The Slovak economy has been struggling with the coronavirus pandemic (not only) for several weeks now. The government is trying to mitigate these effects and is taking various measures to help entrepreneurs cope with difficult times. One of such measures is also assistance through the so-called temporary protection of entrepreneurs, effective until 31.12. 2020. Its purpose is to prevent a possible wave of bankruptcies due to the negative economic effects of the pandemic. This protection is intended to ensure that companies gain time so that they are not executed, their creditors do not file for bankruptcy, or that the companies themselves do not have to file for bankruptcy on their property. In the following article, we've answered a few questions you may have about temporary protection.

1. Who is entitled to apply for the temporary protection?

All entrepreneurs whose current problems have arisen in connection with the coronavirus pandemic.  The temporary protection will not be provided to entrepreneurs who had been insolvent before the pandemic began.

2. How and where to submit the application for the temporary protection and what it should contain?

The application may only be submitted via the electronic form prepared and published by the Ministry of Justice of the Slovak Republic at their website. This application must be submitted electronically and the applicant’s signature on the application for temporary protection must be authorised. Natural persons  may also submit the application in person or by mail. Signatures of applicants who are natural persons do not have to be certified, but the application must be accompanied with a copy of the applicant’s ID card, otherwise the application will not be considered.

The application for temporary protection must contain general essentials (to be filled in by the applicant) and special essentials (they will be written in the application form). The applicant will have to declare the following:

• The applicant is entitled to submit the application and the purpose of the application is seeking the temporary protection.
• The amount of the applicant’s overdue liabilities has significantly increased or their revenues have significantly decreased with a consequent substantial threat to the operation of their undertaking.
• The applicant was not insolvent on 12 March 2020.
• As of the date of submitting the application, there are no reasons for the cancellation of the applicant’s company and the applicant is not subject to any initiated bankruptcy proceedings or permitted restructuring procedures.  
• As of 12 March 2020, the applicant was not subject to any insolvency proceedings aimed at settling the claims arising from their business operations.
• As of 12 March 2020, no right of lien enforcement has been initiated with regard to the applicant’s company, item, right or any other proprietary value belonging to the company.
• In calendar year 2020, the applicant has not divided their profits or any other company resources, and has not removed the consequences of such actions.
• In calendar year 2020, the applicant has not taken any actions imposing a threat to their financial stability, except for the measures aimed at mitigation of the consequences of the spread of a dangerous infectious human disease Covid-19, and has not removed the consequences of such actions.
• The applicant keeps their accounting books in a proper manner and does not violate the obligation of archiving the financial statements.

3. Registration of temporary protection, starting date and termination date

The court will examine every application from the formal point of view. If an application for temporary protection is complete, the court will immediately provide the temporary protection by producing a temporary protection certificate (which will be regarded as delivered upon filing it) and will also immediately execute the measures aimed at publishing the information on the provided temporary protection in the Commercial Bulletin.

Temporary protection becomes effective on the day following the day of publishing it in the Commercial Bulletin.

Temporary protection terminates on 1 October 2020 (the effective period of the temporary protection may be extended by the authorities, but not for longer than 31 December 2020). It terminates also upon the enterpriser’s request to terminate the temporary protection or upon the court’s resolution on the cancellation of the temporary protection (in the event of non-existence of the reasons for the provision or duration thereof).

4. What are the effects of temporary protection?

Temporary protection provides protection against bankruptcy proceedings initiated by creditors. The proceedings initiated by creditors after 12 March will be suspended (this also applies to the initiation by creditors during the existence of the temporary protection). The temporary protection ensures that entrepreneurs are not exposed to the threat of proceedings initiated by creditors.

Protection include also deferral of the obligation of entrepreneurs to initiate their own bankruptcy proceeding. It also allow discontinuation of bankruptcy proceedings after 12 March 2020 (in the case of liabilities arising from business operations) and impossibility to initiate the enforcement of the right of lien related to the company, an item, a right or any other proprietary value belonging to the company. Another measure is prohibition to terminate contracts by contracting partners due to a delay that occurred between 12 March and 12 May 2020 in connection with the pandemic and which does not impose a threat to the contracting partner. Another option is support of the financing using the new capital. Entrepreneurs has the obligation to make efforts to satisfy creditors to the highest possible extent.

CONCLUSION:

We understand that we have provided you with a wealth of information in this article. Therefore, do not hesitate to contact us if you have any questions or have already decided to submit this application. The professional team of the law firm VGD Legal s.r.o. is available to you at any time and will be happy to advise you in the area. We are constantly monitoring the situation and in case of new facts we will inform you about them in time. If you are interested in receiving the latest information via e-mail, subscribe to our website. You can find other useful information on our Facebook or Linked-In.