A bond with a fixed or determinable floating return used to finance the company's own operations or project is not collective investment: the investor is entitled to principal and predetermined interest. However, if an additional return is payable upon certain business results, or the return can be reduced or withheld depending on those results, the criterion linking returns to asset value is met. A bonus return therefore changes the structure's legal classification and is not merely a marketing detail.
Fixed returns and own financing
Collective investment is a business activity involving raising money from investors to invest under a defined investment policy for the benefit of those whose money has been raised. It may be conducted under authorisation or under special conditions laid down by law (Section 2 of Act No. 203/2011 Coll. on Collective Investment). One defining feature is that investors’ return of capital or profit depends, even partly, on the value or returns of assets acquired with the raised capital.
In its guidance on unauthorised collective investment activity, the National Bank of Slovakia gives a direct example: where a company issues a corporate bond with a fixed or determinable variable return, such as one linked to three-month Euribor, and uses the capital to finance its own operations or project, this is not collective investment. Investors’ contractual return is predetermined or determinable, and the capital serves the issuer’s own operations. The investor nevertheless still bears the risk that the issuer will fail to repay principal and interest, as well as any risk of fluctuations in the bond’s market price; the absence of collective-investment features does not make the investment safe.
Where the position starts to change
The boundary is crossed when the return becomes conditional. The NBS states that if the contractual documentation allows an investor to receive an additional return conditional on the company achieving certain financial results, or allows the return to be reduced or withheld entirely depending on those results, the criterion linking investors’ return of capital or profit to the value of acquired assets is met, even if only indirectly.
These are precisely the features often added to terms and conditions to help sell an issue: a “share in the project’s success”, a “bonus coupon when planned sales are achieved” or a “return linked to occupancy”. Each moves the structure closer to a regime requiring authorisation or compliance with a special statutory regime. Sub-threshold registration is subject to its own restrictions under Sections 31a and 31d; details are provided in unauthorised collective investment.
Economic substance, rather than documentation, is assessed
When examining this dependency, the formal wording of the documentation is not decisive. The assessment examines the investor’s actual exposure to market risk through an economic analysis of the business model. Rewording a clause is therefore insufficient if the economics remain the same.
Legal form is not decisive either. The NBS states that it makes no difference whether the arrangement involves a capital contribution, preference or ordinary shares, other securities, a silent partnership agreement, another profit-sharing agreement, or a combination of them.
What to do in practice
If you are considering a performance-linked return, assess the entire structure before drafting the terms and conditions: where the money comes from, how it will be used, who decides on its use, and what actually determines the investor’s entitlement. Depending on the outcome, the issue can be structured as a bond with a determinable return, or financing can follow another route.
See also our bond issuance in Slovakia and property development financing services.
This answer provides general information on the law as at 10 September 2026. It does not constitute legal services or replace an assessment of an individual case. The details of your situation may differ. Book a consultation to discuss them.
