This article explains why, for married couples where even just one spouse is in business, having the community property of spouses (bezpodielové spoluvlastníctvo manželov, 'BSM') cancelled by a court is a more effective protection of family assets than the usual narrowing of the BSM by notarial deed. It describes the difference between the two institutions, the statutory grounds and conditions for cancelling the BSM, and the subsequent process of settling the property.
Business brings freedom, but financial risk walks hand in hand with it. Many entrepreneurs in Slovakia, both starting out and established, do not fully realise how close their business is to the family budget. Under the Slovak Civil Code, a strict rule applies: a creditor's claim that arose against only one of the spouses during the marriage may, in enforcement proceedings, also be satisfied out of assets belonging to the community property of spouses (bezpodielové spoluvlastníctvo manželov, 'BSM').
If you are in business as a sole trader, it is not only your business assets that are at stake, but also the family house, flat and savings you own together. The most effective tool of preventive legal protection for the family in this case is having the BSM cancelled by a court.
When spouses look for a way to separate the business from the family in property terms, the first option they often consider is narrowing the BSM by notarial deed. There is, however, a fundamental difference between narrowing before a notary and cancellation by a court.
Narrowing the BSM (notarial deed): This is an agreement by which you remove only specific items from the BSM (e.g. business income, a business share, or a property about to be purchased). There is a catch, however — this agreement is effective against a third party (a creditor, a bank, the tax office) at the time the claim arose. In practice, you would have to inform every business partner in advance that you have narrowed your BSM, which is extremely impractical. because if the result of the agreement is that the debtor becomes "without assets" and the creditor has nothing to satisfy the claim from, the courts may, on the creditor's application, declare such an act legally ineffective against the creditor. The creditor can then pursue enforcement against those assets exactly as if no agreement had ever been made.
Cancellation of the BSM by a court: Unlike a notary, the court does not deal with individual items but cancels the BSM as a whole. It is an authoritative decision of a state body which, once final, applies automatically against all third parties, regardless of whether they knew of it or not.
The law protects the non-business spouse on two levels. The first is the requirement to obtain the non-business spouse's consent to the use of joint assets at the start of the business. If this consent is missing, the legal act is absolutely invalid under § 39 of the Slovak Civil Code for conflict with the law. Consent may also be given implicitly.
The second, far stronger level is the cancellation of the BSM during the marriage. The purpose of the law is to protect the spouse who is not in business. Business is always associated with the risk of a negative impact on the family. The ground for cancellation here is given directly by statute — it is enough that one of the spouses has obtained an authorisation to carry on business (e.g. a trade licence).
Caution: On a literal reading of the statute, the court has a mandatory obligation to cancel the BSM. It examines only one thing: whether the business authorisation actually exists at the time of its decision. If the authorisation were revoked before judgment is delivered, the court cannot grant the action (in line with R 54/1999).
The action may be filed by the spouse who has not obtained an authorisation to carry on business. Where both spouses have obtained business authorisations, either of them may file the action.
The court's decision has ex nunc effect — meaning the BSM ceases to exist only on the date the court's decision becomes final. From that moment, everything you acquire belongs to your sole property.
Once the judgment becomes final, the assets that were until then joint must be settled. An action to cancel the BSM cannot be joined directly with an application for its settlement. Filing an application for settlement (whether by agreement or by court action) presupposes that the BSM has already been cancelled with final effect and that the spouses have not reached an out-of-court agreement.
Cancelling the BSM because of business is not a sign of distrust towards your spouse. On the contrary, it is a highly rational and pragmatic step by which you lock the family assets into a safe zone, shielded from any future business risks and enforcement proceedings.
Are you or your spouse in business, and do you want to avert the risk of losing the family assets? Do not wait for the first problems to arise. Contact us and we will help you set up legal protection for your family and prepare an application to cancel the BSM.
