Company formation and change of legal status

We provide comprehensive legal support to business entities in the areas of company formation and changes of legal status. We bring our clients’ business plans to life with years of experience and expertise, guiding them through all the legal procedures necessary to form and adapt their company structure.

Company formation: 

The key to forming a new company is to draw up the formation agreement or memorandum of association correctly and to comply with the required legal formalities. We advise our clients on the most appropriate legal form for their business, both in the formation of simple companies and, in particular, in the formation of more complex companies with multiple founders, on the establishment of branches and business units. The decision on the appropriate legal form for the newly formed company is based on an analysis of the business objectives, the foreseeable responsibilities of the founders, a careful consideration of the tax aspects of each form of company and the intended business.

Our services include the drafting of formation instruments, including the memorandum of association, articles of association and other formation instruments and agreements of company members. We provide our clients with a comprehensive service when forming a new company, including taking care of the company’s registration procedures with the competent authorities and ensuring that the formation process is carried out efficiently and in accordance with the law.

Stages of company formation:

  • Business plan drafting: Assessing the business objectives and financial needs for a successful formation.
  • Choosing the legal form: Determining the most appropriate legal structure for the company in relation to its purpose, type of activity and taxation.
  • Company registration: Preparation and filing of the necessary documentation for the company’s entry in the register.
  • Company formation: Addressing the memorandum of association, determining the share capital and the rights of the company members.

Particular emphasis is placed on agreements of company members at the time of formation, or even during the lifetime of the company, to reconcile the interests of all the company members and to ensure the better functioning of the company. Such an agreement between the company members usually covers various issues relating to the management of the company, profit-sharing, liability, voting rights and other aspects of the company members’ participation and performance. The point is that such an agreement is a private document and is not made public, unlike the memorandum of association, which is available to everyone. Agreements of company members are internal agreements based on trust and cooperation between company members that help to create a stable and successful business environment for the company.

Changes of legal status: 

Changes of legal status allow for adjustments to the structure and organisation of a company, such as mergers, divisions or conversions into another legal form. We guide our clients through complex legal procedures, ensuring legal certainty and compliance with the law.

Forms of changes of legal status:

  • Merger of companies: The integration of two or more companies into one in order to achieve the best synergy effects and maximise business results. A merger of companies can be carried out by transferring all the assets of one or more companies to another company (merger by absorption) or by forming a new company to which all the assets of the merging companies are transferred (merger by formation).
  • Division of companies: The division of a company into two or more separate entities allows the separation of business activities. Possible forms are: A split-up, which is carried out by the simultaneous transferring of the total assets of the transferring company that dissolves due to the split up, while no winding up of the transferring company is performed, to new companies limited by shares or to transferee companies limited by shares; a spin-off, which is carried out by transferring the total or individual parts of assets of the transferring company, which does not dissolve due to the spin-off, to new companies or to transferee companies; and a split-off, which is carried out by transferring individual parts of assets of the transferring company, which does not dissolve due to the split-off, to new companies or to transferee companies.
  • Change in the legal status: Change in the legal status of a company (e.g. conversion from a sole trader into a limited liability company or a limited liability company into a public limited company) to meet new business needs.

A very common form of a change in the legal status is the conversion of a sole trader (s.p.) into a limited liability company (d.o.o.). It is a form of a change in the legal status in which a sole trader, which has in the past been liable for the obligations of its business with its entire assets, is converted into a legal entity, where liability is limited to the capital invested. The purpose of converting a sole trader into a limited liability company can be multifaceted and depends on the specific objectives and circumstances of the business owner. Some of the key reasons for conversion are:

  • Limitation of personal liability: With the conversion into a limited liability company, liability is limited to the amount of capital invested, which means that the owner’s personal assets are no longer at risk in the event of the company’s financial difficulties.
  • Business opportunity and growth: Conversion into a limited liability company can provide easier access to loans and financing, making it easier for the entrepreneur to grow and develop their business.
  • Business expansion: If a sole trader wants to incorporate new partners or company members, conversion into a limited liability company is the appropriate legal form to incorporate more owners and divide the equity interest.
  • Family business: If the sole trader is a family business and the family members want to be involved in its operations, a limited liability company is a more appropriate legal form, allowing ownership and responsibilities to be shared between the family members.
  • Access to public tenders and business with larger companies: In some cases, the status of a limited liability company is required to participate in public tenders or to do business with larger companies.

Experience has taught us that the change in the legal status is often a multi-faceted and complex legal operation, in which the smooth and successful implementation of the process requires the involvement of experts from other relevant fields, most often auditors and chartered surveyors.

Krištof & Brečko Advokatura