Contract LawInsolvency 24. March 2020

Slovakia: COVID-19 Pandemic: Action Plan on Insurance, Insolvency Proceedings and Relations with State for Slovak Entities and Foreign Entrepreneurs in Slovakia

24. March 2020
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JUDr. Milan Malata
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act legal Slovakia

Insurance

  • Administration and thorough documentation will be decisive for the successful enforcement of claims. Know and understand the details of the insurance policies and applicable terms and conditions. Prepare a summary of them – even of those you find marginal or unimportant. Taking into consideration the fact that the COVID-19 pandemic is still unfolding, it is unclear what approach will be taken by the insurance companies when assessing insurance claims. Whether you are a big player or a small company, the only practical approach is to audit all insurance conditions and to set up internal processes aimed at safeguarding their fulfillment.
  • In the case of receivables insurance comply with obligations and deadlines under the insurance conditions. Make mandatory notifications to insurance companies and debtors. 
  • If you are covered by insurance against failed payments or business interruption, it is essential to fulfill all obligations on time, even if they are administrative.
  • Read and study all policy provisions that eliminate coverage for some type of risk. The insurance company will inform you about such exclusions. However, it is important to be active and to communicate with the insurance company to make sure that the existence of a possible exclusion is assessed correctly.

Bankruptcy and restructuring proceedings, court and administrative proceedings

  • Monitor your business partners and other relevant entities concerning any ongoing insolvency proceedings, especially the ones you provided collateral for. We can expect a rapid increase in such proceedings in the next months. The process of early identifying the commencement of insolvency proceedings will be essential not only for the assertion of claims but also for the legal possibility to terminate the contract or enforcement of collaterals or securities. Do not miss the opportunity to claim your receivables by not making the effort to monitor bankruptcy and restructuring proceedings.  
  •  Use re-negotiations of contractual relationships with business partners under the risk of insolvency as a tool to targeted contractual changes or to improve your contractual position. Combine agreements on extensions of the maturity of receivables with changes of other outstanding issues such as acknowledgment of debt, the set-up of set-off mechanisms, tightening of supplier’s liability, collateral security, etc. Take hold of the situation and try to turn the existing negatives into an improvement of your contractual position.
  • Introduce internal monitoring of indicators pointing to insolvency to avoid applications for bankruptcy filed by your creditors against your company or the liability of statutory bodies for (not) filing for bankruptcy.
  • Also, the judiciary has been affected by the COVID-19 pandemic. However, court hearings were not yet adjourned by a measure or regulation. Bear in mind that periods still run in proceedings. Actively communicate with the courts. Submit requests for adjournment of the court hearing or for extensions of procedural deadlines set for submitting briefs. The consequence of neglecting the communication with the court may be significant (e.g. judgment in default). Apply these principles also in proceedings before other public authorities (administrative proceedings, etc.).
  • Pay special attention to such legal acts where the legislation explicitly precludes parties to the proceedings to request the remission of a deadline (time period) or its extension. Such legal acts are e.g. statement to the protocol of tax control or administrative actions against the decision of public authorities. Foresee and plan such legal acts.

Relations with a state

  • Monitor support measures and tools adopted by the State. Government officials repeatedly announce that there will be packages of support measures to companies and entrepreneurs suffering the COVID-19 pandemic consequences.  However, not all of them will be effective en bloc. Carefully monitor which measures will be agreed and when. Pay attention to whether they will be applied to all without distinction, or whether they will be granted only to entities requesting or applying for them in some administrative proceedings. Ensure that all documents and evidence is properly collected at all times, do not forget to track by evidence the negative impact of COVID-19 pandemic on you.
  • The “Anti-Letterbox Act” legislation does not allow for exceptions, not even in emergencies. If you enter into contractual relations with the State, e.g. when selling medical supplies, the registration into Register of Public Sector Partners is still mandatory. Begin this process on time as the current situation is slowing down the decision-making process of the courts.
  • Monitor the possibility of claiming compensation for damages caused by emergency measures adopted by the State. One cannot rely on the assumption that the State will compensate for the negative economic impact everyone and everything. Monitor the web pages of public authorities and the Collection of Laws, do not rely only on the information coming from media.  
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JUDr. Milan Malata
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act legal - MPH Advocates
About the authors

JUDr. Milan Malata

Partner

Legal advisor to key financial institutions, banks, leasing companies and major clients from the ICT and telecommunication sector. Highly experienced in insolvency, bankruptcy and restructuring proceedings and dispute resolution. Supervision of cross-border and national M&A transactions and complex due diligence projects. Expert on debt recovery and enforcement proceedings. Focus on white-collar and economic and tax criminal matters. Advised clients on questions of competition law related to collusive conduct, abuse of dominant position and merger control.

Mgr. Jana Alušíková

Partner

Provides legal services to national and international companies and corporations. Represented leading Slovak banks in high-value financial services disputes concerning loan agreements, declarations of guarantors and damages compensation. Regularly advises key players in the ICT sector on questions of cloud computing, licensing, copyright, development of IT systems and service lease agreements. Clients highly regard her ability to use her knowledge from various legal fields in the process of problem solving.

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