Have you not yet been acquainted with the submitted bill amending the Voluntary Auction Act? Don’t worry, we’ve prepared a summary of the most important proposed changes for you.

Auctioneer´s status

The most discussed topic regarding the relevant amendment is a proposal to modify the prerequisites for the auctioneer's activity. Pursuant to the proposed legislation, only the insolvency administrator will be able to carry out the auctioning activity. So far, the performance of auctioning is a free trade license, which is relatively easy to obtain. On the other hand, in order to be included in the list of insolvency administrators, you have to obtain a university degree in law or economics and prove your competence by passing the administrator examination. The Ministry of Justice of the Slovak Republic considers the current conditions for the performance of auctioning to be insufficient, whereas the performance of voluntary auctions usually entails serious interference with the participants' assets and on many occasions requires a demanding legal assessment of existing relationships of the persons involved.

What does it mean for current auctioneers? The proposed amendment allows the current auctioneers to operate and organize auctions for only one year after the amendment comes into effect. However, if they wish to pursue an auctioning activity even after this transitional period has elapsed, they will have no other choice than to obtain the necessary higher education and to pass the administrator examination.

Auction participants

As a result of objections from the professional public towards the auctions in which the proposer of the auction himself became the auctioneer or those towards the participants who were clearly linked to the auctioneer, the proposed amendment excludes the persons who have an undesirable affiliation with the auctioneer from the participation in such auction. This means that the proposer, the auctioneer, the auctioneer's employees and their related persons will not be able to participate in the auction, whereas the wording of the amendment also provides a definition of what constitutes related persons.

In order to ensure greater independence of auctioneers from the proposers, it is also suggested that the auctioneer could not be the proposer or a person related to the proposer.

Place of auction

Pursuant to the current legislation, the auction may also take place on the other side of the republic, as the place of the auction is determined by the auctioneer in agreement with the proposer of the auction. The proposed amendment limits the possibility of choice to a publicly accessible place located in the territorial district of the region in which the object of the auction is located. This represents an effort to eliminate speculative auctioning activities outside of the region, where the object is located, in order to discourage interested bidders. It is the region that should reflect both the interest of the property owner as well as interested bidders, who will not have to travel too far and at the same time represent an acceptable solution for the auctioneers who will have the opportunity to find suitable space for the realization of an auction.

Limitation of the cash payments and enhancing transparency

The current legislation does not limit the cash payments, which can be easily misused in terms of legalization of incomes from criminal activity, and so the Ministry of Justice proposes to set a maximum cash payment limit of EUR 5,000.

In order to enhance the transparency of the whole auction process, the amendment introduces the payment of the entrance fee for the auction solely by payment to the auctioneer's account, not in cash as it is now (except for the owner of the property and the debtor, unless they are the same person). The amendment presupposes an active interest of the participants even before the actual auctioning, which should discourage the potential participants from obstructing the auction. For this purpose, the auctioneer will also have an additional obligation to deposit the funds received by him in relation to the performance of the auctioning in a separate bank account will be provided.

Own expert report of the owner

The proposed legislation enables the provision of a valuation of the object of an auction not only by the auctioneer but also by the owner of the object. The aim is to eliminate the possible non-cooperation of the property owner in relation to the inspection of the object for the purpose of its valuation by the auctioneer and the need of expert reports reviews, which increases the costs of the auction at the expense of the owners. The owner will have four weeks to provide his own expert report and such expert report should not be older than 3 months as of the date of inspection.

Auctioneer's remuneration

A change on the amount of the auctioneer's remuneration is also planned, where, on the one hand, the upper limit of the auctioneer's remuneration is proposed to be reduced from 10% to 5% of the proceeds of the auction in connection with the limit of 20% of the amount of the receivable. However, on the other hand, it is proposed to guarantee the auctioneer a remuneration of 75% of the calculated upper limit remuneration that cannot be reduced even by the agreement on auction. The purpose is to achieve greater independence to the auctioneer.

The effects of the transfer of ownership by an auction

Pursuant to the proposed amendment, the effects of the transfer of ownership by an auction will be distinguished based on the person of the proposer. If the proposer is the owner of the object of an auction, there is no concern of speculative establishment of an easement and other burdens on the auctioned object with the intention to harm the creditor, and therefore, as under the current legislation, the rights of persons arising from the easements attached to the object of an auction will not be affected by such a transfer of ownership. However, unlike the current legislation, the transfer of ownership because of an auction will also not affect the pre-emptive rights attached to the subject of the auction.

If the pledgee will be the proposer of the auction, these effects will be governed by the new regulation incorporated by the proposed amendment into Act no. 40/1964 Coll. Civil Code as amended. The easements and pre-emptive rights agreed as rights in rem, which will be established in relation to the pledged asset later than the pledge, which will be exercised, cease. This shall not apply if they will be established with the written consent of the pledgee, whose right is exercised, by law or based on the decision of the competent authority.

The effectiveness of the submitted bill amending Act no. 527/2002 Coll. on voluntary auctions and on the amendment of Act of the Slovak National Council no. 323/1992 Coll. about notaries and notarial activities (Notarial Code) as amended is planned for 1 December 2019.

The submitted bill is currently in the stage of the evaluation of interdepartmental comment procedure, in which many subjects such as The Slovak Banking Association submitted a number of comments and observations from application practice on the proposed changes. These comments concern, in particular, the adjustment of each of the above-mentioned points such as the auctioneer's status, or the possibility of providing an expert report by the owner, but mainly the anchoring of the deletion of the time-barred pledges from public registers, and thus the changes to the legislation regulated by Act No. 40/1964 Coll.  The Civil Code, as amended, introduced by the submitted bill together with changes of the Act on Voluntary Auctions. At present, the proposal of the bill is according to available media reports on-hold due to the number and extent of the submitted comments until the commented points are duly professionally discussed. We will inform you in time whether the proposed bill is approved and effective.