Purchase of a ready-made company

When selling a Slovak limited liability company (s.r.o.), the procedure is that the shareholder(s) of the company transfer their business interests to new shareholders. Therefore, the Share Transfer Agreement is concluded by the shareholder of the company, not the executive director. The shareholder and the executive director may, but do not have to be, the same natural person.

In order to avoid potential risks associated with the acquisition of a business interest in an already existing company, a high-quality draft of the Share Transfer Agreement is crucial.

In practice, Share Transfer Agreements include representations and warranties, through which the transferor of the business interest declares, for example, that as of the date of signing the agreement, there are no promissory notes issued, accepted, guaranteed (avaled), or endorsed by the company, or through which the company would be otherwise bound; that there are no agreements on future contracts binding the company, etc. In the event that any of the representations and warranties later prove to be false, it is possible to stipulate sanctions in the contract. For instance, it is possible to include the right to withdraw from the contract in such a case.

In practice, Share Transfer Agreements also include a provision obliging the transferor—should any of the representations/warranties or other information provided to the acquirer prove to be false—to ensure, upon the acquirer’s request and at their own expense and responsibility, that the consequences of this situation are promptly rectified, or to promptly provide the acquirer of the business interest with performance by way of a warranty claim.

The law does not exclude the provision of a guarantee by a person other than the transferor of the business interest. The precise configuration of individual legal instruments during the transfer of a business interest would require a detailed assessment of the specific transaction.