Reducing the share capital of an s.r.o.: when it is done, who decides and how creditors are protected

With good preparation, an increase of share capital can be completed in a few weeks. A reduction is different: the law treats it as an interference with the guarantee on which creditors rely, and therefore makes it conditional on publication and on periods that no shareholder decision can shorten. Anyone contemplating a reduction, for instance on a shareholder’s departure or on returning part of the capital, should know the procedure before convening the general meeting.

When a reduction arises

The typical reason is a shareholder whose participation has ended and whose ownership interest no one has taken over. Where a shareholder is expelled for failure to pay up a contribution, the law gives the company a fixed period in which to decide:

Where the ownership interest is not transferred under paragraph 5, the general meeting shall decide, within six months of the date on which the shareholder was expelled, to reduce the share capital by the expelled shareholder’s contribution; otherwise the court may, even of its own motion, dissolve the company and order its liquidation.

— Section 113(6) of the Commercial Code (unofficial English translation)

The same applies to expulsion by the court (Section 149) and to termination of a shareholder’s participation by the court (Section 148(1)). How expulsion proceeds is examined in the question on expelling a shareholder. The second reason is a decision by the shareholders that the company does not need so much tied-up capital. Even then the whole creditor-protection procedure applies without exception.

The law also sets a floor. After a reduction, share capital may not fall below EUR 5,000 and no shareholder’s contribution below EUR 750 (Section 146 in conjunction with Sections 108 and 109(1)). Where a reduction would go below that floor, another solution must be found, such as transferring the interest to the remaining shareholders.

The decision and its form

A reduction is decided by the general meeting (Section 125(1)(e)) and requires the consent of at least a two-thirds majority of all shareholders’ votes unless the memorandum of association requires more (Section 127(4)). The form must be watched at the same time. For a decision on a reduction, the authenticity of the signature of the chair of the general meeting on the minutes must be officially certified and, from 17 August 2026, a stricter form has been added: where the reduction changes the ratio of ownership interests, the proceedings of the meeting must be certified by a notarial deed (Section 127a(3) and (4)). A sole shareholder decides in writing with an officially certified signature (Section 132(1)).

The amount of the share capital and of the contributions forms part of the memorandum of association, so a decision on a reduction amends it and the managing directors must then draw up its full wording (Section 141(3)). Slovak law does not prescribe the content of the decision in detail; the decision should nevertheless state by how much the capital is being reduced, how the individual shareholders’ contributions change, and what happens to the amount of the reduction, whether it is paid out to the shareholders or used otherwise. We organise the proceedings of the meeting, including a notary for decisions requiring one, as part of our general meeting service.

Creditor protection: why a reduction takes months

At the heart of the procedure lie publication and a call to creditors:

The managing directors shall publish the reduction of the share capital and its amount within 15 days after the decision, twice in succession at an interval of 30 days. The notice shall call on the company’s creditors to lodge their claims within a period of 90 days after the last notice.

— Section 147(1) of the Commercial Code (unofficial English translation)

Creditors who lodge their claims in time must be given adequate security by the company or have their claims satisfied (Section 147(2)). The reduction can be registered only once both steps have been proved (Section 147(3)). At least four months therefore pass from the first publication before the application can be filed, and to that must be added the preparation of the decision and dealing with the creditors who come forward. Slovak law, moreover, knows no exception for cases where the recoverability of claims is not impaired. Where the company has nothing with which to secure its creditors, the reduction stalls, and paying shareholders out before registration would be a serious mistake. When a change of capital operates and how to time the application is examined in the article on when a Commercial Register change takes effect.

The Czech s.r.o.: similar periods, different details

The Czech Business Corporations Act takes the same route but regulates some matters more precisely. The resolution of the general meeting must state the amount of the reduction, the change in the amount of the contributions, how the amount of the reduction is to be dealt with, and the period for surrendering the ownership interest certificate (Section 233 of Act No. 90/2012 Coll.). Contributions are reduced proportionately, and disproportionately only with the consent of all shareholders (Section 234(1)). The managing directors publish the resolution within 15 days, twice at an interval of 30 days, and in addition call on known creditors in writing to lodge their claims within 90 days after the last publication (Section 236).

The difference lies in creditor protection. In Czechia the obligation to secure or satisfy lodged claims does not apply where the reduction does not impair the recoverability of the claims, and a court may decide on adequate security (Section 237 and Section 238). A group with both a Slovak and a Czech subsidiary therefore cannot transplant the procedure from one country to the other without adjustments.

What to consider before deciding

Before convening the general meeting, check whether the reduction would breach the statutory minimum, whether the company has the means to secure its creditors, and whether a transfer of an ownership interest would not be simpler. Where the capital is being reduced by the contribution of an expelled shareholder or a shareholder whose participation the court has terminated, that person is entitled to a settlement share (Section 150(1)) and its calculation must be aligned with the reduction; the procedure is described in the question on calculating the settlement share. Paying the amount of the reduction out to shareholders also has accounting and tax consequences, which should be discussed with an accountant before the decision. We prepare the decision, the publications, the communication with creditors and the application for registration as part of our changes of share capital service, for Slovak and Czech companies alike; the opposite procedure is described in the question on increasing the share capital of an s.r.o..