Economic Crimes in the Slovak Republic
Even when you win in court, some debtors do anything to avoid paying. Sometimes a company in debt is sold to a so-called “straw man”. A straw man is a person who provides only their name, officially buys the company in debt and then does nothing. The previous shareholder leaves the company and is thus not responsible for the mess remaining behind. The “new” shareholder is usually a person who cannot be found and is usually from abroad. These situations are not easy to deal with.
Now we have a new economic crime in Slovakia called “unfair liquidation”. Unfair liquidation occurs when a company does not terminate its business activity by liquidation but transfers its rights and obligations to someone who does not wish to carry out any actual business activity. This means that instead of resolving the (usually negative) financial situation of the company, the original shareholder prefers to transfer their share and leaves the scene.
Although this new economic crime has been in existence for over a year, the Slovak police have only recently filed the first charges. In order to prosecute and convict someone for this crime, their conduct must fulfil several conditions.
The first issue that the police deal with is the actual financial situation of the company in debt. In practice, it often happens that the old shareholder „strips“ the assets from the company prior to transferring the shares, i.e. at the time of the share transfer it is no longer possible to properly terminate business activity by liquidation, as the company has no assets and is usually insolvent. In this case, an insolvency application should be filed, and liquidation is therefore out of the question. This activity is also criminal though does not amount to “unfair liquidation” but rather another criminal offence called “damaging the creditor”.
Another problem of “unfair liquidation” is the fact that the „straw man“ must be a natural person. In the case of transfers to a legal person, this offence cannot be committed.
It becomes even more complicated when the „straw man“ tries to do business through the newly acquired company. Then it could be difficult to prove that the „straw man“ was not interested in doing business, which is one of the obligatory characteristics of the crime of unfair liquidation.