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Ban on Competition for Managing Directors

According to the Slovak law, managing directors (as statutory bodies of limited liability company) are banned from performing certain activities that have competitive character with respect to the company in which they perform their function of managing director. Unless additional limitations arise from memorandum of association/foundation deed or articles of association, managing directors must not:

  • conclude, in his/her own name or on his/her own account, business deals related to the company’s entrepreneurial activity,
  • mediate the company’s business deals for other parties,
  • participate in the entrepreneurial activity of another company as a member with unlimited liability, and
  • perform activities as the statutory body (or a member of the statutory body) or another body of another legal entity with a similar subject of entrepreneurial activity, unless it is a legal entity in the entrepreneurial activity of which the company in which they exercise the powers of managing director participates, or in which any of its shareholders or a person that is controlled by the same person as the shareholder is a shareholder, or in which any of its shareholders or a person that is controlled by the same person as the shareholder is a shareholder.

Should managing directors violate the ban on competition, the company may demand that:

  • they surrender to the company any benefits gained from the transaction by which they violated the ban on competition, or that
  • they transfer the corresponding rights to the company.

However, it needs to be underlined that the company must exercise its rights against the managing director within three months following the day on which the company learnt of this fact; however, no later than one year from the origination thereof; otherwise, the company’s right shall be null and void.

The company is further entitled to claim damages from the managing director who violated ban on competition according to the relevant provisions of the Commercial Code.