The Slovak economy is facing a difficult period. With public finances under pressure and the government pursuing consolidation, the investment climate is deteriorating. Foreign direct investment has slowed significantly, with Slovakia not being regionally competitive anymore. Globally, geopolitical tensions, disrupted supply chains, and energy volatility have left businesses struggling to adapt. These macroeconomic headwinds are now translating into sectoral distress. Slovakia’s automotive industry, which forms the backbone of Slovak industrial output and employment, is highly exposed to the global trends, declining demand, overcapacity, and cost pressures. At the same time, retail, transportation, construction, and energy are showing signs of strain. Insolvencies of Slovak businesses are likely to rise in both number and complexity. In my view, the Slovak insolvency framework, unfortunately, is not fit to effectively absorb these developments.
The Slovak insolvency law has traditionally developed through a chain of reactive rather than strategic amendments. Instead of following a reform roadmap, changes have usually been triggered by failures of the system and subsequent public outcry – as in the Vahostav case of 2016 – or by the pressure of stakeholders, particularly banks. The pattern of addressing symptoms means that despite numerous amendments, the system remains beset by inefficiencies.
The causes are largely structural. Courts are generally overloaded, but the direct source of delay lies in the disputes that arise within insolvency itself. Ownership contests over assets frequently block their sale, while disputes over the claims can freeze the distribution of proceeds from liquidated assets. This leads to a negative paradox of the system: the more significant an insolvency is – measured by the value of assets that could be swiftly returned to the economy – the more disputes it generates and the longer it drags on, with precisely the most important cases often producing the least efficient outcomes.
A fundamental design flaw also lies in the existence of two distinct proceedings: bankruptcy and restructuring. Unlike systems that use a single “insolvency track” which can flexibly move toward liquidation or restructuring depending on circumstances, in Slovakia, restructuring is formally a distinct procedure that is often filed for by debtors only to gain time before bankruptcy is declared. This duality leads to delays at a crucial time and places unnecessary burdens on creditors who have to register their claims repeatedly.
Digitalization has brought only modest improvements. While an insolvency register is publicly available and electronic filings are mostly mandatory, systems have been fragmented and poorly integrated. Communication with trustees and courts has relied heavily on outdated methods. Therefore, high expectations of substantially enhanced transparency and efficiency relate to the commencement of operation of a new centrally managed Insolvency Register that unifies all pre-insolvency, insolvency, and liquidation proceedings into one online platform. Its introduction was repeatedly postponed and will now finally become operative as of October 1, 2025.
A further weakness is the lack of tools to keep companies operating at the outset of bankruptcy and to swiftly sell them as going concerns. This prevents the emergence of a genuine distressed assets buyers’ market. A chance to change this is the planned EU regulation on pre-packaged sales – Slovakia will face the task of implementing pre-pack mechanisms.
The overall design of the insolvency proceedings prevents the system from fulfilling one of its most important, yet often underestimated, functions: to recycle economic assets back into productive use. Assets often remain “locked” for years in insolvency estates, immobilized by disputes and procedural bottlenecks.
Against this backdrop, the government has prepared an amendment to the Slovak Act on Bankruptcy and Restructuring. The bill has been passed by parliament and will take effect on October 1, 2025. The adopted changes focus on reducing some administrative burdens, for instance, by removing requirements for notarized signatures. They also refine legal provisions on penalties for late filing for bankruptcy and somewhat ease the initiation of bankruptcy proceedings by creditors. Adjustments are foreseen in the rules governing creditors’ committees. The amendment also seeks to facilitate conversions from restructuring to bankruptcy.
These measures can reduce some friction in daily practice, yet they do not address the structural flaws. The amendment provides several tweaks, in line with the tradition of reactive legislation. Without doubt, the new Insolvency Register will bring more important positive practical consequences but does not address design flaws of the regulation.
A surge of distressed companies will soon strain the framework, which, while functioning formally, will not deliver optimal results. The coming economic “winter” will expose the absence of real reform that is necessary for the insolvency system to be able to mitigate rather than amplify economic shocks.
By Radovan Pala, Partner, Taylor Wessing
This article was originally published in Issue 12.8 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.
