of the company which is comparable to the influence corresponding to this share,
  3. a silent partner,
  4. a person related to persons referred to in points 1., 2. or 3. hereof,
  5. a person acting on behalf of the persons referred to in points 1., 2. or 3. hereof

shall be considered performance replacing the company’s own resources.

The following is not considered performance replacing a company’s own resources:

  • performance or security provided to a company during a crisis in order to overcome it according to a restructuring plan,
  • provision of funds to the company for a period not exceeding 60 days; this shall not apply if provided repeatedly,
  • deferral for a period not exceeding six months of the maturity of an obligation from the supply goods or services; this shall not apply if the deferral is granted to the company repeatedly,
  • providing items, rights, or other monetary value to the company free of charge.

Performance replacing a company’s own resources, along with interest and contractual fines, cannot be returned if the company is in crisis, or if it entered into a crisis as a result of such performance. 

If the company returns performance replacing a company’s own resources during the crisis (while as the return shall be considered also off-setting the receivables), such performance shall be returned back to the company and the statutory bodies shall be obliged to enforce such performance. For the returning back of such performance shall be liable jointly and severally all of the statutory bodies which have executed such function at the time of returning of performance contrary to the Commercial Code and also the statutory bodies which have executed their function during the period, in which the company has not enforced its entitlement of returning back such performance.

Authors:

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

Restructuring

Act No. 7/2005 Coll. on bankruptcy and restructuring and on alteration and amendment of some acts, as amended (“Bankruptcy Act”) within its prevention provisions imposes on the debtor in a state of imminent bankruptcy the obligation to take, without undue delay, appropriate and proportionate measures to avert bankruptcy.

The current situation relating to the spread of Covid-19 disease may be the reason for the arising of such an adverse economic situation causing the debtor to fail to avert its bankruptcy. In such case, the debtor may deal with such a situation by the means of restructuring.

The restructuring is a special type of civil procedure regulated by the Bankruptcy Act, the purpose of which is the economic recovery of the debtor, which is during the restructuring proceedings entitled to continue in its business activity under the supervision of its creditors, court and bankruptcy administrator. 

In this respect we do point out that the Bankruptcy Act differentiates between two forms of the bankrupt:

  • insolvency – the company is not able to fulfill 30 days after the maturity period at least two financial obligations to more than one creditor or
  • indebtment – the company is obliged to keep accounts pursuant to the Accounting Act and it has more than one creditor and the value of its debts exceeds the value of its equity.

We also point out that the above-mentioned possibility of the debtor to deal with its economic situation by the restructuring does not release the debtor from its statutory obligation to file the petition in bankruptcy if it is indebted (for more information we do refer to part dealing with the problematics of bankruptcy). 

If the bankruptcy of the debtor is imminent or it is bankrupt it may appoint the relevant bankruptcy administrator to prepare the restructuring opinion.

The bankruptcy administrator during the preparation of the opinion researches the financial situation and business situation of the debtor and pursuant to findings he does recommend or does not recommend the restructuring of the debtor in his opinion. The administrator may recommend the restructuring if:

  • the debtor is a legal person performing the business activity,
  • the bankruptcy of the debtor is imminent or already it is in bankruptcy,
  • financial statements of the debtor provide a true and real picture of the facts which are subject to accounting and on the financial situation of the debtor,
  • the last restructuring of the debtor or its legal predecessor was at least 2 years ago,
  • it is possible to reasonably presume that at least substantive part of the operation of the debtor will be maintained, and
  • in case of the restructuring permit, it is possible to reasonably presume a higher extent of satisfaction of the debtor’s creditors than in case of bankruptcy declaration.

If the administrator has recommended the restructuring in his opinion not older than 30 days, the debtor as well as the creditor (with the consent of debtor) shall be entitled to file an application for restructuring proceedings. For more information on the detail of application we do refer to the Sec. 112 of Bankruptcy Act.

If the court finds out that the application for restructuring proceedings fulfills the mandatory criteria, not later than within 15 days after the delivery of the application it decides on the initiation of the restructuring proceedings, the effects of which are, in particular, as follows:

  • debtor is obliged to limit the performance of its activity only on the ordinary legal actions,
  • the receivable which has been in restructuring proceedings applied for cannot be subject to the enforcement proceedings against the assets in the ownership of debtor,
  • the secured receivable, which has been in restructuring proceedings applied for, shall not be subject to start and continuing in performance of security rights against the assets in the ownership of debtor,
  • the receivable, which has been in restructuring proceedings applied for shall not be subject to the receivables set-off.

If the following criteria are met, the court shall not later than within 30 days after the initiation of the restructuring proceedings decide by the means of resolution on the allowing of restructuring:

  • opinion shall meet the mandatory criteria and its content is clear and understandable,
  • opinion shall be prepared by the administrator registered in the list of administrators, having its office established within the district of the bankruptcy court of appeals, where the respective bankruptcy court is seated,
  • opinion shall be at the time of filing the application not older than 30 days since it was day of preparation,
  • administrator empowered to prepare the opinion has recommended the restructuring of debtor.

The allowing of restructuring has, in particular, the following effects:

  • the restructuring prevents from the situation where the same debtor would be subject to the bankruptcy proceedings,
  • the enforcement proceedings against the assets of the debtor shall be stopped,
  • court and arbitration proceedings with respect to the receivables which were in restructuring proceedings applied for shall be interrupted.

The resolution on allowing of restructuring shall contain provision by which the court appoints the administrator (on the basis of random selection among the administrators, having their office registered within the district of the respective bankruptcy court is seated), and shall call the creditors to apply for their receivables by the forms provided for in the Decree of Ministry of Justice of SR no. 665/2005 Coll., by delivering one original copy to the administrator within 30 days after the allowing of the restructuring. The application form delivered after expiry of such period shall not be taken into account. At the same time, in the respective resolution, the court shall set out the extent of legal actions of the debtors, which shall be during the restructuring subject to the consent of administrator. The court shall publish such resolution in the Commercial Journal, and the restructuring shall be considered as allowed at the next date following the real publishing of such resolution in the Commercial Journal.

Subsequently, the administrator shall be obliged within 30 days to fairly check the status and issues for the disputability of the applied receivables. Provided that the administrator becomes aware of such disputability, administrator shall the respective receivable or its part deny. Otherwise shall be such receivable or its part considered as identified.

The creditors shall be during the restructuring entitled to execute their rights through the creditor bodies (in the extent in which were their receivables identified), and that in particular creditors meeting (consisting of all creditors, which have applied for their receivables) and creditors committee (consisting of creditors elected by the creditors meeting).

The administrator shall during the restructuring perform supervision over the business activities of the debtor, while this supervision shall be performed with due care, preventing the debtor to decrease the value of its assets or to upset the successful termination of the restructuring. At the same time, the supervision over the activity of the debtor, administrator and creditor bodies shall be performed also by the court.

The process of recovery of the debtor shall be performed on the basis of the restructuring plan – the deed regulating the creation, amendment or ceasing of the rights and obligations of the persons mentioned therein, as well as the extent and way of satisfaction of such persons, which are creditors of the applied receivables, or the shareholders of the debtor.

If the court has allowed the restructuring on the basis of the application of the debtor, the plan has to be prepared and such prepared plan has to be gradually submitted to the creditors committee, meeting of the participants of the plan and to the court by the debtor. If the application has been submitted by the creditor, the plan shall be prepared and submitted by the administrator.

The plan has to be prepared in the manner securing the highest possible level of satisfaction to the creditors of debtor while securing its reality and sustainability. The plan shall provide the unsecured creditors the satisfaction of their receivables in the amount at least 20% higher than they could achieve in the bankruptcy proceedings.

The plan adopted by the consenting meeting shall be as well validated by the court by the means of the resolution issued upon the request of the party which as submitted the plan and such resolution shall be published in the Commercial Journal.

In that regard we do state that the statutory grounds for the refusal of the plan by the court shall be, in particular, the following facts:

  • the level of satisfaction of any of unsecured receivables (with exclusion of the subordinated receivables or receivables which would be in the bankruptcy proceedings satisfied as the subordinated receivables), is lower than 50% of the amount of the respective receivable, this shall not apply if the respective creditor expressed his consent with such lower level of satisfaction in writing,
  • the considerations set out for the satisfaction of any of unsecured receivables (with exclusion of the subordinated receivables or receivables which would be in the bankruptcy proceedings satisfied as the subordinated receivables) shall be according to the plan provided during the period longer than 5 years, is lower than 50% of the amount of the respective receivable, this shall not apply if the respective creditor expressed his consent with such longer maturity period of the considerations set out for the satisfaction of its receivables in writing.

The restructuring plan approved by the court shall have the following effects:

  • provisions of the plan shall become effective towards all participants of the plan by the publishing of the resolution on approval of the plan in the Commercial Journal,
  • by the publication of the resolution on approval of the plan in the Commercial Journal ceases to exist the right of the creditors, which have not properly and in due time, applied for their receivables, to enforce these receivables from the debtor, as well as the securing rights relating to the assets of the debtor which have not been applied properly and in due time,
  • the debtor or its takeover party shall not after the termination of the restructuring divide the profit or other equity between its members sooner, than the unsecured receivables of the creditors will be satisfied to the amount of the identified receivables pursuant to the plan.

Subsequently, the court shall publish in the Commercial Journal the resolution on termination of restructuring, which means the ceasing of the effects of the initiation of the restructuring proceedings and the interrupted court and arbitration proceedings subject which are receivables,, applied for in the restructuring shall be terminated. 

If the debtor or the takeover party would not, within the 30 days after the delivery of the call, fulfill properly and in due time towards the person mentioned in the plan the receivable or the other obligation arising from the plan, such plan then starts to become ineffective towards the participant of the plan. In such ineffectively of the plan towards the creditor shall be the debtor obliged to fulfill the original receivable of the creditor in the extent in which such receivable has been applied for and identified.

At last but not least we do point out that this legal status shall be valid at the date of its publication, while we do have information on the planned amendments to legislation regulating the abovementioned problematics.

Authors:

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

Bankruptcy

The one (and many times the only) way of resolution of adverse economic situation of the corporate person – the debtor, which has resulted in the bankruptcy, are bankruptcy proceedings regulated by the Act No. 7/2005 Coll. on bankruptcy procedure and restructuring, as amended (“Bankruptcy Act”). This situation may be currently caused by the adverse effects of the spread of Covid-19 disease (e.g. interruption of the relations between the debtor and his business partners, decrease of the demand for the goods/services of the debtor and subsequent decrease of his income relating therewith).

The bankruptcy procedure is the special type of civil procedure, the aim of which is in particular the identification of the assets of bankruptee (debtor), its monetization and subsequent satisfaction of the creditors of bankruptee according to the allocation of the proceeds from such monetization. With respect to mentioned, it is necessary to point out that the majority of the bankruptcy proceedings ends up in a winding up of the bankruptee.

The debtor shall be considered as bankrupt if it is:

  • insolvent – the company is not able to fulfill 30 days after the maturity period at least two financial obligations to more than one creditor or
  • indebted – the company is obliged to keep accounts pursuant to the Accounting Act, as amended, and has more than one creditor and the value of its debts exceed the value of its equity.

The bankruptcy proceedings shall be initiated by the application for bankruptcy. The Bankruptcy Act differentiates between the debtor application and creditor application, and that is based on the person filing the application to the district court seated in the district where the respective regional court is seated.

Indebted debtor shall be obliged to file the application for the bankruptcy standardly within 30 days after it becomes aware or with respect to his obligation to act in due care may have become aware of his indebtment. With respect to mentioned we point out that according to the current legislation adopted due to the spread of disease Covid-19 is the period during which is the debtor obliged to file the application for bankruptcy in case of indebtment, which has arisen within the period between 12.03.2020 and 30.04.2020, prolonged to 60 days. This obligation bounds, besides the debtor, also the statutory body or member of statutory body of debtor, liquidator of debtor and legal representative of debtor. In case of breach of duty to file the application for bankruptcy in due time, the Bankruptcy Act envisages the imposing of the sanction (in the form of contractual penalty) in the amount corresponding to the half of the minimum share capital of joint-stock company (i.e. 12.500,- EUR), which has to be paid to the bankruptcy assets of debtor.

The creditor shall be entitled to file the application for bankruptcy standardly if he may reasonably presume the insolvency of his debtor.

The applicant, either the debtor or the creditor, shall be obliged before the filing of the application for bankruptcy to pay on the account of the court the advance payment for the remuneration and expenses of the preliminary administrator, corresponding to the amount of 1.500,- EUR. 

With respect to the fact that this article is not primarily focused on the specifics of the initiation of bankruptcy proceedings, for more information on the requisites for bankruptcy declaration we do refer to Section 12 of Bankruptcy Act. Since the legal regulation is complex and complicated, we do advise to consult this issue with an attorney. 

If the court finds out that the application for bankruptcy meets the statutory requisites, not later than within 15 days after the delivery of the application, it shall decide on the initiation of the bankruptcy proceedings, which shall have the following effects:

  • debtor is obliged to limit the performance of its activity on the ordinary legal actions,
  • the assets of debtor cannot be subject to the enforcement proceedings,
  • the assets of debtor cannot be subject to start and continuing in performance of security rights

If the bankruptcy proceedings have been initiated on the basis of the debtor application, the court shall not later than within 5 days after the initiation declare bankruptcy over the assets of debtor, or within the same period shall appoint the preliminary administrator (in case of doubts over the value of assets of debtor).

If the bankruptcy proceedings have been initiated on the basis of the creditor application, is the bankruptcy declaration procedure more complicated. The court shall with respect therewith call the debtor in particular to submit its statement to the application, certificate of its solvency, and the documents and provision of information, which shall prove its solvency. Only if the debtor fails to certify its solvency, the court shall declare bankruptcy over its assets.

The declaration of bankruptcy has in particular the following effects:

  • the entitlement of bankruptee to dispose with the assets which are subject to the bankruptcy proceedings shall be transferred onto the administrator,
  • the undue receivables and obligations of the bankruptee which have arisen before the bankruptcy declaration and which are relating to the assets which are subject to the bankruptcy proceedings shall be until the cancelation of the bankruptcy proceedings considered as due,
  • all court and other proceedings relating to the assets which are subject to the bankruptcy proceedings shall be interrupted,
  • the assets which are subject to bankruptcy proceedings cannot be subject to the initiation of enforcement proceedings, previously initiated enforcement proceedings with respect therewith shall be stopped,
  • the assets which are subject to bankruptcy proceedings cannot be subject to the security rights, with the exclusion of the situation envisaged in Bankruptcy Act,
  • unilateral legal actions of the bankruptee shall cease to exist, if they relate to the assets which are subject to bankruptcy proceedings, in particular its orders, mandates, power of attorneys and proxy holdings,
  • the receivable arisen to the bankruptee after the bankruptcy declaration cannot be set-off with the receivable which has arisen to the bankruptee before the bankruptcy declaration,
  • by the bankruptcy declaration, the entitlement to act on behalf of the bankruptee in employment relationships towards the employees shall be transferred onto the administrator.

The court shall publish the resolution on declaration of bankruptcy in Commercial Journal, while the bankruptcy shall be considered as declared on the next date following the real publication of such resolution in Commercial Journal. The debtor becomes the bankruptee after the bankruptcy declaration. In the resolution on declaration of bankruptcy, the court shall appoint the bankruptcy administrator, which will lead the bankruptcy proceedings afterwards and which will call the creditors to apply for their receivables by the forms provided for in the Decree of Ministry of Justice of SR no. 665/2005 Coll., by delivering one original copy to the administrator within 45 days after the declaration of bankruptcy. The application form delivered after expiry of such period shall be taken into account, however the respective creditor cannot execute the voting rights and other rights connected to the applied receivables, and the possible security right of creditor is not taken into account.

Subsequently, the administrator shall be obliged within 30 days to fairly check the status and issues for the disputability of the applied receivables. Provided that the administrator becomes aware of such disputability, administrator shall the respective receivable or its part deny. Otherwise shall be such receivable or its part considered as identified.

The creditors shall be during the restructuring entitled to execute their rights through the creditor bodies (in the extent in which were their receivables identified), and that in particular creditors meeting (consisting of all creditors, which have applied for their receivables) and creditors committee (consisting of creditors elected by the creditors meeting).

As we indicated above, the administrator during the bankruptcy proceedings in particular identifies the assets of the bankruptee, which shall be subsequently monetized by the rules provided for in the Bankruptcy Act. With respect therewith we do point out that according to the legislation adopted with respect to the spread of the Covid-19 disease shall be the administrator obliged in the period between 27.03.2020 until 30.04.2020 (according to the amendment of this legislation effective from 12.05.2020 - in the period between 27.03.2020 until 31.05.2020) retreat from the performing of the auction, instructing the sale of the assets by the auctioneer, organizing the offer procedure or other procedures aimed on the sale of the assets. If the administrator does not fulfill those conditions, such monetization shall be invalid.

At the final phase of the bankruptcy proceedings (possibly sooner) the administrator shall allocate the proceeds from the monetization between the particular creditors, the applied receivables of which have been identified, and by performing this action the administrator fulfills the one of the general goals of the bankruptcy proceedings – to satisfy, or at least partially satisfy the receivables of the creditors of the bankruptee. 

Provided that the all assets have been monetized and the proceeds have been allocated, the administrator shall be obliged to perform the steps aimed at the cancellation of the bankruptcy proceedings, including the filing of the application for cancellation of the bankruptcy proceedings, on the basis of which the court shall decide on the cancellation of the bankruptcy proceedings. 

At last but not least we do point out that this legal status shall be valid at the date of its publication, while we do have information on the planned amendments to legislation regulating the abovementioned problematics.

Authors:

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

Debt Relief (Personal Bankruptcy)

The current situation relating to the spread of the disease Covid-19 brings along adverse effects, such as decrease of salaries or loss of job of natural persons, or decrease of demand for the goods/services of natural persons-entrepreneurs causing decrease of their turnovers, and such effects may result in a situation in which such persons are not able to pay their debts.

Particularly natural persons non-entrepreneurs, as well as natural persons entrepreneurs may achieve relief of their debts which they do fail to pay, and that can be done by the use of the institute of debt relief (also so-called “personal bankruptcy”) which is the formal process governed by the Act No. 7/2005 Coll. on bankruptcy procedure and restructuring, as amended (“Bankruptcy Act”).

However, there exist receivables against the debtor which cannot be relieved by the use of mentioned institute. Those shall be so-called exempted receivables and are as follows:

  • child support,
  • secured receivable,
  • receivable arisen from the compensation for damage caused on the health or caused by intentional action,
  • employment-law entitlements against the debtor,
  • financial sanction imposed on the debtor within the criminal procedure,
  • non-monetary claims.

The debtor shall be entitled to apply for the debt relief provided that they fulfill the following conditions:

  • has to be insolvent, i.e. it is not able to fulfill 180 days after the maturity period at least one financial obligation,
  • there has to be ongoing enforcement proceedings against the debtor (in case of the bankruptcy declaration, from the initiation of enforcement proceedings must pass at least 1 year),
  • it has to be applied for with honest intent,
  • the centre of main interests has to be in Slovak Republic.

Person interested in the debt relief has to firstly fill and submit the Request for provision of legal aid in the debt relief proceedings along with the attachments in the Legal Aid Centrum, while the Legal Aid Centrum will provide consultation to such person and check the filled request. The whole procedure is free of charge. More information are available at: https://www.centrumpravnejpomoci.sk/sekcia/7-osobny-bankrot.

Subsequently the Legal Aid Centrum decides whether it admits such person the entitlement to the provision of legal aid in the debt relief proceedings. Provided that the application of debtor has been admitted, the Legal Aid Centrum shall start to represent this person – debtor – before the court during the decision making whether the debtor will be debt relieved, including the submission of application for debt relief (according to the Bankruptcy Act such application may be submitted only through the Legal Aid Centrum, or the attorney appointed by such centrum).

Provided that the court will decide on the debt relief of debtor, at the same time the court appoints the bankruptcy administrator of the debtor, which shall afterwards maintain the debt relief process until its finalization (in particular, the administrator shall identify the assets of the debtor and subsequently shall monetize the assets and satisfy the creditors of debtor).

Bankruptcy Act differentiates between the debt relief in the form of bankruptcy procedure or repayment schedule.

 

Debt Relief by Bankruptcy Proceedings

In this form of debt relief, it is not necessary for the debtor to have assets and income. The possible income of the debtor is not affected in the debt relief by the bankruptcy proceedings. However, if the debtor has assets, it has to take into account the fact that these assets or its part will be monetized, and the debtor will lose such assets. From the proceeds from such monetization the debts will be partially paid. 

The debt relief by bankruptcy proceedings is suitable for the debtors having the debts higher than is the value of their assets, or if they do not have assets and have only low or no income.

After the debt relief performed by this form, all enforcement proceedings shall be stopped, besides the exemptions mentioned above, and it is not possible to deduct the income of the debtor. At the same tame by the declaration of such debt relief, the joint ownership of spouses shall cease to exist.

The debtor shall be aware that the Legal Aid Centrum shall provide the loan in amount of 500,- EUR for the advance payment for the remuneration of administrator, which the debtor shall pay away.

 

Debt Relief by Repayment Schedule

This form of debt relief is suitable for the debtors having the regular income. The debtor keeps all of assets in the use of repayment schedule.

The requisite (besides the other abovementioned) is payment of the amount around 700,- EUR, which does consist of 500,- EUR for the advance payment for remuneration of administrator and around 200,- EUR to the attorney, which may be appointed by the debtor or by Legal Aid Centrum. The debtor shall be obliged to be represented by the attorney in the debt relief by repayment schedule.

If the debtor does meet all of the criteria, the court shall within the 15 days provide the debtor the protection from creditors (for the maximum period of 3 years).

The appointed administrator has 45 days from the date of abovementioned advance payment to inspect the situation of debtor and prepare the repayment schedule. The repayment schedule shall be set out in a way in which the debtor pays at least 30% of all debts within 5 years. The court shall accordingly set out how many % within the extent of 30% to 100% of unsecured debtors shall be paid by the debtor.

Similarly to the bankruptcy procedure, when using the repayment schedule the enforcement proceedings against the debtor shall be stopped. If the court sets out the repayment schedule, it is a ground to decide on the stopping of the enforcement proceedings.

We do point out that the debtor shall be entitled to repeatedly apply for the debt relief by bankruptcy proceedings or repayment schedule not sooner than after the 10 years from the declaration of bankruptcy or from the setting out of the repayment schedule.

At last but not least we do point out that this legal status shall be valid at the date of its publication, while we do have information on the planned amendments to legislation regulating the abovementioned problematics.

Authors:

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

Changes in the Labor Code effective from 04.04.2020

On April 2, 2020, the Slovak Parliament approved an amendment to the Labor Code, which responds to the labor market requirements regarding COVID-19:

The approved amendment to the Labor Code introduces exceptions to the generally applicable rules that shall apply to employment relationships during the state of emergency or during the extraordinary situation and within two months of their withdrawal.

  • The employer is entitled to order the work from the employee's household, if the agreed type of work allows it. Also, an employee has the right to work from his / her household if the agreed type of work allows it and there are no serious operational reasons on the employer's side that do not allow working from home.
  • The employer is obliged to notify the employee of the working time schedule at least two days in advance, unless he / she agrees with the employee for a shorter period. Such time schedule is valid for at least a week.
  • The employer is obliged to notify the employee about obligatory holidays at least seven days in advance and at least two days in advance if it is an unused holiday from the previous year. This period may be shortened with the consent of the employee.
  • Protection against dismissal for an employee who has an important personal impediment to work due to quarantine measures, isolation, personal and day-to-day treatment of a sick family member or personal and full-time care for a natural person under a special regulation. Such an employee shall be protected against dismissal in the same way as an employee on sick leave.
  • The employer is obliged to assign the original work and workplace to an employee who returns to work after isolation, personal and full-time treatment of a sick family member or personal and full-time care for a natural person pursuant to a special regulation. If assignment to the original work and the workplace is not possible, the employer is obliged to assign this employee to other work corresponding to the employment contract.
  • If an employee cannot perform all or part of the work due to cease or limit of the employer's activity at the discretion of the competent authority or due to cease or limit of the employer's activity as a result of a state of emergency or during the extraordinary situation, the employee is entitled to a wage compensation equal to 80% of his/her average earnings, but at least to the minimum wage.

Author:

Mag. Iur. Viera Kolláriková, advokát

Changes to the Social Insurance Act

The COVID-19 crisis and the declaration of an extraordinary situation or state of emergency have resulted in the following measures:

  • Unemployment support period is extended by 1 month if it were to expire during the crisis situation. The support period which has elapsed during the crisis situation before the effective date of this law amendment shall start to run again on the effective date of this law amendment and shall expire one month after the effective date.
  • The Government may, for the duration of the crisis situation and for a period of two months after its lift, impose conditions of a “special” entitlement to the unemployment benefit, the conditions of its payment, the length of the support period and the amount of the benefit.
  • It is not possible to pay premiums in cash at the branch of an insurance company during the crisis situation. Submissions in respect of benefits made by electronic means which are not signed by a secured electronic signature and the agreement on payment of the benefit to the account specified in the application does not require written confirmation.
  • In connection with the authorization of payment schedule of outstanding premiums, the Social Insurance Agency will not indicate an increase in the amounts due by interest.
  • Entitlement for nursing payment arises from the first day of the need for personal and all-day care or personal and all-day care and expires on the end of the need for personal and all-day care or personal and all-day care. This applies also to a person who is personally and all-day taking care of a child whereas during the crisis situation has passed a month:
    1. since the child has reached the third year of age,
    2. since this child has reached the sixth year of age in the case of a child who has a long-term unfavorable medical condition according to a special regulation,
    3. since the child ceased to be considered as a child with a long-term unfavorable condition according to a special regulation, if he / she is less than six years old,
    4. since the child has reached the sixth year of age if the policyholder has been placed in custody replacing the care of the parents by a decision of the competent authority, unless three years have elapsed since the first decision of the competent authority
    5. since the lapse of three years of the first decision of the competent authority to entrust the insured person to care replacing the care of the parent if the child is less than six years of age:

Previously approved measure in the Social Insurance Act effective from 27th March 2020:

An employee who has been recognized as temporarily incapable of work during the crisis due to a quarantine measure or isolation is entitled to sickness benefit from the first day of temporary incapacity for work. The amount of sickness benefit in this case is 55% of the daily assessment base.

Author:

Mag. Iur. Viera Kolláriková, advokát

Amendments to the Act on Safety and Health at Work

  • In the context of safety and health in the workplace, the employer is not obliged to instruct the employee during the COVID-19 crisis when taking up employment with the rules of safety and health in the workplace if this obligation cannot be objectively fulfilled; however, failure to comply with this obligation must not directly and seriously endanger life and health. The employer is obliged to instruct the employee as soon as possible within one month from the date of recall of the crisis situation.
  • The period of periodic instruction of employees with rules of safety and health in the workplace, the end of which will be during the crisis situation, is resting during the crisis situation. If the end of this period falls within a period of one month from the date of the recall of the crisis situation, it shall be deemed to be fulfilled if the employer fulfills the instruction duty no later than one month from the date of the recall. This shall apply if it is objectively impossible to meet the obligation to instruct within the original period and failure to comply with the obligation to notify within the original period shall not directly and seriously endanger life and health.
  • The other deadlines ending during the crisis period are resting. If their end falls for a period of one month from the date of the recall of the crisis situation, it shall be deemed to be fulfilled if the employer fulfills the notification duty no later than one month from the date of the recall of the crisis situation.

Author:

Mag. Iur. Viera Kolláriková, advokát

Changes in the Employment Services Act

The approved changes to the Employment Services Act extend the possibility of receiving projects to support the maintenance of jobs to companies that are not registered in the Register of Public Sector Partners and simplify the application process:

  • Eligibility for financial contribution in connection to the projects oriented on retention of jobs, including jobs where self-employment is carried out, and to support the retention of employees in the context of a declaration of extraordinary situation or state of emergency and removal their consequences, shall be demonstrated by the applicant's affidavit, unless proven otherwise. If the Office subsequently finds that the applicant did not meet the conditions of the eligibility at the date of submission of the application, he/she shall return the granted contribution to the Employment Office.
  • An employer who received the financial contribution in connection to the projects oriented on retention of jobs, including jobs where self-employment is carried out, and to support the retention of employees in the context of a declaration of extraordinary situation or state of emergency who must be entered in the Register of Public Sector Partners, shall be until 31st December 2020 deemed as registered.

 Author:

Mag. Iur. Viera Kolláriková, advokát

The need of Employee to take care of their Children due to closed schools and pre-school facilities

Employee: The employee is entitled to receive a nursing benefit, the same as in case of custody of a sick child, however, only in case of custody of children under 11 years old. For this special situation connected to the coronavirus, the Social Insurance introduced a new type of application form for nursing benefit. For the purpose of obtaining the claim, the application can be filed without the attestation of the child`s attending physician, and the claim can be made directly at the relevant branch of the Social Insurance Agency by telephone or can be sent by email. Detailed information and the application form are available directly on the Social Insurance website. At the end of the month the parent must  send an Affidavit which is also available on the Social Insurance website where he / she has to declare in which days he was taking care of the child.

The recent amendments of the Social Insurance Act provide nursing payment to the parents for the entire duration of the school closures. However, this payment is provided only to one parent and only for days in which he / she does not receive payment from the employer. Only one person may claim the nursing benefit and absence from work in relation to one child. It is not possible to receive salary and nursing payment simultaneously.

Employer: Pursuant to section 141 (1) of the Labour Code, the employer shall excuse an employee's absence from work during the time of his / her temporarily incapacity for work due to care of a sick family member or care of a child below ten years of age who for serious reasons cannot be placed into a childcare facility or school. Pursuant to section 223 (2) of the Labour Code, the employer shall excuse an absence from work also to a person who performs work on the basis of an agreement on work performed outside an employment relationship, among other reasons, for the care of a sick family member and care for a child under 11 years of age. However, these persons have no claim for reimbursement of their remuneration.

Pursuant to the new regulation of section 250b (5), during the nursing period the employee is protected against a dismissal. After the employee returns to work, the employer is obliged to assign him / her to the original work and workplace.

Author:

Mag. Iur. Viera Kolláriková, advokát

The Employee has been ordered quarantine

Employee: Pursuant to section 144 (2) of the Labour Code, the employee shall be obliged to provide the employer with evidence of the existence and duration of the impediment to work. The competent institution shall provide the employee with a written confirmation of the existence and duration of the impediment to work, and the employee is obliged to notify the employer without undue delay. 

According to the recent amendments of the law, as of 27th March 2020 the state covers the employee’s compensation during this incapacity for work since the first day of the quarantine. The amount of sickness benefit in this case is 55% of the daily assessment base.

Before 27th March 2020 the employee was entitled to compensation as in case of temporary incapacity for work. Pursuant to Act no. 462/2003 Coll. on Compensation of Employee Temporary Incapacity for Work, the employee was entitled to compensation of income from the employer during the first 10 days of the quarantine measure, amounting to 25% of the daily assessment base during the first three quarantine days and 55% from the fourth to the tenth day of quarantine; (provided that the employee does not have any income from that employment relationship). From the eleventh day the employee is entitled to a sickness benefit according to Act no. 461/2003 Coll. on Social Insurance in the amount of 55% of the daily assessment base. Self-employed persons and voluntary insured persons and insured persons within the protected period are entitled to sickness benefit under the stated conditions from the first day of the ordered quarantine measure.

The Social Insurance also introduced a simplified process for obtaining entitlement to sickness benefit. In case of quarantine there is no need of a personal visit to the doctor and the Social Insurance can verify the patient's application by telephone.

Employer: In case of an ordered quarantine of an employee, the employer shall excuse his /her absence from work during the period of quarantine in accordance with section 141 (1) of the Labour Code. During this time, the employee is not entitled to remuneration compensation.

Author:

Mag. Iur. Viera Kolláriková, advokát

Employee and Protective measure

Employee: In case of a precautionary measure the regional Public Health Authority recommends that the employees do not enter the workplace and do not work, the employee has the right for a “home office” option, if the agreed type of work allows it and there are no serious operational reasons on the employer's side that do not allow working from home. Respectively, in agreement with the employee, the employer may determine him / her to take leave.

Prior to 04th April 2020 it was necessary to obtain consent of the employer and employee about changing the workplace to the employee’s household.

Employer: Pursuant to section 141 (3) letter b) of the Labour Code, the employer may grant the leave for other reasons than referred to in subsection 2, with or without wage compensation.

The employer may use its power to order employees to take leave within the meaning of section 111 (1) of the Labour Code, but the employer is obliged to notify the employee at least 7 days in advance. This period may exceptionally be shortened with the consent of the employee.

Prior to 04th April 2020 the notice period of the holiday order was 14 days.

Author:

Mag. Iur. Viera Kolláriková, advokát

Processing of the personal data by the municipality

It is possible for municipalities, cities, or its parts, to have knowledge about their quarantined or directly infected people, from the Public Health Authority about? 

Information on the quarantine or contagion of a citizen, a specific person from a municipality or city in conjunction with the precise identification of that natural person is a specific category of personal data, so it is essential that processing of such pesonal data was lawful within the meaning of Art. 5 of the principles of the regulation GDPR and in particular the principle of legality. The lawful processing of a specific category of personal data (that is, data about a specific person being in quarantine or infected) can only be carried out if at least one of the additional conditions for processing under Art. 9, par. 2 of the GDPR is met and at the same time it is always necessary to have a legal basis for processing under Art. 6 par. 1 of the GDPR.

According to Art. 9, par. 2, par. (g) of the GDPR, such conditions should be laid down in a generally binding legislation which should impose appropriate and specific measures to protect the rights and freedoms of the data subject.
(e.g. government resolutions).

In the opinion of the Office for Personal Data Protection, in connection with the declared emergency situation, such a generally binding legal regulation could be Act no. 42/1994 Coll. on civil protection of the population,
which requires a clear, precise and foreseeable concrete measure to be taken by the State and its relevant component, which is authorized to do so. Only on the basis of such guaranteed statement (Government Resolution) and respective guarantees, it is subsequently possible to implement measures at lower levels of management, aimed at protecting public health and which are already incorporated in current laws, i.e. ready for use in practice. If such measures are taken by the municipality or the part of the municipality without implementing the government's measure, we are the opinion that this may be a violation of the competences laid down in Act No. 42/1994 Coll. Such a procedure also appears to be non-compliance with the GDPR, as municipalities and towns have not given guarantees in practice and implementation of measures, thus not guaranteeing the privacy of compliance with the last sentence with Art. 9, par. 2, par. (g) of the GDPR.

Author:

JUDr. Radoslav Varešinský, LL.M., advokát

Processing personal data of employees

There are common cases when an infected person is detected in the workplace and it is in the interest of other employees to know who it is to be able to behave preventively and so on.

According to the statement of the European Data Protection Committee, the above mentioned rules of GDPR and domestic legislation should still be respected.

Can an employer require visitors or employees to provide specific health information in the context of COVID-19? 

The application of the principle of proportionality and data minimisation is particularly relevant here. The employer should only require health information to the extent that national law allows it. 

Is an employer allowed to perform medical check-ups on employees?

The answer relies on national laws relating to employment or health and safety. Employers should only access and process health data if their own legal obligations requires it.

Can an employer disclose that an employee is infected with COVID-19 to his colleagues or to externals?   

Employers should inform staff about COVID-19 cases and take protective measures, but should not communicate more information than necessary. In cases where it is necessary to reveal the name of the employee(s) who contracted the virus (e.g. in a preventive context) and the national law allows it, the concerned employees shall be informed in advance and their dignity and integrity shall be protected.  

What information processed in the context of COVID-19 can be obtained by the employers? 

Employers may obtain personal information to fulfil their duties and to organise the work in line with national legislation.  

Author:

JUDr. Radoslav Varešinský, LL.M., advokát

General rules of the safety in workplace

An update to the health and safety rules in the workplace as of 04th April 2020 are published on the top of the page.

Employer: Pursuant to section 5 of Act No. 124/2006 Coll. on Health and Safety at Work, the employer is obliged to apply the general precautionary principles in implementing the measures necessary to ensure occupational safety and health (including information, education and work organization and resources). The general principles of prevention include the elimination of hazards and the resulting risks, as well as risk assessment that cannot be excluded. In fulfilling these obligations, the employer must assess the risk, for example in relation to known areas of coronavirus and cancel business trips. In case of an employee returning from a coronavirus zone, he or she may, depending on the circumstances, order them to monitor their health within 14 days of arriving from the area, or consider working from home, to take leave or order a medical examination. Taking appropriate measures depends on the employer's risk assessment. In its decision-making it may follow the measures ordered by the Security Council of the Slovak Republic, respectively recommendations of Ministry of Health of the Slovak Republic, Ministry of Foreign Affairs and European Relations of the Slovak Republic and, Public Health Authority, which are published on their websites.

Employee: Pursuant to section 12 of Act No. 124/2006 Coll. on Health and Safety at Work, an employee has the right to refuse to work or leave the workplace and to go to safety if he / she reasonably believes that his / her life or health is immediately and seriously endangered. Such a situation could arise if someone in the workplace had a reasonable fear of being infected with coronavirus. At the same time, he / she has the duty to comply with the employer's instructions for ensuring Health and safety at work and to cooperate in their fulfilment.

Author:

Mag. Iur. Viera Kolláriková, advokát

Covid-19 and lease agreements of closed operations

As result of the Measure of the Public Health Authority of the Slovak Republic many operations were closed. This situation has a major impact on the loss of income of companies, because they will face the obligation to pay rent for their premises. 

The protection of tenants was approved by the law Nr. No. 92/2020 Coll., effective from 12.5.2020. Pursuant to this legal provision, the landlord may not unilaterally terminate the lease of real estate, including the lease of an apartment or non-residential space, until 31st December 2020 due to the tenant's delay in paying the rent, including payments for services normally associated with the lease due in the period from 1st April 2020 to 30th June 2020, if the tenant's delay was due to circumstances originating in the spread of the dangerous contagious human disease COVID-19. This reason for the delay must be sufficiently certified by the tenant. Other reasons for termination of the lease are not affected.

For many, the question arises as to whether closure due to COVID-19 can be considered a vis major situation - force majeure and thus exempts from rent payments.

Majority of lease agreements for commercial purposes are governed by the Commercial Code. For those who have not explicitly agreed in the lease agreement the possibility of exemption from the payment of rent in a situation of force majeure, the Commercial Code will not provide protection. In the case of non-payment of rent, the lessee may be liable for delay and possible damages.

The Default of the debtor (lessee) is based on the principle of objective liability without liberation under the Commercial Code. Under the Commercial Code, the debtor may only be released from liability for delay if the debtor is in default due to the creditor's delay. For other reasons, the debtor may not exculpate from liability for delay. Thus, the Commercial Code does not allow the liberation from liability for delay due to force majeure.

The result of the debtor’s default is (a) entitlement of a creditor to require compensation according Section 373 et seq. of the Commercial Code (b) entitlement of the creditor to withdrew from the contract, if the law stipulates it, e. g. according Section 345 or Section 346 of the Commercial Code, (c) entitlement of the creditor to withdrew from the contract if the contract stipulates it, (d) the risk of damage to property passes on the debtor according to Section 368 of the Commercial Code (e) the right of the creditor to claim damages; and (f) the right of the creditor to claim default interest.

In case of overlapping of claims is the creditor in sense of Section 369b of Commercial Code entitled to compensation of damage caused by default in fulfilment of a monetary obligation only if this damage is not covered by the default interest or by a lump-sum compensation of the costs connected with the enforcement of the receivable, or the total thereof.

Under the Commercial Code, the liability for damage to the debtor is also based on the principle of objective liability, but with the possibility of liberation. The debtor has the opportunity to prove that the breach of obligations was caused by circumstances excluding liability. Such circumstance shall be considered as an obstacle when:

  • it occurred independently of the will of the liable party and prevents it from fulfilling its obligation (independence),
  • the liable party cannot reasonably be expected to avert or overcome this obstacle or its consequences (irreversibility),
  • and the liable party cannot reasonably be expected to foresee this obstacle at the time of creation of the obligation (unpredictability).

A circumstance excluding liability for damage shall not result in the termination of the obligation. After the obstacle has fallen, the liability-exclusion effect also ceases. The court cannot reduce the compensation of damages. The issuance of the Measure of the Public Health Authority of the Slovak Republic fulfils the above-mentioned conditions, therefore it can undoubtedly be considered as a circumstance excluding liability if it immediately (in a direct causal connection) prevents the fulfilment of the obligation.

The contractual fine is also sometimes agreed in case of delay. The contractual fine shall not be subject to circumstances excluding the liability stated in compensation of damages. Thus, even if there are circumstances that exclude liability for damage (Measure), this shall not affect the obligation to pay a contractual fine.

Subsequent Impossibility of Fulfilment

In sense of Section 352 subsection 2 of the Commercial Code if the legal regulations issued after conclusion of the contract, where the effectiveness of such regulations is not limited in time, prohibit the debtor’s conduct to which the debtor is obligated, the obligation shall cease to exist and the debtor shall not be liable for any delay or damage.

The measures of the Public Health Authority of the Slovak Republic on closure of operations are such a legal regulation. It is relevant whether they were issued for a certain period of time or until further notice, resp. it is important to assess whether the obligation can be fulfilled after the measures have been withdrawn, or it has completely extinguished in the meantime. 

If the obligation can still be fulfilled by a third party during the validity of the measures, the Commercial Code explicitly states that in such a case the obligation is considered to be fulfilled. In the event that the obligation is fulfilled, the debtor is not exempted from the effects of the delay or from liability for damage.

Contrary to the principles of honest business relations

Section 265 of the Commercial Code stipulates that the exercise of a right that is contrary to the principles of honest business relations shall not enjoy legal protection. Lessees may argue with it in negotiations with the lessor to achieve a reduction of rent for the period of closure of operations based on the Measure of the Public Health Authority of the Slovak Republic.

Although this provision provides a relatively wide scope of application as well as a wide judicial discretion, it is unlikely that it can be fully exempted from the payment of the rent.

In practice, it has already been shown in the past that one of the Contracting Parties had effort to make use of this provision resp. abuse as a compensation of their own risk in trading, eventually their inability or lack of caution in concluding contracts, e.g. in contractual agreement of various sanctions for breach of obligations (interest or contractual fines).

In such cases, this provision would not be applied as a means of legal protection but would become a means which would significantly undermine the legal certainty of the parties to commercial obligations relations.

Contractual arrangement for exemption from payment of rent in a situation of force majeure

In the event that the contracting parties have agreed to exempt the payment of rent in the case of a situation of vis major - force majeure, it is also important how they dealt with its definition. This will be decisive for assessing whether the closure of operations for COVID-19 could be included. The following conditions must therefore be met:

  • the contract contains the aforementioned force majeure arrangements,
  • under the contractually defined case of force majeure, the Measure of the Public Health Authority of the SR can be included,
  • the case of force majeure is a direct immediate cause of the infringement; and
  • involved party complies with the conditions agreed in the force majeure arrangement, e.g. report the existence of force majeure.

Only if all of the above conditions are met at the same time the lease may be forgiven. 

Consequently, establishments which have been closed on a voluntary basis or closed only to the public and which continue to use the subject of the lease (e. g. restaurants which turn into food expenditure) cannot be exempted from the obligation to pay rent).

In the absence of a definition of the term "vis major" in the contract, the definition of force majeure will be derived from the definition of circumstances excluding liability for compensation od damage referred to in Section 374 of the Commercial Code above mentioned (independence, irreversibility and unpredictability). 

Obstacles to fulfil duty may be in the nature of a natural event (flood, sudden change in weather conditions), but also in cases of civil war, blockade, imposition of sanctions, acts of third parties (ambush) or of a legal nature (e. g. an official ban on certain products in case of an epidemic). The vis major event can therefore also include the Measure of the Public Health Authority of the Slovak Republic on the closure of all retail establishments and all establishments providing services, with the exception of public health threats since 16 March 2020, which was further amended on 17 March 2020. However, there must also be a link between the Public Health Authority Measure and the direct immediate cause of the infringement.

Author:

Mag. Iur. Viera Kolláriková, advokát

Stopping the Production and Labour Law

Employee: If the Regional Public Health Authority orders the closure of operations resulting into the non-assignment of work to an employee, such situation represents an obstacle on the part of the employer. Nevertheless, the employment relationship of an employee still lasts and the employee shall be remunerated by the employer in the amount of his/her average monthly income. Since 04th April 2020 an employee has entitlement to 80% of the average income if the employer temporarily interrupts production due to non-delivery of production components (downtime). Prior to 04th April 2020 the employee was entitled to 100% average income during the obstacle on the side of the employer.

Employer: In case the employees' representatives are appointed at the company, it is possible that the employer concludes an agreement with them on a remuneration compensation which is lower than the average monthly income. By such an agreement it is possible to reach the legal minimum limit of 60% of the employee's average monthly income.

If the employees work at the employer according to a working time account pursuant to section 87a of the Labour Code, the employer may in accordance with the agreed rules order the employees to stay at home. However, the employees will additionally work the working hours they missed as part of their working time account after the measures have ended.

The employer may agree with the employee to take compensatory leave for overtime work in accordance with section 121 (3, 4) of the Labour Code. The employee must agree to take such compensatory leave.

The employer is not entitled to any compensation for the damage incurred against the regional Public Health Authority or anyone else. The damage will remain in the employer's sphere.

Author:

Mag. Iur. Viera Kolláriková, advokát

Measures aimed at Jobs Sustainability Support

The Government of the Slovak Republic (government) on 31st March 2020 adopted the following conditions for supporting the maintenance of employment during the extraordinary situation or state of emergency and the removal of their consequences. In comparison to previously adopted measures of the government dated 14th April 2020 it is a matter of their modification, specification of conditions as well as the extension of support to mitigate the effects of extraordinary situation declared with respect to the spread of COVID-19 disease on the employment and the labor market. 

MEASURE 1: State contribution to the employers whose operations are mandatory closed on the basis of decision of Public Health Authority:

Entitled Applicant for Measure 1:

Employer (including self-employed person as employer) with the exemption of the public administration entities, whose operations are mandatory closed on the basis of decision of Public Health Authority and who will maintain jobs also during the interruption or restriction of their operation on the basis of Public Health Authorities Measure during the declared extraordinary situation or state of emergency.

Amount of Support:

Support in the amount of 80% of the average salary of the employee or in the amount set out by the collective agreement or other written agreement with the representatives of employees throughout the period of provision of the contribution under the condition that the employment relationships will continue to exist. Maximum support for one employee in the amount of EUR 1.100.

Based on the notification of the Ministry of Labor and Social Affairs on the possibility of submitting an application for a financial contribution, the total amount of aid for one self-employed applicant (SZČO) may not exceed EUR 800.000 (EUR 120.000 for fisheries and aquaculture applicants, EUR 100.000 for applicant in primary agricultural production). As to other enterprises, the limit in the amount of 800.000 EUR for one applicant was canceled, i.e. that also the large enterprises may apply for same contribution of the state as other entities.

MEASURE 2: State contribution to self-employed persons whose operations were mandatory closed or limited their operations on the basis of decision of Public Health Authority

Entitled Applicant for Measure 2:

Self-employed person which cumulatively meets the following conditions:

  • Person who has interrupted or restricted performance or operation of business activity on the basis of Public Health Authorities Measure or whose revenues have decreased during the period of declared extraordinary situation or state of emergency at least by 20% (10% in March),
  • Person who has been insured with respect to healthcare and social insurance (mandatorily or voluntarily) in the period up to 31st March 2020 and the insurance lasts after this date or who draws so-called insurance contributions holiday pursuant to the Act No. 461/2003 Coll on social insurance, as amended,
  • Person who has not concurrent employment agreement,
  • Person who has not cancelled or suspended its trade license

Amount of Support:

The state contribution shall compensate the decrease of revenues during March 2020 with an amount 90 – 270 EUR depending on the decrease of revenues from 10% and more and during April and May 2020 with the amount 180 – 540 EUR depending on the decrease of revenues from 20% and more.

Revenues will be compared to the same period last year.

MEASURE 3: State contribution to employers affected by the extraordinary situation or state of emergency

Entitled Applicant for Measure 3:

The employer with exemption of the public administration entities, who maintain jobs also during the interruption or restriction of its operation activity during the period of declared extraordinary situation or state of emergency.

Amount of Support:

The applicant may decide between the following forms of the contribution for the employee, who does not draw the social security benefits (sick leave benefit, nursing leave benefit) or is not on holiday:

  • payment of compensation of salary of employee in the maximum amount of 80 % of the average salary of each employee, with a maximum of EUR 880 per month, or
  • flat-rate contribution for the compensation of the part of salary expenses for each employee depending on the decrease of the revenues in the amount mentioned in Measure 2.

The employer can choose only one of the options for the entire period of the contribution.
The allowance cannot be provided for employees who receive social security benefits or take leave.

MEASURE 4: State contribution to the selected groups of natural persons which during the declared extraordinary situation or state of emergency do not have any income

Entitled Applicant for Measure 4:

A natural person who from 13.03.2020 does not have any other income (from business, non-business and employment activity), who is

  • self-employed person and who has interrupted or restricted the performance or operation of his activity, or
  • self-employed person who has suspended his trade license as of 13.03.2020, or
  • in the employment relationship on the basis of an alternative employment agreement which is valid in 2020, even during the declared extraordinary situation or status of emergency.

For this purpose, as income shall be considered also: retirement pension, early retirement pension, invalidity pension, service pension.

Amount of Support:

The applicant may apply a flat-rate contribution for compensation of loss of income from employment and other gainful activity in the amount of 105 EUR for March 2020 and in amount of 210 EUR for April and May 2020.

Undertaking in difficulty

One of the conditions relating to the above-mentioned measures is that the applicant shall not to be an undertaking in difficulty.

For the determination of this status of the applicant is the basic rule that if a company is in liquidation, restructuring or bankruptcy, it is automatically an undertaking in difficulty. 

If an undertaking has been in existence for less than three years, it is not considered to be in difficulty unless it is in liquidation, restructuring or bankruptcy.

If the company has existed for more than three years, the entrepreneur must further investigate the financial situation of the company.

At the request of the Ministry of Labor and Social Affairs, this condition was deleted in relation to employers who will apply for employee wage contributions. However, the European Commission did not accept another request that the self-employed person in difficulty could also apply for a contribution, so at present the existence of a company in difficulty is only examined in the case of measures no. 2 and 4.

Author:

Mag. Iur. Viera Kolláriková, advokát

The above information is up to date, and we continuously monitor the evolution of the situation and respective changes.

Overview of Key Employment Law Support Policies in Europe in connection to Coronavirus

We have created with our colleagues in Europe this overview of support policies in Employment Law in Europe. It provides a comparison of 25 countries (including Slovakia) which can be simply accepted to knowledge but can also lead to an inspiration of the European leaders how to proceed further.

https://www.andersentaxlegal.es/recursos/doc/portal/2020/01/09/covid-19-employment-and-labor-law-measures-andersen-europe-employment-service-li.pdf

LGP in the media

We take a responsible approach to the situation and we also try to provide legal advice to the general public. You can also find them in a well-known daily newspaper Pravda - a nationwide opinion-based newspaper with the longest tradition in Slovakia. 

On Monday, March 16th, 2020, the article was published, where we are bringing a set of basic information in the field of labour law explaining the employer's obligations and the employee's claims in relation to coronavirus.

We have provided you with further interesting information in the article concerning an organization of a funeral ceremonies during the coronavirus, as well as the obligation of health institutions to inform about death of a close person at the time of banned hospital visits, published on Thursday, March 26th, 2020.