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Financial Participation

The legal regulations in Slovakia have few provisions on employee financial participation. This relates in particular to profit-sharing in share companies.

Share Ownership

As in the Czech Republic, employee share ownership in Slovakia is derived from two sources: the privatization process and the acquisition of shares in private companies on a preferential basis.

During the privatization process, there were two opportunities for the acquisition of employees’ shares: through the voucher privatization until 1993, or by acquiring shares during the MEBO programmes after 1995.

The voucher privatization started before the break-up of Czechoslovakia and permitted all citizens possessing vouchers to acquire shares in the enterprises where they were employed.

In 1995, the Meciar government introduced a special programme for insider privatisation (called “Principles of Implementation of Workers’ Participation in the Privatization of Enterprises”) aimed at promoting the participation of employees in established companies and the issuance of employee shares. This programme was withdrawn in 1996, mainly due to political problems and a shift in power from the Ministry of Privatization to the National Property Fund. The Slovak Republic National Council Act No. 192/1995 was the basic legal act regulating the main privatization method to be used as from then on: direct sales. One aspect was to enforce employee ownership, with companies being obliged to either issue employee shares accounting for 10% of the equity capital or to enable employees to acquire at least a one third stake in the company to be transferred. Another requirement stipulated an obligation of the privatized companies to issue 34% of their share capital in employee shares. This requirement was abolished after only half a year. Subsequently, the law foresaw only an option but no obligation for companies to do so.1

The concept of “employee shares”, allowing private companies to announce schemes under which employees could buy company shares at a discounted price, was abolished in 2001 in Slovakia. Previously issued employee shares had to be converted into regular shares by January 2004. Article 204, paragraph 4 of the Commercial Code (CC) enables companies to acquire shares on preferential conditions to replace employee shares. A company can also acquire its own stock in order to transfer it within 12 months to the employees. Joint stock companies can also issue new shares granting employees favourable conditions in the context of so-called mixed capital increases, i.e. the capital increase of a company by issuing new stock financed partly or entirely out of the company’s own capital. The general shareholder’s assembly can decide that shares be offered to employees at a discounted price and the difference be paid for by the company. The company may pay in full for the stock acquired by the employees, should it be able to finance such a purchase completely out of its own resources. When the company pays for the shares, the total discount can be up to 70% of the share price, provided that the remaining 30% is paid by the employee. Besides the described mechanism, share acquisition by company employees may also be accomplished by the company providing credit and financing, acting as guarantor or by a combination of all three preferential conditions.2


CC article 178 paragraph 4 states that employees may be entitled to a share of company profits, in accordance with the Articles of Association (cash-based profit-sharing). It is also stipulated that the Articles of Association may state that profits allocated to employees be used exclusively to purchase shares on preferential conditions or to offset the discount granted to employees for this purpose (share-based profit-sharing). Share-based profit-sharing can also be used for capital increases - CC article 210 paragraph 4 regulates a capital increase by the issuing of shares to be transferred on preferential terms to employees. All benefits are subject to personal income tax of 19% for those with annual incomes up to 34,401.74 euros and 25% for those with higher incomes.3

Wilke, Maack and Partner (2014) Country reports on Financial Participation in Europe. Prepared for www.worker-participation.eu. Reports first published in 2007 and fully updated in 2014.