Cross-border conversion

What it means

Cross-border conversion is an umbrella term for a cross-border merger, cross-border division and cross-border conversion in the narrow sense, meaning moving a company’s seat to another EU state and changing into a local legal form. The company is not wound up; its assets, contracts and employees pass to the successor company.

The rules were harmonised by a 2019 EU directive, which Slovakia transposed in a separate Act on Cross-Border Conversions in force since 2023. The procedure resembles a domestic merger but has more steps protecting shareholders, creditors and employees, plus a legality check in both states.

At the end of the process the competent authority of the departure state issues a pre-conversion certificate, on the basis of which the authority of the receiving state registers the company. When moving out of Slovakia the company is deleted from our commercial register and continues as a foreign company, and the reverse when moving in.

How it works in practice

The process begins with a conversion plan, a report for shareholders and a report for employees, which are published so creditors and employees can comment. An expert valuation, approval by the general meeting and a legality check by the registry court follow, and only then registration. The whole procedure usually takes several months.

For the accounts, extraordinary financial statements are prepared as at the conversion date, together with the opening balance sheet of the successor, with revaluation differences if assets are revalued. For tax it matters whether a permanent establishment remains in Slovakia: assets that leave the country may be subject to exit taxation.

An alternative for large groups is the European company, which can move its seat under its own regulation. Smaller companies that simply want to do business in another country often manage with a branch or subsidiary and avoid a cross-border conversion altogether.

What to watch out for

The biggest risk is underestimating the tax consequences. Moving the seat also changes tax residence, and without advance planning it can trigger tax on unrealised gains, loss of the right to carry forward tax losses or disputes over where the company is really managed.

The authority can also refuse a conversion if it finds it is being done for abusive purposes, such as escaping creditors or taxes without genuinely moving the business. A formal seat in another country without real management there will not stand up before a court or the tax authorities.