Family business succession: transferring to children during your lifetime

The founding generation of Slovak businesses established in the 1990s is handing over management. Many families address succession only when life forces the issue through inheritance. Legally, this is the worst available route: proceedings take months, the company is left waiting and the resulting interests may not reflect who actually works in it. Lifetime transfer is a controlled process with a chosen successor, clear price and safeguards for both generations.

Why inheritance is the worst route

The Commercial Code initially appears accommodating.

Unofficial English translation:

An ownership interest is inherited. The articles of association may exclude inheritance unless the company has a sole shareholder. — § 116(2) of Act No. 513/1991 Zb.

The difficulty is what follows. If several heirs inherit one interest, they own it jointly and can exercise rights only through a common representative (§ 114(3)), whom they must first agree on. A widow and children with different views hold one voice; until agreement, the company lacks a functioning general meeting. An heir unwilling to be a shareholder may also seek court termination of participation. See inheritance of an ownership interest and death of a sole shareholder and director.

Staged lifetime transfers

The basic tool is an ordinary transfer spread over time. A parent first transfers a minority interest to test the successor’s management while retaining the majority. Further portions follow a timetable or agreed milestones. From 17 August 2026, every transfer agreement requires a notarial deed or lawyer-authorised form under § 115(4), as amended by Act No. 29/2026 Z. z. The articles may also require general meeting consent (§ 115(1) and (2)). Family transfers are often free or at a symbolic price. See gratuitous transfers to family for tax aspects and transfers to close persons for special rules.

An agreement between generations

While both generations participate, a written shareholder agreement under § 66c should govern their relationship. It typically contains three safeguards. The parent retains a veto over major decisions, company sale, large borrowing or business-object changes, even with a minority. Options address failed succession: a parent’s buyback if the successor leaves or breaches the agreement, mirrored by a successor’s right to sell if the parent halts the handover. A deadlock mechanism addresses equal holdings and disagreement. Each option needs a price or valuation method, typically an expert report, and a deadline for signing after notice. One limitation must be acknowledged.

Unofficial English translation:

A corporate body’s decision conflicting with a shareholder agreement does not become invalid for that reason. — § 66c(2) of Act No. 513/1991 Zb.

The agreement therefore needs its own sanctions, contractual penalties and breach-triggered options, while key rules should also be reflected in the articles. See drag-along and tag-along enforceability for courts’ approach to transfer arrangements.

A holding: parents above, children in operations

For several children or businesses, a holding structure works well: parents own the holding, which owns operating companies. Succession then transfers interests in the holding instead of each company separately. Which child manages which operation becomes a question of roles, not ownership. Family assets remain together, operating profits accumulate in the holding and parents may retain overall control after handing over daily management. The former single-member chaining ban is no longer an obstacle: Act No. 29/2026 Z. z. deleted § 105a, allowing a single-member s.r.o. to form another alone from 17 August 2026.

A successor in office, not just on paper

Ownership transfer should be accompanied by management transfer. A successor becoming director needs a written service agreement approved by the general meeting (§ 66(6)). It defines powers, remuneration, non-compete obligations and which decisions can be made alone or require parental or family-council approval.

When to start

The best time is before succession becomes necessary. Family holdings and succession covers the overall handover, holding structures the group, shareholder agreements intergenerational rules and ownership interest transfers individual steps including lawyer authorisation.