Legal Q&A · 04

Company financing — questions and answers.

22 answered questions on a subject we handle every day. Find related services in the catalogue: Company financing.

Answered by , Czech and Slovak attorney, admitted to the Slovak and Czech Bars (SAK 300422 · ČAK 19654).

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Questions about Company financing

  1. Can our s. r. o. buy back its own business interest and hold it for future employees? No. A limited liability company cannot acquire its own business interests unless the law exceptionally provides otherwise (Section 120(1) of the Commercial Code), so an s. r. o. cannot create an equity pool for future employees. Its participation programme must use another structure: options over existing members' interests, phantom equity, or conversion to a simple joint-stock company.
  2. Can we offer employees shares below their issue price? Yes. A general meeting resolution increasing share capital may approve employees acquiring a specified number of shares below their issue price, provided the company covers the difference from its own resources (Section 204(4) of the Commercial Code). Existing shareholders' pre-emption rights are not an obstacle: by law, issuing shares to employees constitutes an important company interest justifying their exclusion.
  3. What is phantom stock, and when is it better for a company than actual equity? Phantom stock is a contractual arrangement giving an employee a cash entitlement linked to the company's value, typically conditional on continued service, performance and events such as a company sale. The employee does not become a shareholder, ownership is not diluted, and administration is the simplest of all ESOP structures. To work, the arrangement must appear in a contract with the individual concerned, rather than only in a shareholders' agreement.
  4. How many shares can a simple joint-stock company allocate to employees, and when must it distribute them? A simple joint-stock company may itself subscribe for shares intended for employees and contractors up to 20% of share capital, within a period approved by the general meeting of no more than 18 months. It must transfer them within five years of subscription (Section 220r of the Commercial Code). Transfer of these shares to anyone other than eligible persons is valid only at nominal value plus share premium and subject to retention of title; otherwise it is invalid.
  5. Can self-employed contractors, such as developers outside employment, also receive ESOP equity? In a simple joint-stock company, yes. Section 220r(1)(b) of the Commercial Code expressly covers not only employees but also individuals operating under a trade licence or other authorisation whose work for the company is protected by intellectual property rights. In a joint-stock company, the statutory shortcuts apply only to employees. In an s. r. o., contractors are accommodated through options over members' interests or phantom equity.
  6. When is a bond offer a public offer? A public offer is any communication in any form or by any means containing at least the type of security, the issuer and the price or return. The issuer may be apparent from the context or a linked website; the price may be indicated indirectly, for example through its calculation method. The National Bank of Slovakia assesses content rather than the heading, so the threshold is lower than most issuers expect.
  7. Does publishing bond terms and conditions on our website constitute a public offer? Generally yes. The Bonds Act permits publication of terms and conditions on the issuer's website, but the National Bank of Slovakia treats this as a public offer because it is ordinarily accessible to a wider audience. A declaration that the offer is private does not help. A public offer may nevertheless qualify for a prospectus exemption. An open website is particularly sensitive where the audience is limited; volume- and value-based exemptions are assessed under their own conditions.
  8. Is it enough to state in the materials that this is a private offer? No. The National Bank of Slovakia assesses a communication in substance, based on its content. A different formal title is not decisive, and a disclaimer or statement that it is a private offer does not prevent classification as a public offer. The NBS expressly adds that private offer is not a legally defined term; issuers use it for offers that do not meet the characteristics of a public offer.
  9. When do we need a prospectus for a bond issue? Slovakia's volume exemption applies to public offers with total consideration in the EU below EUR 5,000,000 per issuer or offeror over the relevant 12-month period. Relevant offers are aggregated under Article 3(2c) of the Prospectus Regulation; offers for which a prospectus has been published and offers exempt under Article 1(4) are excluded. If you rely on the volume exemption under Section 120(2), the prescribed document must be submitted to the NBS and made available to the public. Duties under other exemptions must be assessed separately.
  10. We offer bonds to fewer than 150 investors. When will the exemption fail? What matters is who the offer is addressed to, rather than how many people ultimately buy the bond. The communication must clearly show that it targets no more than 149 persons, for example by defining the recipient category. If basic bond information is published on a publicly accessible website, the National Bank of Slovakia treats it as a public offer requiring a prospectus. Saying the page serves only investors already contacted does not satisfy the exemption.
  11. How should an offer intended only for qualified investors be labelled? The communication must unambiguously state that the public offer is exclusively for qualified investors, using wording that leaves no room for conflicting interpretations and presentation that makes it stand out. The exemption applies only to that offer: for a subsequent sale or admission to a regulated market, the prospectus requirement and any applicable exemption must be assessed afresh.
  12. How long does NBS prospectus approval take? The standard prospectus approval period is 10 working days from submission of the application. For an issuer with no securities admitted to trading on a regulated market that has never offered securities to the public, the first draft has a 20-working-day period. A prospectus supplement is approved within 5 working days. Crucially, deficiencies restart the period when remedied: the quality of the initial submission determines the overall time, rather than the statutory period alone.
  13. Can a network of financial agents sell our bonds? Only an investment firm or bank may place an issuer's bonds; financial agents may not provide this regulated investment service to the issuer. They may participate in other stages of the distribution chain serving clients, but cannot provide placement of the issue. This must be resolved before designing the distribution model because it changes the economics of the entire issue.
  14. Which wording must we avoid in bond marketing? A corporate bond investment or its return must not be described as guaranteed, safe or risk-free, including phrases such as guaranteed return, guaranteed interest rate, invest with a guarantee or guaranteed profit. Equating bonds with bank deposits or government bonds, and using the names of the National Bank of Slovakia or Investment Guarantee Fund for promotion, are also bad practices. The NBS may prohibit publication of such material or suspend it for ten working days.
  15. Does National Bank of Slovakia prospectus approval mean an issue is safe? No. When approving a prospectus, the National Bank of Slovakia does not assess the issuer's financial position and has no mandate to determine whether it will have enough money to repay principal and promised interest. Its role is to ensure investors have sufficient, good-quality information to assess risks. Presenting prospectus approval as a sign of quality or lower investment risk is bad practice.
  16. What must an issuer disclose after issuing bonds? Every issuer makes the terms and conditions and amendments available and submits them to the central depository within 15 days of starting issuance. If the bonds are admitted to trading on a regulated market, additional disclosures cover interest payments, redemption, early redemption, cancellation, conversion, exchange, subscription and bondholder meetings, both on the issuer's website and in the Central Register of Regulated Information. The NBS recommends publication no later than ten working days before the record date.
  17. Can we give investors a bonus return linked to a project's success? 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.
  18. When does a company need NBS authorisation to lend money? It depends on whom you lend to and where the money comes from. Lending your own funds to another company does not require National Bank of Slovakia authorisation; offering and providing consumer credit does. Since 2024, trading in non-performing bank loans has also had its own licensing regime: only a licensed credit servicer may service them for a purchaser. Raising lending funds from the public crosses another regulatory boundary.
  19. What is a bond issue agent, and can an issuer manage without one? An issue agent handles an issuer's dealings with the central depository, from obtaining an ISIN to registering the issue. It is usually a depository participant or an investment firm authorised by the NBS. The Bonds Act does not require this role: the issuer bears the duties and can fulfil them directly for a smaller issue. However, licensed partners are necessary when selling bonds to investors.
  20. We raise money from investors for projects. When is this unauthorised collective investment? The assessment considers joint investment under a defined investment policy for investors' benefit and whether their returns depend on the acquired assets. Legal form is not decisive in itself. The activity must be authorised or comply with a special statutory regime; registration as a sub-threshold manager is subject to asset-volume and distribution restrictions. Fixed-interest financing of the company's own operations is generally not collective investment, but it still carries default risk and is subject to other rules.
  21. We finance a project with private investor loans. When does this become unlicensed deposit-taking? Deposits are repayable funds from the public carrying an obligation to repay, and only banks may accept them. The more an investor loan resembles a deposit, with guaranteed principal and fixed interest offered to a wider audience, the closer it comes to unauthorised activity. The law draws one firm line: approaching no more than ten persons exclusively through personal contact is not a public invitation. If investors' returns instead depend on project performance, collective investment rules must also be assessed.
  22. We want to launch a crowdfunding platform. Do we need NBS authorisation? If a platform facilitates loans to business projects or places securities they issue, it provides crowdfunding services under Regulation (EU) 2020/1503 (ECSPR) and needs authorisation, granted in Slovakia by the National Bank of Slovakia. The Regulation covers offers with consideration up to EUR 5,000,000 per project owner over 12 months. Donation and reward crowdfunding fall outside it, while household lending has its own licensing regime. The NBS assesses, in particular, management, the business model, payment flows and prudential safeguards.

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