Credit agreement template

Obchodný zákonník (Commercial Code)

Governs the credit agreement as a separate contract type: drawdown, interest and when it is due, early repayment, repayment on request and withdrawal for late instalments or for using the money for another purpose. It also prohibits a company in crisis from repaying funding that replaces its own funds, and sets special rules for contracts between a company and its sole shareholder or members of its bodies.

Nariadenie vlády č. 21/2013 Z. z. (Government Regulation No. 21/2013)

Sets the rate of default interest and the flat compensation for the costs of recovering a claim, which is a one-off 40 euros.

Zákon o dani z príjmov (Income Tax Act)

For significant controlled transactions between related persons, which include credit with principal over 50,000 euros, it compares the interest with interest between independent persons and limits how much interest the borrower may deduct as a tax expense.

Credit without interest

Paying interest is part of the basic provision on the credit agreement and the parties cannot depart from it. If the amount of interest is not agreed, the borrower pays interest at the maximum rate permitted by or under law, and if there is none, the usual interest charged for credit provided by banks at the borrower's registered office when the agreement was concluded. Anyone who wants to lend without interest needs a loan agreement.

Credit to your own company in crisis

Credit provided to a company in crisis by its shareholder holding at least 5 %, a member of its statutory body or a person close to them is funding that replaces its own funds, if the crisis is apparent from the latest financial statements, would have been apparent had they been prepared on time, or the lender knew or could have known it would be apparent from interim financial statements. The same applies when the maturity of earlier credit is deferred or extended during the crisis. The company must not repay such funding while it is in crisis, nor if repayment would put it into crisis. A company is also in crisis when the ratio of its equity to its liabilities is less than 8 to 100. This does not apply to money provided for no more than 60 days, unless provided repeatedly. The crisis rules apply only to limited liability companies, joint-stock companies, simple joint-stock companies and limited partnerships with no natural person as general partner.

A company lends to its shareholder at low interest

A limited liability company must not return contributions to its shareholders, and a performance to a shareholder without adequate consideration counts as a return of contributions regardless of the form of the arrangement. With credit to a shareholder, adequacy is assessed mainly by the usual market price and the shareholder's ability to pay. The difference between the consideration provided and adequate consideration must be returned to the company, and the members of the statutory body are liable for its return.

Interest between related persons and tax

Under the Income Tax Act, credit with principal over 50,000 euros between related persons is a significant controlled transaction: if the interest differs from interest between independent persons and the difference reduces the tax base, it is added to it. For a borrower subject to the thin capitalisation rules, typically a Slovak limited liability or joint-stock company, interest on credit from a related person is also not a tax expense to the extent it exceeds 25 % of the sum of profit before tax, depreciation and interest expense.

Instalments without an agreement on the whole remainder

Under the special provision on credit, with repayment in instalments the lender may withdraw from the agreement and demand the amount owed with interest if the borrower is late with more than two instalments or with one instalment for more than three months. Anyone who wants earlier acceleration of the whole remainder must have it in the agreement.

No drawdown deadline

If the agreement does not say until when the borrower may request the money, they may do so until either party terminates the provision of credit. The borrower may terminate with immediate effect and the lender at the end of the calendar month following the month in which the notice was delivered to the borrower, unless the agreement sets another period. With an agreed drawdown deadline, the template expressly provides that the lender may not terminate before it ends, to avoid any dispute.

An oral arrangement with the sole shareholder

Contracts between a limited liability company and its sole shareholder who also acts on its behalf must be in writing. Credit that a sole shareholder and managing director provides to their own company therefore needs a written agreement.

A joint-stock company lends to a board member

A joint-stock company may provide credit to a member of its board of directors, a procurator or another person authorised to act for it, persons close to them and persons acting on their account only with the prior consent of the supervisory board and on terms usual in ordinary business dealings.