Slovak s.r.o. (LLC) Director Liability: What Every director Must Know?

If you are a director (konateľ) of a Slovak s.r.o. — whether in your own company or in someone else’s — you have probably never sat down and properly thought through what that actually means. How many directors know they cannot contractually limit their liability? That they can be personally liable for the company’s debts two years after leaving the role? That withdrawing cash from the company’s ATM can be a criminal offence?

 

A Director Manages Someone Else’s Assets — Not Their Own

The most common misconception we encounter: an entrepreneur believes that the assets of their s.r.o. are their assets. They are not. A director exercises the administration of someone else’s property — property that belongs to the company, its shareholders, and ultimately to its creditors as well. The fundamental principle follows from this: every decision must prioritise the interests of the company. The director’s own interests come last. This is not a philosophy — it is a statutory obligation.

 

Duty of Care: What the Law Requires

The law requires a director to carry out their function with professional due care. What does that mean in practice?

Before every significant decision, a director must:

• Gather all available information necessary to make a qualified decision
• Consider the advantages and disadvantages of the decision
• Assess the risks the decision poses to the company
• In the case of specialist questions (legal, tax), consult a relevant expert

Importantly: liability is not absolute. A director is not liable for the outcome of their decisions — they are liable for whether those decisions were made with professional due care. Business risk is a reality, and the law accepts this.  Key point: The burden of proof lies with the director. If the company suffers a loss and a creditor comes knocking, the law presumes that the director did not act with professional due care. It is the director who must prove otherwise.

 

Director’s Liability Cannot Be Limited by Contract

We regularly encounter requests from directors who want their service agreement to cap their maximum liability — for example at €4,000 per month. Such arrangements are void. A director’s liability cannot be contractually limited, nor can it be waived in advance. Any agreement between the company and a director purporting to limit liability has no legal effect.

 

You Are Also Liable for the Other Director

Statutory bodies are collective bodies, and directors are jointly and severally liable for any damage caused. It is not sufficient to say: “I didn’t know about that — the other director did it.”

The duty of professional care includes active engagement with what is happening in the company. A director must regularly check the company’s bank accounts, monitor its financial situation, and stay informed to a degree that allows them to identify any misconduct by a co-director in time. If they fail to do so and the company suffers a loss as a result of another director’s actions, they may be held liable — even if they personally did not carry out the offending acts.

A real-world example: accountant systematically enriched himself for several years, diverting payments on his own account. When the fraud was discovered, the director who had never checked the bank statements was held liable for the resulting loss — even though they had not made a single unauthorised payment themselves.

 

Liability After Leaving the Role

Have you resigned as director? That does not mean everything is over. Several things most people are unaware of:

The role does not end immediately upon delivery of a resignation. If a director merely delivers a written resignation (rather than resigning at a general meeting), the role only ends at the next general meeting at which the resignation is addressed — or at the latest after three months. During this period the director remains fully obliged to carry out their duties.

A departing director must inform. The Commercial Code imposes an obligation on outgoing directors to alert the remaining directors or shareholders to any facts that could cause harm to the company. A real case: a director resigned during court proceedings and failed to notify anyone of an imminent deadline to appeal in a tax dispute. The company missed the deadline. The director faced potential legal action for failing to fulfil this obligation.

The duty to cooperate continues after departure. The Commercial Code requires former directors to provide, to a reasonable extent, cooperation to tax administrators, bailiffs, and courts even after their role has ended. Closing the door and resigning is therefore not the definitive end of responsibility.

 

Personal Liability for Company Debts: When Yes and When No

The standard answer people know: a director is not personally liable for the company’s obligations. That is true — but only under certain conditions.

There are specific situations in which creditors can reach the director’s personal assets:

• If the director breached the duty of professional care and as a result the company lacks sufficient assets to satisfy creditors’ claims
• If the director withdrew money from the company without legal entitlement (cash withdrawals, interest-free loans to themselves)
• If the director conducted business activities for their own benefit instead of on behalf of the company
• If in a situation of threatened insolvency the director preferred certain creditors over others
• If the director filed for bankruptcy late

 

Criminal Liability: Three Provisions You Need to Know

1. Causing Damage in the Administration of Another’s Property

This criminal offence applies to situations where a director acts to the detriment of the company — for example by selling assets below market value, even when they themselves are the sole shareholder. Many assume that a single-member s.r.o. with no creditors is a “safe zone.” It is not. In specific circumstances the police can be assertive and investigate the basis on which such a transfer took place.

2. Embezzlement (Sprenevera)

A director has the authority to dispose of the company’s financial resources — but only in the company’s interest. If they withdraw those resources for private use (ATM withdrawals on the company card, personal purchases), they commit the criminal offence of embezzlement.

3. Insolvency of a Legal Entity

If a director brings about the company’s insolvency through their actions and thereby prevents creditors from being satisfied to a significant degree (the threshold is €20,000), this constitutes a standalone criminal offence. This is a powerful incentive for directors to act responsibly — particularly when the company starts experiencing financial difficulties.

 

Liability for Contracts: An Unfavourable Contract ≠ Automatic Liability

Not every unfavourable contract creates director liability. If before signing a contract the director:

• Gathered all available information
• Considered the advantages, disadvantages, and risks
• Consulted a relevant specialist (lawyer, tax adviser)

…then they will not be liable for any loss that arises from that contract. Business risk is legitimate.

Beware of instructions from a shareholder or general meeting. If a director receives an instruction to sign a contract from a shareholder or the general meeting, they have a defence — but only if the instruction is not contrary to law. If the instruction is unlawful, the director should not follow it, and will be liable for any resulting damage if they do. Blind compliance with instructions is not a defence.

 

Borrowing Money from the Company: When Is It (Il)legal?

Slovak practice is that directors and shareholders regularly borrow money from their own companies. This is understandable — Slovak law does not permit interim dividend payments during the year, and the legal route to the money only opens after the annual accounts are approved.

A loan from the company is not automatically illegal — but it must meet the following conditions:

• It must carry interest — always, when moving from a legal entity to a natural person. The interest should be at a market rate (currently 5–10%). An interest-free loan is both a tax and a commercial law offence.
• It must not be regular and in equal amounts — regular monthly transfers closely resemble a salary, and the tax authority may reclassify such a loan as employment income.
• It should be one-off or irregular — and ideally offset against the dividend in the following year.

If the receivable from a shareholder accumulates year after year without settlement, a creditor (including the state) may claim against this asset of the company. The director is responsible for actively pursuing recovery of the receivable — if they fail to do so, they may be held liable for the resulting loss.

 

When Insolvency Threatens: The Director’s Heightened Obligations

When clouds begin to gather over a company, this is not merely a business problem — it is the moment at which a director’s obligations and exposure increase dramatically.

Company in crisis: If the ratio of equity to liabilities falls below 8:100, the company is in what Slovak law terms a “crisis.” Special rules apply — directors may not, for example, repay shareholder loans, as doing so would make them personally liable to external creditors for the repaid amounts.

Threatened insolvency: If there are objective indicators that the company will be unable to meet its obligations within the next 12 months, directors are required to act. They must inform shareholders, communicate with creditors, and seek expert advice.

Obligation to file for bankruptcy: If the company has at least two creditors and has been unable to meet its obligations for more than 90 days, it is in a state of insolvency. Directors are required to file for bankruptcy without undue delay — at the latest within 30 days of the date on which they became or should have become aware of the insolvency.

Late filing of a bankruptcy petition carries serious consequences:

• Contractual penalties of up to €12,500
• Personal liability for creditor losses (measured as the difference between what creditors would have received had the petition been filed in time and what they actually received)
• Disqualification — a ban on holding any director role for up to 3 years, applying across all companies, not only the insolvent one

 

Transferring company to Directors (“Biely Kôň”): Popular but Risky

A so-called “white horse” (biely kôň) — a person who lends their identity as a nominal director or shareholder — is defined in Slovak criminal law precisely as a person who lends their identity. The Criminal Code addresses this through the offence of unfair liquidation.

Transferring a company to a nominee director does not release the original director from liability for the past. Furthermore:

• The original director who sets up a new company and continues operating through it may fulfil the elements of the criminal offence of breach of a non-compete obligation or causing damage in the administration of another’s property
• Slovak law recognises the concept of a de facto director — anyone who effectively runs a company, even without being formally registered, bears the same liability as a registered director
• If the transferred company has a “high cash balance” on paper (funds recorded in accounting but not actually present in the bank account), this may constitute embezzlement by the original director

 

Liability for an External Accountant or Lawyer

If a director properly selected a professional adviser (based on references and demonstrated expertise in the relevant area) and that adviser makes a mistake, the director is not directly liable for that error. However, the director is still required to:

• Actively monitor the company’s financial situation — it is not sufficient to wait for the accountant to call if a problem arises
• Contractually arrange regular monthly reporting from the accountant (status of liabilities, ratio of assets to liabilities, etc.)
• If an adviser causes a loss, the director is obliged to pursue a claim against them

 

Conclusion: The Law Exists — and It Works

Slovak practice creates the impression that director liability is theoretical. Courts are slow, enforcement is difficult, companies get transferred and life goes on. That impression is partly true — but only partly. For directors, one practical message follows from all of this: document your decisions. Obtain assessments from relevant experts. Monitor the company’s financial situation regularly. When problems arise, act promptly and take professional advice.

And for creditors who have not been paid: do not stop at the company. The personal liability of the individuals behind it is real — and in many cases it is legally enforceable.