Startup Ecosystem in Slovakia
Have you ever thought about expanding your startup to Slovakia? The position between several European countries, growing infrastructure and euro currency lure many foreign investors and entrepreneurs and this article will explain you some basic obstacles you will have to overcome in order to successfully open your business in Slovakia.
Startup scene in Slovakia has grown tremendously in the past couple of years, also thanks to governmental support including for example startup visa, grants and favourable legislative changes. There is a tendency that in the upcoming years will bring up to light even more successful startups.
The process of creation
The first question you will have to ask yourself is whether you want to be a member of a company (shareholder) or you would like to be a part of executive board of an upcoming company. In general, you can become a member of a company (shareholder) even when you do not have residence permit but if you want to be executive, you have to be citizen of European Union (EU) or Organisation for Economic Co-operation and Development (OECD). If you are not a citizen of one of those, you have to have a residence permit in order to set up an enterprise. The permit shall be given to a person in the case this person proves that it represents a position of an executive director. For a natural person it is possible to do both positions: shareholder and executive director.
There will also be a question whether you would like to set up a brand, new company or you want to stay with your original enterprise and make in Slovakia just “organisational unit of foreign person” which is terminus technicus in Slovak Commercial Code. Which option suits you the most is necessary to discuss with a legal expert who will make a custom solution for each case. After you decide, it is necessary to register your enterprise into the Slovak Companies Register. This step is also well recommended to discuss with an expert who is experienced in setting up of companies and communication with relevant authorities. Finally, the legal form of the company which will act in Slovak market is to be decided.
Most of the clients choose between limited liability company (in Slovak “spoločnosť s ručením obmedzeným” or s.r.o.) and joint stock company (in Slovak “akciová spoločnosť” or a.s.) with over 90 % consisting of limited liability companies. It is mostly because of limited liability of members (shareholders) who are according to article 106 of Slovak Commercial Code liable only up to the outstanding fraction of its pledged contribution registered in the Slovak Companies Register. This is a huge advantage in comparison with other company types, for instance in General Commercial Partnership (Art. 76 of Slovak Commercial Code and following) where members are liable up to their all assets. Usually, it takes around 30 days to set up a company. For limited liability company is also required to deposit of a minimum share capital of 5,000 Euro in a bank account and it has to be done by one or more shareholders (the maximum is 50).
Similarly, a foreign person may establish a Slovak legal entity (eg s.r.o. or a.s.) or become its sole shareholder. In this respect, however, a certain restriction applies to a limited liability company. As for a natural person, he can be the only partner in a maximum of three limited liability companies and in the case of a legal person which has one shareholder, it cannot be the sole founder or shareholder of another limited liability company. Foreign persons in Slovakia are in this sense entitled with the same rights and obligations as Slovak persons.
Also, you have to take into consideration that limited liability company can be set up even by one person (either by a natural or legal person). There are few documents which are necessary to set up a company, counting Memorandum of association, Declaration on oath, Declaration of administrator of the deposit, The Lease agreement/ consent of the property owner. The tax office must also issue approval concerning that they do not owe any money to the Tax office nor to the Custom office. Finally, all founders must provide their signatures specimen. All the necessary steps are recommended to be provided by expert in order to prevent any errors. Lastly, the company is then founded on the day when it enters the Commercial Register.
In the case that you would choose a joint stock company as a legal form, two founders have to be present if it is a case of a natural person or in the case of fonders who are legal persons, the one is legal person is sufficient. In comparison with limited liability company there are also other conditions including for instance higher starting capital or necessity to create a Board of Supervisors. Therefore most of the starting entrepreneurs tend to choose limited liability company.
One of the options for the startup companies could be the possibility of choosing the simple stock company (in Slovak “Jednoduchá spoločnosť na akcie”). Basically, it represents the hybrid between the classical limited liability company and joint stock company. It was implemented recently in 2017 and the reasons were among other things the necessity of law maker to react to actual situation on the market. By implementing this company type, entrepreneurs obtained a possibility for instance to set up a company with founding capital starting from just one euro or not to establish the Board of Supervisors.
Apart from the legal conditions of founding a startup, one could be interested about the ecosystem of startups. There are several incubators which took place in Bratislava, in order to help starting entrepreneurs with their business. Ones of the most relevant are FutureNow (https://ftrnw.org/about-us/[A1] ), Rubix Lab (http://rubixlab.com/), The Spot (https://thespot.sk/), Impact Hub (http://impacthub.sk/), HubHub (https://www.hubhub.com/en/) and Connect Cowworking (http://connect-network.com/en/home/). Hand in hand goes regular meetings of startup community, including Startup Camp (https://www.ecommercebridge.sk/historia-startupcamp-bratislava/) or TEDx Bratislava (https://www.tedxbratislava.sk/en/home/).
Guidance can be provided too by the renowned institutions such as Slovenska sporitelna a.s., the part of an Erste Group Bank AG (https://www.slsp.sk/sk/biznis/zaciname-podnikat?gclid=CjwKCAjw9vn4BRBaEiwAh0muDCsfT9eFcEQUdUT3jBp0IOp4mGB4PVl3agLInihODYeqb0ZdsWgGrRoCECcQAvD_BwE).
In conclusion, we could state that the situation with the startup community in the last years has improved exponentially and there is an assumption that it will only prosper.
Questions regarding Hungarian or Slovakian startup law or startup companies? Contact us!
In the field of Hungarian startup law we can recommend the following articles:
dr. Dobos István attorney at law / dr. Kőhidi Ákos attorney at law / Ján Mrázik – Faculty of Law of Comenius University
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(Disclaimer: Concerning Slovakian law, our partner law firm in Slovakia will assist our clients.)