Legal guide for company directors and CEOs in Slovakia

Because environmental, social and governance (ESG) is such an increasing focal point of good corporate governance, we address ESG duties and responsibilities first. For more general duties and responsibilities of directors and CEOs, please scroll down the page or use the navigator to jump to the relevant section. 

Yes, directors of companies with an obligation to prepare annual reports must also include in each report information on the impact of the company’s activities on the environment and employment, with a reference to the respective information given in the financial statements. 

In addition to this information, entities meeting certain criteria stipulated by the act no. 431/2002 Coll., on accounting, as amended, must provide in their annual reports also information on sustainability matters such as environmental issues, social issues, issues regarding human rights, governance issues etc. including information necessary to understand impact of the company on these sustainability matters as well as how these sustainability matters impact development, performance and position of the company. The aforementioned criteria according to the Slovak act on accounting are aimed at the company’s thresholds which are stipulated for average number of employees, turnover and aggregate assets value and the fact whether a company issued securities which are traded on a regulated market in EU member state. The act on accounting includes detailed list of information which must be reported by those companies. The annual report which includes mandatory information on sustainability matters must include also a report of an auditor who must issue its opinion on compliance of reporting on sustainability matters with applicable law. The annual report as well as sustainability report and related opinion of an auditor must be inserted and published in a relevant register of financial statements.

In addition, companies that issue securities accepted for trading on a regulated market of any EU member state must under certain conditions describe the diversity policy applied in its bodies (especially concerning the age, sex, education and professional experience of the members of those organisations), the targets of the policy, the method of its application and its results.

Certain companies, especially those active in the financial sector, might be subject to additional specific ESG-related requirements.

Although the majority of companies do not have to prepare and publish ESG-related reports, some wish to provide such information voluntarily to promote their strategies, policies and long-term vision, and by doing so, to address potential new investors and customers.

Directors are generally obliged to ensure the company’s compliance with all statutory obligations. This includes compliance with workplace health and safety regulations, anti-discrimination rules, and prevention of criminal acts such as bribery and corruption being committed by a company or for its benefit. In particular, directors must observe various statutory obligations which might be fully or partially related to ESG considerations such as:

• Follow the statutory requirements regarding the employer’s social policy (employment conditions for employees, catering for employees, recreation and education of employees, specific obligations towards employees who take care of children, pregnant employees, minor employees etc.)
• Create a social fund and use it to fund employees’ specific activities (recreation, catering, travelling to work etc.)
• Observe equal treatment rules and apply adequate instruments to prevent discrimination in the workplace
• Regularly inspect the standard of occupational health and safety, in particular the state of manufacturing and working methods and equipment in workplaces and the level of risk factors of working conditions, and maintain methods of determining and assessing risk factors under the special regulation
• Observe the environmental, financial, accounting and other relevant obligations stipulated in the respective laws.
• The scope of ESG-related obligations depends on various criteria, and directors should assess them by considering the specifics of the business and structure of the relevant entity. Directors can incur various potential liabilities because of a breach of their duties. These include:
• Liability for compensation for a loss caused to the company (and subsequently to its creditors)
• Criminal liability for certain criminal offences that can be attributed to directors
• Personal liability to pay a fine in the event of failing to observe employment-related obligations.

ESG related legislative changes in Slovakia are heavily driven by various legislative initiatives in the European Union. Directors of Slovak companies must comply with duties imposed by regulations adopted at EU level which have direct effect in the Slovak Republic such as for example the Taxonomy Regulation. The Taxonomy Regulation defines requirements for sustainable investments and sets out criteria for determining whether an economic activity is to be classified as environmentally sustainable in order to be able to determine the degree of environmental sustainability of an investment.

The other set of regulatory package consists of EU directives which need to be transposed into Slovak national laws to impose duties on directors of Slovak companies. Two adopted EU directives are important in this respect: the Corporate Sustainability Reporting Directive (CSRD) which requires certain companies to report on sustainability, and the Corporate Sustainability Due Diligence Directive (CSDDD) which requires companies to monitor actual or potential adverse impacts on human rights and the environment within their value chains.

The Corporate Sustainability Reporting Directive (CSRD) has been already transposed into Slovak law by way of an amendment to the Slovak act on accounting which became effective on 1 June 2024. It should apply initially only to large enterprises based on defined criteria (such as average number of employees, turnover and assets value) and then gradually to smaller enterprises during a transitional period. Full application is stipulated for 2028. For further details see the answer to question 1 regarding reporting obligation stipulated by Slovak Act on Accounting.

See the answer to questions 1 and 3 regarding reporting information in annual reports.

The board of directors is a collective body in the case of joint stock companies. Unless the Commercial Code or the company’s articles of association provide otherwise, the board of directors may only take a decision if more than half of the board members are present at the meeting; the decision is approved if a majority of the members present vote for it. 

Slovak law does not recognise the concept of non-executive director. 

There are certain restrictions on who can become a director. Among other things, it is important to note that: 

• only an individual person with full legal capacity can become a director;
• directors are required to have no criminal record for a criminal offence under commercial or bankruptcy law, a criminal offence against property, and other intentionally committed criminal offences the facts of which relate to the entrepreneurial activity;
• a supervisory board member cannot at the same time be a director of the same company;
• due to conflict of interest provisions (see below), a director of a company cannot at the same time be a director of another company with an identical or similar business activity, unless the companies are in the same group.

Directors of a limited liability company and members of the board of directors of a joint stock company from EU or OECD member states are not required to be resident in Slovakia. There is no nationality requirement. Directors can also be shareholders of the same company. 

Limited liability companies

A director is appointed at the general meeting by the shareholders (on a resolution of the general meeting). On incorporation, the first director(s) must be designated in the company’s articles of association. The law prescribes no minimum or maximum number of directors. Directors are eligible for reappointment and may be elected either for definite or indefinite periods of time. 

Joint stock companies

Members of the board of directors are appointed at the general meeting by the shareholders. The articles of association can determine that members of the board of directors will be appointed and dismissed by the supervisory board in the manner prescribed by the articles. The term of office of the members of the board of directors is specified in the articles and cannot exceed five years. The number of directors is not prescribed by law and must likewise be determined by the articles. Directors are eligible for reappointment. 

A director can be dismissed by a resolution of the general shareholders’ meeting or, in the case of a joint stock company, by a decision of the supervisory board if the articles of association so provide. 

A director may resign at any time. The company must, however, be notified of his/her resignation. Subject to the memorandum of association or the articles of association, such resignation is effective as of the date of the next meeting of the company body authorised to elect a new director (the general meeting or the supervisory board). If the director resigns during a meeting of that body, the resignation is immediately effective. If the authorised body does not convene a meeting within three months after notification of the resignation, the resignation is effective after the expiry of that period. The removed or resigning director is required to inform the company of the steps which should be taken to avoid any potential loss to the company. 

Any change in the director’s office must be registered with the Commercial Register. Such registration only has a declaratory effect towards third parties. 

Directors are “statutory bodies” of the company and they manage all the company’s business, unless such business falls within the powers of another company body. The directors have full authority to represent the company and there is generally no need for the directors to have special authorisation for certain acts to be valid. However, for certain material legal actions specified in the Commercial Code, approval of the general meeting or supervisory board is required (e.g. sale of the business as a going concern). 

Each director is authorised to act individually on behalf of the company, unless the memorandum of association (in the case of a limited liability company) or articles of association (in the case of a joint stock company) require that two or more directors act jointly on behalf of the company. The way in which the company is represented must be registered with the Commercial Register. Where a director does not act and sign on behalf of the company in accordance with the prescribed method of representation, his/her acts are invalid and will not bind the company. The authority of the directors to act on behalf of the company can be restricted by the memorandum of association or by a decision of the general meeting, and in the case of a joint stock company by the articles of association or by a decision of the general meeting or supervisory board. However, such restriction, even if it is registered with the Commercial Register, will have no effect towards third parties and the company will be bound by the acts of the director even if these are beyond his/her authority. 

Regarding third parties, a company is bound by the conduct of its directors even if the director(s) act outside the company’s scope of business activity. Only if a director acts outside the powers entrusted by law will the company not be bound by his/her acts. 

The company may sue a director who acts outside his/her powers for compensation by way of damages. 

The memorandum of association in the case of a limited liability company, or articles of association in the case of a joint stock company, may provide for virtually any number of directors and any combination of signing authorities. 

The board of directors of a joint stock company is a collective statutory body. Unless the Commercial Code or the company’s articles of association provide otherwise, the board of directors may only make a decision if more than half of the board members are present at the meeting; the decision is approved if the majority of the members present vote for it. The business of a board meeting is recorded in the minutes of the meeting, which should be signed by the chairman of the board and the minute taker. 

Business management decisions by directors of a limited liability company require the consent of a majority of directors, unless the company’s articles of association require a higher number of votes. In other, more common matters, like signing employment contracts or granting of powers of attorney for representation in court proceedings, directors may decide and act individually, unless joint action is required by the memorandum of  association. 

The company’s memorandum of association or articles of association may also permit voting in writing or by other means of communication. 

The relationship between the company and its directors is a commercial relationship and it may be regulated in a written service contract between the director and the company (the director of a company is not an employee by virtue of acting as a director). If they do not conclude such a contract, the relationship between company and director is automatically subject to the provisions of the Commercial Code governing mandate contracts. The contract between the company and the director must be in writing and must be approved by the general meeting, providing that such contract has actually been concluded. The articles of association of a joint stock company may determine that the service contract of a member of the board of directors needs to be approved by the company’s supervisory board.

Agreements between the company and the director that seek to limit the director’s liability are prohibited. This also applies to such provisions in the memorandum of association or articles of association. A director’s remuneration is decided by the general meeting. Joint stock companies may delegate this power to the supervisory board if the articles of association provide for this. If remuneration is not agreed, the director is entitled to compensation commonly associated with a director’s duties. A mandate contract or service contract can also provide that the performance of the director’s office will not be remunerated. 

A joint stock company may only conclude a credit or loan contract with a member of its board of directors, transfer to or grant the director use of the company’s property, or secure the director’s obligations, with the prior approval of the supervisory body and on terms which are customary in business transactions. The same applies to close relatives of directors and to persons who act on the directors’ account. 

Directors are subject to a ban on competing in business. Unless the memorandum of association or the articles of association impose further restrictions, a director must not: 

• enter into transactions in his/her own name or on his/her own account which are related to the company’s business activities;
• act as an intermediary in the company’s business activities towards third parties;
• participate in the business activity of another company as a partner with unlimited liability; or
• act as, or be a member of, a statutory body of another legal entity engaged in an identical or similar line of business as the company, unless the companies are members of the same group. 

Through its shareholders, a company may require that a director who violates this prohibition must surrender to the company any benefit gained from such transaction or that he/she transfers the corresponding rights to the company. These rights may be claimed against the director within three months of the company becoming aware of the prohibited act, but in any case no later than 12 months afterwards. The company also has the right to require the director to compensate it for any damage caused by any breach of the ban on competing in business. 

Directors’ duties are set out in the Commercial Code, which is supplemented by a number of other binding provisions.

They include:

• making arrangements to properly maintain prescribed records and accounts;
• monitoring on an ongoing basis the value of the company’s equity and its debts to evaluate whether the company is in crisis (a director who finds out or, taking all circumstances into account, should have found out that the 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);
• maintaining a list of shareholders (if required by law);
• informing members, shareholders and the company’s bodies about the company’s affairs;
• submitting annual financial statements, proposals for profit or loss distribution and annual reports to the general meeting for approval;
• applying for proper registration of relevant facts with the Commercial Register; directors submit proposals for registration of (and any changes to) the relevant data with the Commercial Register and are responsible for ensuring that the registered information is correct;
• convening a general meeting on the basis stipulated in the Commercial Code;
• submitting to the general meeting a report on the company’s business affairs and assets at least once a year;
• notifying and explaining obligations to the supervisory board (or in the case of a limited liability company without a supervisory body, to the general meeting) regarding the main business plans and the development of the company’s business and assets;
• immediately informing the supervisory board of all facts that may impact on important company business or assets; and
• convening an extraordinary general meeting and submitting proposals for remedies if company losses exceed one third of its registered capital. 

Directors must exercise their range of powers with due managerial care and in accordance with the interests of the company and all its members or shareholders. Directors are obliged to obtain and take into account all available information regarding the decision and not to disclose confidential information and facts to third parties if such disclosure might be detrimental to the company, its partners or shareholders. A director may also not put his/her own interests, the interests of third parties or the interests of his/her partners before the interests of the company. 

Directors must ensure that the company complies with all statutory requirements and that the company fulfils its duties and obligations properly and on time (e.g. administrative law requirements, business licences, environmental requirements, proper payments, social security insurance, payment of taxes, tax declarations, labour law, and commercial law requirements). The law sets out many sanctions, particularly financial sanctions, for breaches of these requirements.

If the company becomes over-indebted under the Bankruptcy Act, a director must without undue delay submit a bankruptcy petition to the court. If he/she fails to file for bankruptcy, the director will be obliged to pay a penalty of EUR 12,500, unless: (i) he/she can prove that he/she was authorised to put measures in place to overcome the insolvency and after acting with due care filed the petition immediately after learning that the implemented measures would help to overcome the insolvency; or (ii) within 30 days from learning about the over-indebtedness, he/she instructed a restructuring trustee to prepare a restructuring report and file an application for restructuring with the relevant court that granted this application. 

In general, directors owe duties to the company. Directors who breach their duties are jointly and severally liable to compensate the company for the damage caused. 

Such a breach is an objective liability, i.e. no negligent or intentional conduct is required. However, directors will not be liable if they can prove that they acted with due managerial care, in good faith, and that the act was in the company’s interests. They also cannot be held responsible for executing resolutions of the general meeting, unless the resolution is in conflict with the law, memorandum of association or articles of association. Directors are not relieved from liability even if the supervisory board approves their acts. 

A director can also be criminally liable for certain criminal offences defined in the Criminal Code, especially for economic crimes (e.g. credit fraud, abuse of information in commercial relations) committed during the performance of his/her duties.

12. How do the director’s duties change if the company is in financial difficulties? 

If the directors determine or, considering all facts, are able to determine that the company is in crisis, they are obliged, in compliance with the requirements of necessary professional or due care, to do everything that a reasonable person would do in a  similar situation to overcome the crisis. A company is in a crisis if it is: (i) bankrupt; or (ii) threatened by bankruptcy. A company is threatened by bankruptcy if the ratio between its net equity and its debts is lower than 8:100. 

Regarding a crisis, the Commercial Code also defines the payments substituting for its own resources, which are: (i) credit or a similar performance which economically corresponds to it, which could also be performed by mutual set-off, execution or realisation of the pledge with the same effect; (ii) any performance provided to a company before the crisis, whereas the maturity of this performance was postponed or extended during the  crisis, such as extending the maturity of an invoice. The payments substituting for its own resources can be provided by, among others, the controlling person, e.g. a holding company. Under the relevant provisions of the Commercial Code, a repayment of contributions substituted for its own resources is not permitted if a company is in crisis or, as a consequence of the above, could be driven into a crisis. 

If the company is over-indebted, the managing director is obliged to file for bankruptcy within 30 days from learning of this fact or from the moment he/she could have learned of this fact with due care. 

As already specified in the sections above, directors can incur various potential liabilities as a consequence of a breach of their duties. These include the following:

• liability for compensation for a loss caused to the company (and subsequently its creditors);
• criminal liability for certain criminal offences that can be attributed to the directors; personal
• liability for paying the penalty in the event of failing to file for bankruptcy;
• liability for returning illegally repaid payments in the event of a breach of the ban on the repayment of  contributions substituted for its own resources if the company is or could be driven into a crisis (in such a case , the directors will become guarantors of the wrongfully disbursed payments by operation of law).

Any arrangement between the company and a director which seeks to limit or relieve the director of his/her liability for damage caused to the company is null and void. The same applies to such provisions in the company’s memorandum or articles of association. 

However, there is no absolute ban on a holding company indemnifying the director of a subsidiary for such liabilities, unless this would be a breach of the parent company’s directors’ duty of care. A company may also take out directors’ and officers’ liability insurance. 

The company can surrender its claims for damages against the director or enter into a settlement with the director, but no earlier than three years after these claims have arisen. Such a surrender or settlement will only be effective if the general meeting approves it and shareholders with a 10% share (5% in the case of a joint stock company) of the registered capital do not object to it.

Claims for damages that a company has against its executive officers may be exercised by a creditor of the company acting in the creditor’s name and on their own account, if they are unable to satisfy their receivable from the company’s property.