From an organisational unit to a Slovak s. r. o.: sale of the enterprise, employees and deletion in the right order

A Czech company opened an organisational unit in Slovakia to test the market. Several years on, the unit has its own customers, a warehouse and dozens of employees, and the bank or an investor is asking why the Slovak business is carried on directly by the parent company. The answer is usually a separate Slovak s. r. o. The Act, however, knows of no act by which a unit could be “converted” into a company. The transformation is a chain of three steps: form the company, transfer the unit’s enterprise to it and delete the unit, each step with time limits of its own.

Why a unit is not converted but transferred

An organisational unit is an organisational division of the enterprise of a foreign company (Section 7(1) of the Commercial Code), not a legal entity. It has no assets, contracts or employees of its own; all of these belong to the parent company. It therefore cannot change its legal form or merge with a company. What has to be moved is the unit’s enterprise, and for that the Commercial Code offers an agreement on the sale of an enterprise or of part of it:

The provisions of Sections 477 to 486 also apply to agreements by which a part of an enterprise forming a separate organisational unit is sold.

— Section 487 of Act No. 513/1991 Coll. (unofficial English translation)

For there to be a sale of part of an enterprise, the unit must form a coherent whole distinguishable from the rest of the company. The commentary literature regards separate accounting for the unit, from which it is apparent what belongs to it, as a particularly important indicator, and expressly accepts that an agreement on the sale of part of an enterprise may also be used to transfer the organisational unit of a foreign person. Keeping the unit’s accounts separate from the time it is established will therefore also make it easier to define the subject matter of the sale.

The agreement on the sale of part of an enterprise

An agreement on the sale of an enterprise requires written form and certified signatures of both parties (Section 476(2)). Section 487 does not expressly refer to that form, but the commentary literature requires written form for the sale of part of an enterprise as well, and we recommend observing the certified signatures as a precaution. All rights and obligations to which the sale relates pass to the buyer (Section 477(1)). As regards obligations, the Act protects creditors by a means other than consent:

The creditor’s consent is not required for the transfer of an obligation; the seller is, however, liable as guarantor for the performance of the transferred obligations by the buyer.

— Section 477(3) of Act No. 513/1991 Coll. (unofficial English translation)

The new company must notify the creditors of the assumption of the obligations, and the parent company must notify the debtors of the transfer of the receivables, without undue delay (Section 477(4)). A creditor whose prospects of recovering a receivable are unquestionably worsened by the sale may seek a court declaration that the transfer of the obligation is ineffective as against it; it must do so within 60 days of the day on which it learned of the sale, and at the latest within six months of entry of the sale in the Commercial Register (Section 478(1)). The sale of an enterprise or of part of it is entered in the register on the application of the seller (Section 488(1)) and the agreement is deposited in the collection of documents (Section 34(q) of Act No. 29/2026 Coll.).

The price deserves particular attention. Where an s.r.o. buys an enterprise from its own founder, an expert report is required if the consideration is at least 10% of the registered capital, the agreement takes effect only once it has been deposited in the collection, and during the company’s first two years of existence it must be approved in advance by the general meeting (Sections 59a(1) and (2)). An alternative is to contribute the enterprise to the company as a non-monetary contribution; both routes are compared in our answer on the unit’s enterprise: purchase or contribution to an s. r. o..

What does not transfer by itself

The agreement transfers assets, contracts and obligations, but not public law authorisations. A trade authorisation cannot be transferred to another person (Section 10(8) of Act No. 455/1991 Coll.), so the new company notifies its trades itself, and for craft and regulated trades appoints a responsible representative. Licences and permits tied to the person of the entrepreneur must likewise be checked, as must key contracts, which may require the other party’s consent to a change of contracting party.

Employees

On the transfer of an economic unit, rights and obligations arising from employment relationships in respect of the transferred employees pass to the new company by operation of law (Section 28(1) of the Labour Code). Both the parent company and the new company must, however, inform them in writing at the latest one month before the transfer (Sections 29(1) and (3)). The new s. r. o. must therefore exist sufficiently far in advance of the transfer date. The details are examined in our answer on the transfer of a unit’s employees to an s. r. o..

The transfer date and deletion of the unit

The activities are to pass on a single date: from that date the new company invoices, the people are its employees and the contracts are in its name. The unit is deleted only afterwards, once the transfer is complete. The application for deletion is filed by the foreign company (Section 46(13) of Act No. 29/2026 Coll.), registration takes place within two business days, and the application may also specify a future date on which the deletion is to be entered (Sections 58(1) and (3)). On deletion, the parent company’s authorisation to carry on business in Slovakia through the unit ceases (Section 21(5)(b) of the Commercial Code). What to bear in mind in the deletion itself is described in our answer on winding up an organisational unit and its deletion.

Typical mistakes

The main risk lies in the wrong order of steps: the unit is deleted before the new company has taken over the contracts, or the employees learn of the change of employer later than the Act requires. Another mistake is buying the enterprise from the parent company without an expert report and without the approval required by Section 59a, so that the agreement does not take effect. A third is a forgotten notification to debtors and creditors, after which customers continue to pay into the parent company’s account.

We manage the transformation as a single project with a timeline running from formation of the company to deletion of the unit, under our transformation of an organisational unit into a company service. If you are only now establishing the unit, we will set it up so that it can later be transferred without complications, under our organisational unit in Slovakia service.