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Slovenian Legal System

The Slovenian legal system is based on a traditional civil law model, with sources of law organised by hierarchy and adopted at both state and local level. Due to the principle of primacy of EU law, national laws may not contravene the rules adopted at EU level. Furthermore, national laws must conform with the generally recognised principles of international law and international treaties ratified by the National Assembly of Slovenia.

Court decisions, save for Constitutional Court rulings, are not deemed as a mandatory legal source, however, in practice, published judicial decisions of the higher courts and the Supreme Court are relied on by parties.

Judicial System

The Slovenian judicial system includes courts of general jurisdiction, organised on four levels, that is, 44 local courts (for less serious criminal cases and civil cases concerning claims for damages or property rights not exceeding certain thresholds, as well as certain other civil cases and non-litigious matters) and 11 district courts (for criminal and civil cases which exceed the jurisdiction of local courts) at first instance, four higher courts at appellate instance, and the Supreme Court as the highest court in the state.

Additionally, there are four specialised courts of the first instance competent for labour and social security disputes, with a labour and social dispute higher court as the Court of Appeal, one administrative court with the status of a higher court, and the Constitutional Court.

The FDI screening mechanism was swiftly introduced into Slovenian law on 31 May 2020, as part of temporary, COVID-related legislation. It was only recently implemented as an amendment to the Investment Promotion Act (Zakon o spodbujanju investicij) in July 2023.

Any transaction that falls under the definition of a foreign direct investment must be notified to the Ministry of Economy, Tourism and Sport (the “Ministry”) by the foreign investor (ie, a non-EU entity/person) or the target, acquired or newly established company (see 7.1 Applicable Regulator and Process Overview), provided that such FDI falls under one of the “critical” sectors. The Investment Promotion Act explicitly lists the activities that are considered as critical and fully reflects those listed in the Regulation (EU) 2019/452, which, among other things, includes certain critical infrastructure (eg, energy, transport, water, health, media), critical technologies and dual-use items (eg, artificial intelligence, robotics), supply of critical inputs (eg, energy or raw materials), food security, access to or ability to control sensitive information (including personal data), the freedom and pluralism of the media; as well as projects or programmes in the EU interest, as set out in Annex I to the Regulation (EU) 2019/452.

In general, the Ministry takes a very broad view of what constitutes critical infrastructure; for instance, computer programming and even holding activities have been recognised as such. This has led to a trend that nearly every transaction is notified out of caution, despite the parties being convinced that their business activities do not fall under critical sectors. 

The Ministry may either approve the investment, approve it with conditions (remedies) or prohibit the investment entirely. So far, there do not appear to be any cases where the Ministry has rendered a negative opinion on a transaction.

As mentioned under 1.2 Regulatory Framework for FDI, FDI screening was only introduced into Slovenian law in 2020 and was recently amended.

In a notable change, the legislator has exempted EU investors from a notification obligation, whereas investors from the EEA and Swiss Confederation remain obligated. Furthermore, the Ministry is now obliged to issue a reasoned decision and not merely a non-binding opinion, as was common practice under the previous regime. This change brings a higher level of legal certainty to investors.

Although the Ministry’s interpretation of critical sectors is quite broad and substantial fines may be imposed on foreign investors and/or on a target, acquired or newly incorporated company due to failure to (timely) notify the investment, there do not appear to be any cases where the Ministry has prohibited the investment or approved it only conditionally, or issued a fine.

As the FDI screening regime is becoming an increasingly important factor for the parties to consider in M&A transactional documents, it is anticipated that the law and practice in this area will continue to evolve.

In Slovenia, most M&A transactions are structured as share deals (including by way of takeovers and mergers), while asset deals occur less frequently due to the complexity of requirements under Slovenian law, and possible joint and several liability issues. However, an asset deal does enable the purchaser to specifically select the assets and liabilities that will be acquired, while leaving behind other parts of the business in which the purchaser is not particularly interested. Demergers and spin-offs have also become increasingly more relevant in recent years, in particular since these transactions may be considered tax neutral, provided that the relevant conditions required by law are met. Therefore, a business decision on selecting the appropriate transaction structure is always examined on a case-by-case basis.

Most transactions occur in the private market, meaning that public M&A is not widespread in Slovenia. Nevertheless, public and certain private joint stock companies are subject to the provisions of the Takeovers Act (Zakon o prevzemih), which prescribe the rules for both mandatory and non-mandatory takeovers. Once the applicable threshold (ie, one third of voting rights or any additional 10% of voting rights following the successful takeover, until a threshold of 75% of voting rights is reached) is exceeded, a mandatory takeover bid for the shares by an individual shareholder, or shareholders acting in concert, is triggered. It is important to note that the takeover legislation applies to any joint stock company that has either 250 shareholders or over EUR4 million of total equity.

In addition to the FDI screening regime, M&A transactions exceeding certain thresholds are also subject to merger clearance (see 6. Antitrust/Competition).

Furthermore, certain transactions within specific sectors may be subject to the approval/authorisation of the relevant regulators (see 8.1 Other Regimes).

Before publishing the mandatory takeover bid (see 3.1 Transaction Structures and 8.1 Other Regimes), the acquirer must obtain the approval of the Securities Market Agency (Agencija za trg vrednostnih papirjev).

Moreover, pursuant to the Market in Financial Instruments Act (Zakon o trgu finančnih instrumentov), any acquisition or disposal of shares:

• listed on a regulated market in Slovenia; or
• issued by a non-listed joint stock company provided that it has at least 250 shareholders or EUR4 million total equity, as evident from the latest published annual accounts of such company, by which a relevant threshold (5, 10, 15, 20, 25, 33⅓, 50 and 75% share of voting rights) is reached or exceeded, or should the voting rights of a shareholder subsequently fall below such threshold (when it has been achieved in the past),

is subject to reporting to the issuer of the shares and the Securities Market Agency within four trading days after the Slovenian counter-party was aware or should have been aware of the acquisition or disposal of relevant shares, or the fact of the relevant threshold being met by any corporate action of the issuer. The reporting obligation is already triggered at the time of entering into a transaction, even though the share transfer occurs or the call option is called a long time after that (or not at all). Despite the short reporting deadline, failure to timely report any change of the qualifying holding can result in a fine amounting up to EUR500,000, or in certain extreme cases, up to 5% of the company’s annual turnover.

Any foreign investor wanting to become a founder or shareholder of a Slovenian company, must prove that no legal restrictions exist under the Companies Act (Zakon o gospodarskih družbah). These restrictions include, among other things, convictions for certain offences, misdemeanours related to payments for work or undeclared work, and non-fulfilment of certain tax obligations.

Generally, the Companies Act provides corporate governance rules for all legal entities. These may be supplemented by additional laws and regulations, particularly sector-specific rules.

Publicly listed companies are organised as joint stock companies, which may be initially incorporated by one or more (legal or natural) persons adopting the statute. The company may opt for a one-tier system with a board of directors, or a two-tier system with a management board and supervisory board.

For private companies, a limited liability company is the generally preferred type of legal entity, which is established by one or more (but up to 50) shareholders. While the limited liability company is managed by its director(s), certain decisions are reserved for the shareholders (and/or for the supervisory board, if the company has one). 

The FDI screening regime does not distinguish between different types of legal entities that are acquired or established in the course of the FDI. However, most investors opt for a limited liability company due to the simplicity of its set-up, lower initial capital requirements, and the extra flexibility available to the shareholders. 

Minority shareholders are granted several special rights under the law, where the scope of such rights depends on the legal form of the company.

For instance, rights of the shareholders of a joint stock company mostly refer to requesting the convocation of a general meeting or requesting an additional agenda item, challenging shareholders’ resolutions on profit distribution, or filing a lawsuit for damages against the management or supervisory board members on behalf of the company. These rights may be invoked by the shareholders, where their aggregate shareholdings amount to at least one twentieth or one tenth (as applicable) of the company’s share capital.

Furthermore, each minority shareholder may request the court to assess the appropriateness of the cash consideration offered by the main shareholder in the squeeze-out process. Each minority shareholder is also entitled to ask the principal shareholder holding at least 90% of the company’s share capital to acquire all of its shares subject to appropriate cash consideration.

In limited liability companies, material additional minority protection rights apply, such as the right to inspect the corporate records of a company which can only be rejected under certain conditions prescribed by law.

Certain corporate decisions (in both joint stock companies and limited liability companies), such as amendments to the articles of association or the resolution on merger, require a qualified majority of 75% of the capital present at the general meeting or even of all the shareholders. Therefore, only shareholders with participation of at least 25% can block certain major decisions.

Moreover, additional minority shareholders’ protective rights can be implemented in the company’s articles of association, most notably drag-along and tag-along rights, transfer restrictions, etc.

As mentioned under 7.1 Applicable Regulator and Process Overview, even a minority investment is subject to FDI screening, provided that the target, acquired or newly established company is active in a critical sector and the 10% threshold (of share capital or voting rights) is reached.

Disclosures in FDI filing

Information on the foreign investor and the (target, acquired or incorporated) company required by the Ministry are explicitly set out in the law – among other things, the filing needs to include information (as well as supporting evidence) on the annual turnover and total number of employees; the ownership structure (including information on the ultimate investor), value and source of financing of the FDI; its business activities and the relevant countries in which the activities are conducted; and a detailed description of the transaction.

Failure to disclose the above information may result in a fine being imposed on the investor/company amounting from EUR100,000 to EUR500,000. Although the range of the fines is high, there do not appear to be any instances in which such fines would be imposed due to lack of information in the notification, as the Ministry usually first requests additional information from the notifying party.

Other Disclosure and Reporting Obligations

Additional disclosure obligations may apply under the securities law requirements (see 5.2. Securities Regulation) or other sector-specific regulations (see 8. Other Reviews/Approvals). Certain sensitive information must also be disclosed in the merger notification. While the merger decisions are publicly available, the investor is entitled to redact confidential information and business secrets therein before publication.

Ljubljana Stock Exchange

Equity capital markets and debt capital markets are somewhat underdeveloped in Slovenia. The Ljubljana Stock Exchange is the only stock exchange in Slovenia and the main market for admission of equity, debt and other instruments. In Slovenia, small and medium-sized enterprises typically resort to classic debt financing through banks and very rarely turn to capital markets to seek funding.

The Equity Market

The equity market is divided into the Prime Market as the elite part of the equity market and the Standard Market. Companies that are listed on the Prime Market must fulfil additional reporting standards. Both markets are regarded as “regulated markets” under the EU Directive on Markets in Financial Instruments (No 2014/65/EC) (MiFID II) and the Slovenian Market in Financial Instruments Act.

SI ENTER

The Ljubljana Stock Exchange also operates SI ENTER, a multilateral trading facility (MTF). The purpose of SI ENTER is to enable trading in securities that are not listed on the regulated market and to list securities of enterprises that do not meet the requirements or lack sufficient funding to be listed on the regulated market. The SI ENTER market provides for less transparency compared to the regulated market.

The key laws on securities and the exchange thereof over capital markets in Slovenia are:

• the Book-Entry Securities Act (Zakon o nematerializiranih vrednostnih papirjev) governing dematerialised securities, encumbrances thereon and their transfer, as well as the central securities register;
• the Market in Financial Instruments Act, mainly regulating the admission of securities to a regulated market and rules for their trading, disclosure and reporting obligations, investment firms, and prohibited market abuse practices;
• the Takeovers Act (Zakon o prevzemih), governing the takeover offer, as well as certain reporting obligations regarding call options and financial futures; and
• other, directly applicable EU regulations, mainly concerning the preparation and content of the prospectus, over-allotment, and market abuse.

Additionally, the listing process and listing requirements for listing equity and debt securities on the Ljubljana Stock Exchange are regulated in the Stock Exchange Rules. The prospectus review and approval process are further regulated by the guidelines on the prospectus review and approval process, adopted by the Slovenian Securities Market Agency.

Foreign investors can also be subject to certain requirements under the above legislation, such as reporting obligations (see 3.2 Regulation of Domestic M&A Transactions) or mandatory takeover regulations (see 3.1 Transaction Structures and 8.1 Other Regimes).

In Slovenia, investment funds may only be set up, managed and their units marketed in accordance with the following laws:

• Acts on Forms of Alternative Investment Funds (Zakon o oblikah alternativnih investicijskih skladov), which regulate alternative investment funds and investment companies;
• the Alternative Investment Fund Managers Act (Zakon o upravljavcih alternativnih investicijskih skladov) mainly governing the management of alternative investment funds, and conditions for (pre-)marketing alternative investment funds’ units in the Republic of Slovenia or outside thereof; and
• the Investment Funds and Management Companies Act (Zakon o investicijskih skladih in družbah za upravljanje), laying out provisions regarding management companies, their services and transfer thereof, and regulating collective investment in transferable securities and conditions for marketing their units.

The FDI screening legislation does not provide for any exemption or specific rules with respect to foreign investors structured as investment funds. Therefore, provided that conditions triggering the FDI notification obligation are met (see 7.1 Applicable Regulator and Process Overview), FDI screening is mandatory for the direct foreign investor organised as an investment fund, as well as for any of its partners as indirect foreign investors in the Slovenian company.

The competent agency for a merger control regime is the Slovenian Competition Protection Agency or CPA (Agencija RS za varstvo konkurence) which assesses concentrations subject to the obligation to notify under the Prevention of Restriction of Competition Act (Zakon o preprečevanju omejevanja konkurence – ZPOmK-2).

Merger Control Assessment

Merger control assessment is a separate procedure to FDI screening and there is no substantive overlap of the two regimes. Whether an FDI is subject to the merger control regime depends on whether it falls under the definition of a concentration (and thus meets the legal condition for obligation to notify) and whether it meets the turnover requirements (and meets the economic condition for obligation to notify).

Legal condition

The legal condition is met if there is a concentration within the meaning of Article 9(1) of ZPOmK-2, which means that a change of control in the undertakings concerned occurs on a lasting basis, namely:

• upon the merger of two or more previously independent undertakings or parts of undertakings; or
• where one or more natural persons already controlling at least one undertaking, or where one or more undertakings, by purchasing securities or assets, by contract or by any other means, acquires direct or indirect control of the whole or parts of one or more other undertakings; or
• where two or more independent undertakings create a joint venture that performs all the functions of an autonomous undertaking on a lasting basis.

Economic condition

The economic condition is defined in Article 66 of ZPOmK-2 and is fulfilled if, in the preceding business year:

• the total annual turnover of (all) parties to the concentration, together with other undertakings in the group, exceeded EUR35 million on the market of the Republic of Slovenia; and
• the annual turnover of the acquired company, together with other companies in its group, exceeded EUR1 million on the market of the Republic of Slovenia.

In the case of the establishment of a joint venture which performs all the functions of an independent enterprise with a longer duration, the economic condition is met if the annual turnover of at least two undertakings involved in the concentration, together with other undertakings in the group in the preceding business year, exceeded EUR1 million on the market of the Republic of Slovenia.

Assessment by the CPA

The CPA may also assess concentrations that do not meet the thresholds set out above if the undertakings involved in the concentration, together with other undertakings in the group, have a market share of more than 60% of the relevant market in the Republic of Slovenia, by inviting them to notify the concentration.

However, if a concentration is assessed by the European Commission in line with the EC Merger Regulation, there is no obligation to notify the concentration to the Slovenian CPA.

The concentration must be notified no later than 30 (calendar) days from the conclusion of the contract or the announcement of the public offer or of the acquisition of control, the period for notification running from the first of these events.

Until the CPA clears the concentration, parties to the concentration are not allowed to exercise rights, including transferring securities or exercising voting rights derived from the equity interests acquired through the concentration (a standstill obligation applies for concentrations that have to be notified to the CPA).

After the notification is complete, the CPA issues one of the following decisions within 25 business days:

• a decision that the notified concentration does not fall within the ambit of ZPOmK-2;
• a decision clearing the concentration (declaring its non-opposition to the concentration and the compatibility of the concentration with the competition rules); or
• a resolution regarding the initiation of the second-phase proceedings – if the CPA finds that the notified concentration falls within the ambit of ZPOmK-2 and that the concentration raises serious doubts as to its compatibility with competition rules.

Within 60 business days of the resolution regarding the initiation of the second-phase proceedings, the CPA is obliged to issue one of the following decisions:

• a decision declaring the concentration is compatible with competition rules; or
• a decision on the concentration’s incompatibility with competition rules and prohibition of the concentration.

The deadlines for decision-making by the CPA set out above are of an instructive, non-binding nature, and failure by the CPA to decide within these deadlines does not render a concentration compatible with competition law rules.

Merger control review carried out by the CPA is a separate procedure to FDI screening, which is carried out by the Ministry of the Economy, Tourism and Sport. There is no substantive overlap of the two regimes and the outcome of one procedure does not influence the other.

The CPA assesses whether the concentration is compatible with competition rules, namely ZPOmK-2. A concentration is not deemed compatible if it significantly impedes effective competition in the territory of Slovenia or its substantial part, especially as a result of the creation or strengthening of a dominant position.

ZPOmK-2 sets out general directions regarding the elements involved in the legal assessment of the concentration, according to which, the CPA should consider:

• the market position of the parties concerned;
• their financial strength;
• the structure of the market;
• the choice available to suppliers and users as well as their access to sources of supply and to the market itself;
• the legal and actual barriers to entry;
• the trends in offer and demand on the relevant markets; and
• the benefits for intermediate and final users, and the technical and economic development, if such development is to the benefit of consumers and does not impede competition.

In principle, the CPA follows the practice of the European Commission (eg, horizontal and non-horizontal merger guidelines).

At any stage of the procedure, the notifying parties may propose corrective measures (remedies) to remove serious doubts as to the compatibility of a concentration with the competition rules.

When assessing the proposed corrective measures, the CPA will take into consideration their nature, extent and the probability of timely and successful implementation. If the proposed measures are accepted, the CPA issues a conditional merger clearance – a decision specifying that a merger is compatible with competition law rules subject to the implementation of remedies. In such a decision, the CPA also sets forth:

• such corrective measures;
• obligations to ensure their implementation and supervision; and
• time limits for their implementation.

In principle, the CPA follows the European Commission practice on remedies, and structural and behavioural remedies are the usual type of remedies that are acceptable to the CPA.

The CPA has the authority to prohibit the concentration if it deems it incompatible with the competition rules (ZPOmK-2). However, as noted, this is decided in a separate procedure that is not connected to the FDI screening regime. Hence, the CPA has no ability to block or challenge FDI, either before or after the investment is made, unless the FDI is scrutinised by the CPA under the merger control regime.

The CPA’s decision to prohibit the concentration (under the merger control regime) may be reviewed by the Administrative Court of the Republic of Slovenia upon a lawsuit filed against the CPA’s decision. The judgment of the administrative court is final. It may only be challenged by revision as an extraordinary legal remedy in exceptional cases before the Supreme Court of the Republic of Slovenia.

If the concentration is implemented prior to obtaining clearance from the CPA, the latter may:

• impose measures on the undertakings concerned to restore the situation prior to the implementation of the concentration, in particular, the division of the undertaking or the divestiture of any acquired shares;
• impose a fine (so-called administrative sanction) of up to 10% of the annual turnover of the undertaking involved in the concentration (including its group companies) in the preceding business year; and/or
• impose a fine of between EUR5,000 and EUR30,000 on the responsible person of the undertaking.

General Overview

FDI notification is triggered when a foreign investor (ie, a non-EU based entity) obtains, directly or indirectly, at least 10% of the capital or 10% of the voting rights in a Slovenian company that is active in one of the sectors considered as critical under the Slovenian FDI screening legislation (for critical sectors, see 1.2 Regulatory Framework for FDI). The first, and each subsequent, acquisition is notifiable. Moreover, incorporation of a new legal entity, in which the foreign investor reaches the above threshold, also triggers FDI notification.

The notification of the transaction must be submitted within 15 days of the publication of the takeover offer, conclusion of the acquisition agreement or registration of the newly incorporated company in the court register, as applicable. The notification may also be provided in advance. The law does not explicitly provide for any exemptions of certain categories of investors or investments.

Failure to submit the filing within the prescribed deadline may result in a fine being imposed on the investor or the (target, acquired or newly incorporated) company, amounting from EUR100,000 to EUR500,000.

Process and Timeline

In contrast to the previous regulation, under which the Ministry mostly rendered non-binding opinions, the Ministry must now make a substantive decision through an administrative procedure to (i) confirm that the transaction is not notifiable; or to (ii) approve, (iii) approve with conditions, or (iv) prohibit an investment. This should strengthen legal certainty for investors, who now have the right to file a lawsuit before the administrative court against the Ministry’s decision.

The FDI screening procedure is now divided into a preliminary review procedure and a screening procedure.

Preliminary review procedure

In the course of a preliminary review procedure a notification commission establishes whether the following criteria are met:

(i) the applicant is a foreign investor;

(ii) the transaction involves a direct foreign investment;

(iii) the notification was filed within the prescribed deadline; and

(iv) the activities of the target or acquired company (or newly established company) in Slovenia are related to critical sectors.

If any criteria under (i), (ii) or (iv) are not met, the notification commission renders an internal opinion, based on which the Ministry issues a decision confirming that the transaction is not notifiable (ie, that there was no obligation to notify the investment).

On the other hand, if the above criteria are met, the notification commission continues to assess whether the transaction will impact public order and security and renders an (internal) opinion that (a) the transaction has insignificant or no impact on public order and security; or (b) the transaction could have an impact on public order and security and therefore, the notification commission proposes the initiation of the screening procedure. Based on the opinion of the notification commission, the Ministry will either issue a resolution by which it approves the investment (in the case of (a)), or initiates the screening procedure (in the case of (b)).

Screening procedure

In this procedure, an expert group issues an (internal) opinion establishing whether the foreign investment impacts the security or public order of the Republic of Slovenia and proposes that the foreign investment is approved, approved with conditions, or prohibited. Based on the expert group’s opinion, the Ministry will issue a decision on the foreign investment within two months of receiving the opinion.

Statutory deadlines

There are no statutory deadlines by which the Ministry must issue a decision on FDI notification, save for the one mentioned under “Screening procedure” above. Under the previous legislation, opinions were normally obtained from the Ministry within four to six weeks of filing. In most opinions, the Ministry concluded that the transaction was notifiable, but that there were no grounds for initiating the procedure at that time. As the new regime requires a formal decision to be issued by the Ministry, the timeline for receiving the decision is expected to take slightly longer.

In principle, the Ministry can initiate the screening procedure (again) within two years from the date of the transaction or publication of the takeover bid or incorporation of the company (even if a decision on the FDI has already been issued), provided it receives information that the investor is engaged in activities in the critical sector which have impacted or could impact the security or public order of an EU member state; or that the investor is engaged in illegal or criminal activities.

The main purpose of the FDI screening is to establish whether the relevant foreign investment impacts public security and order in the Republic of Slovenia. As outlined under 7.1 Applicable Regulator and Process Overview, the Ministry first establishes whether the business activity conducted by the company falls under critical activities. In practice, the Ministry makes the assessment based on the European Nomenclature of Economic Activities (NACE) classification code of the company’s main business activity as registered in the Slovenian business register or evident in the articles of association or deed of formation.

The Investment Promotion Act provides a non-exhaustive list of criteria considered by the Ministry when assessing the potential impact on public security and order, including, among other things, if the foreign investor is (in)directly controlled by a (foreign) government; has previously been involved in activities affecting the public security and order of the member state; or there is a serious risk it is engaged in illegal or criminal activities; as well as certain other criteria regarding its market share in Slovenia or acquisition of capital or voting rights in a Slovenian company exceeding a 25% or 50% threshold.

Thus, in principle, investments made by foreign governments or government-affiliated entities are considered as higher-risk investments, while non-controlling minority investments are deemed as less risky.

Pursuant to the Investment Promotion Act, a non-exhaustive list of potential remedies can be imposed for a maximum duration of ten years by the Ministry. These remedies may include, among other things, restrictions regarding the sale of copyrights and related rights, or fixed assets acquired; prohibitions of certain business co-operations; requirements to reduce the shareholding to be acquired; an obligation to transfer certain sensitive activities to another legal entity, etc.

Foreign investments that in the Ministry’s opinion may affect public security and order in the Republic of Slovenia, may be approved under certain conditions, or prohibited. The Ministry is also allowed to initiate a new screening procedure even after the decision has already been issued (see 7.1. Applicable Regulator and Process Overview).

There is no appeal against the Ministry’s decision; however, an administrative dispute before the administrative court may be initiated by the foreign investor. Under the previous FDI screening regime, applicable until the end of June 2023, there was no right to appeal the Ministry’s non-binding opinions. However, as it appears that no negative opinions have until now been rendered, no significant number of disputes is expected in the future.

Sector-Specific Regimes

The acquisition of companies active in certain industry sectors may be subject to an additional regulatory review or approval process. For instance, the approval of the Bank of Slovenia (Banka Slovenije) or the Insurance Supervision Agency (Agencija za zavarovalni nadzor) is required in the case of acquisition of voting rights or rights in own funds of a credit or insurance institution in Slovenia which reaches or exceeds the thresholds laid down by law.

Real estate transactions are not notifiable under the Slovenian FDI screening regime.

Reporting Obligations

Slovenia has implemented the EU Shareholders Right Directive II, therefore, a joint stock company has a right to identify its (ultimate) shareholders. Information may be requested from the central securities clearing corporation (Centralna klirinško depotna družba) or other intermediaries, that is, investment firms, credit institutions, central securities depositories, and holders of a fiduciary account. The latter is also relevant as the actual beneficial owner (who is not necessarily the same as the shareholder on record) is the addressee of potential regulatory provisions applicable to such shareholder, such as takeover legislation, merger control (see 6. Antitrust/Competition), shareholder reporting, and qualified holding provisions of Slovenian and EU banking regulations (see below).

Pursuant to a general provision of the Companies Act (ZGD-1), a company that acquires more than 25% of the interests or shares in another joint stock company that has its seat in Slovenia, must immediately notify the company. The same obligation applies to a company that acquires a majority interest in another company. Falling below such threshold is also notifiable. Until it has complied with its obligation to notify, the company, its subsidiary or anyone else on their behalf may not exercise the rights deriving from the shares in the company about which it is obliged to notify. However, if a company is subject to the (special) provisions of the Market in Financial Instruments Act, governing the obligation to notify on acquisition of a significant share (see 3.2 Regulation of Domestic M&A Transactions), such general provision does not apply.

Furthermore, every conclusion of an agreement conferring an option to purchase equity securities, or an equity future or forward (or economic equivalent), must be reported to the securities market regulator. This also applies to any changes to such agreement. The reporting deadline is four trading days in each case.

Mandatory Takeover Bid

Acquisition of a 33⅓% share of voting rights in certain joint stock companies triggers the obligation on the acquiror to make a mandatory bid for the acquisition of all outstanding shares. If such acquisition is the result of financial restructuring of the company with the aim to ensure capital adequacy, provided that the acquirer obtains the prior approval of the Securities Market Agency, it is exempted from making a mandatory bid.

Corporate Income Tax

Slovenian tax residents are subject to Corporate Income Tax (CIT) on their worldwide income. A tax resident is a company, either a corporation or a partnership, which has its registered seat or place of effective management in Slovenia.

Foreign companies that have their registered office and place of effective management outside Slovenia are considered tax non-residents. Non-residents are taxed only on:

• income with its source in Slovenia (ie, dividends, interest, royalties, income from the lease of real estate, payment services of performing artists or sportsmen or women); and
• income earned through a permanent establishment (“PE”) in Slovenia.

The standard CIT rate is 19% (in December 2023 a draft intervention law on measures to prevent the consequences of floods and landslides is going through the legislative process and this law also provides for a temporary increase in the CIT rate).

Local regulations do not set a minimum tax rate; however, a tax base may only be deducted at a maximum rate of 63% after applied deductions, so the minimum effective tax rate is 7.03%.

Other Taxes

Besides the CIT, other relevant taxes for business activities are value added tax (VAT), financial services tax, insurance premiums tax, real estate transfer tax, and excise duties. 

Dividends (including dividend-like income) and interest paid to non-residents are generally subject to a 15 % withholding tax (WHT) in Slovenia.

Pursuant to the local CIT Act, WHT is not calculated, withheld and paid on dividends which are paid to a non-resident legal entity that is resident in an EU or EEA member state other than Slovenia and subject to income tax in its country of residence, provided that the non-resident cannot claim the tax on dividends in its country of residence.

If a double tax treaty (DTT) exists between the relevant countries, the WHT rate on dividends and interest may be reduced in accordance with the provisions of the treaty, while some DTTs also require the (beneficial) owner of the income to hold a minimum number of shares.

The WHT rate on dividends and interest payments may also be reduced to zero under the Interest and Royalties Directive and the Parent-Subsidiary Directive.

Under Slovenian law, common tax mitigation strategies are subject to certain restrictions and/or allowances as described below:

• Transfer pricing – the OECD Transfer Pricing Guidelines are not implemented by law; however, the existing national rules largely reflect them. Advance Pricing Agreements (APAs) are also available.
• Thin capitalisation – the tax deductibility of interest on loans (and other forms of debt financing) received from related entities is limited to interest on debt that does not exceed four times the capital participation of the related lender in the taxpayer, unless the taxpayer can demonstrate that the loan would have been granted by an unrelated third party. The interest on loans exceeding the 4:1 debt-to-equity ratio is generally recharacterised as a hidden profit distribution.
• Interest limitation rule – Slovenia is currently in the process of implementing the interest limitation rule under the Anti-Tax Avoidance Directive (ATAD). Under this rule, excess interest will not be tax deductible if it exceeds the higher of EUR1 million or 30% of the tax-adjusted EBITDA of the taxpayer.
• Exemption of dividends (and dividend-similar income) – both a Slovenian resident and a non-resident’s PE may exempt income from dividends (95%) if the legal conditions are met.
• Exemption of capital gains from the sale of shares – capital gains from the sale of shares/stocks are considered to be revenue and are therefore included in the CIT base. However, 50% of the capital gain income may be exempted if the taxpayer making the gain (i) has been a shareholder of at least 8% for a minimum period of six months; and (ii) has continuously employed at least one full-time employee during the said period.
• Tax loss carry-forward – tax losses may generally be carried forward and offset up to a maximum of 50% of the company’s (Slovenian tax resident or foreign company’s PE) tax base for a single tax period. However, tax losses may not be carried forward if (i) the company’s direct or indirect shareholder base has changed by more than 50%; and (ii) the company either did not carry out its business activities for two years before the change in ownership or the company changed its business activities two years before or after the change in ownership.

Capital gains realised by a tax non-resident (ie, without a Slovenian PE) from the sale of their respective investments in Slovenian companies are generally not taxed in Slovenia, as the income is attributed to the foreign company.

If the Slovenian PE of a tax resident or a tax non-resident realises capital gains from the sale of its investment in a Slovenian company, such capital gains are considered to be income of the respective company and may be exempt from CIT under certain conditions (see 9.3 Tax Mitigation Strategies).

Slovenia has introduced a general anti-abuse rule (GAAR), which allows the authorities to disregard any potential arrangement or set of arrangements of which the main purpose is to obtain a benefit that is not in accordance with the purpose of the legislation. In particular, the GAAR provides that an arrangement or series of arrangements may be considered artificial if they are not entered for valid economic reasons.

In addition to the above, the following also apply:

• the controlled foreign company (CFC) rule, according to which the undistributed income of a CFC may be attributed to the controlling company (Slovenian tax resident) and taxed as such;
• the hybrid mismatch rule, which prevents arrangements that exploit the differences in the tax treatment of an instrument or an entity;
• the Multilateral Convention for the implementation of tax treaty-related measures to prevent base erosion and profit shifting (BEPS);
• transfer pricing rules that require transactions between related parties to be at arm’s length;
• exit tax – under the CIT Act, any positive difference between the fair market value and the tax value of assets that leave Slovenia is taxed at the rate of 19% (paid in up to five annual instalments); and
• country-by-country (CbC) reporting, under which a Slovenian entity that is deemed to be a constituent entity of a multinational enterprise group is liable to submit a CbC notification.

Slovenian employment law is highly regulated by both EU and national laws. Furthermore, trade unions and work councils have a strong influence through collective bargaining agreements and work council agreements.

Employment Relationships Act

The Employment Relationships Act, as the main source of Slovenia’s employment law, provides strong protection for employees. Additionally, the rights and obligations of employees in the public sector are regulated by the Public Employees Act. Certain aspects of the employment relationships of transport workers are also regulated by specific legislation.

Generally, the law tends to be interpreted in an employee-friendly manner by the courts (in particular, with respect to termination of employment) and investors may be surprised at the high protection of employees in Slovenia.

Worker Participation in Management Act

There are also certain provisions in Slovenian labour legislation which can have a significant impact on transactions but are frequently overlooked. Namely, in accordance with the Worker Participation in Management Act (Zakon o sodelovanju delavcev pri upravljanju), certain transactions (eg, business transfers via asset deals or demergers) may trigger the parties’ obligation to notify the target works council of the anticipated transaction and to perform consultations with the council. In such case, the works council has to be informed of the anticipated transaction and provided with the relevant documentation ahead of the transaction (ie, at least 30 days before the decision regarding the transaction is to be adopted). Additional information and consultation rights are granted to unions in case one is constituted at the employer level.

This statute is often at odds with modern conceptions of corporate decision-making and deal progress. Whenever a works council or union exists in a Slovenian company, it is advisable for the parties to proceed with due caution and ensure compliance with the above-mentioned obligation.

Takeovers Act

Pursuant to the Takeovers Act, in the case of a public takeover, the target’s management and the bidder are obliged to immediately inform the target’s employees (or their representatives) of the takeover intention and provide them with the target management’s opinion on the takeover bid, upon its publication.

Compensation Frameworks

Remuneration for work consists of salary (which will always be in monetary form) and other types of remuneration, if specified in the collective agreement. The employer must consider the minimum salary laid down in legislation and/or a collective agreement, which is directly binding on the employer. Employers are also responsible for reimbursing certain expenses, such as meals during work, travel to and from work, and certain business trip-related expenses. Slovenian employees are automatically covered by the social insurance system, which includes health, accident, unemployment and pension insurance, and are entitled to a seniority bonus.

Equity Participation

Participation of employees in the company’s profit is only regulated by the Employee Participation in Profit Sharing Act (Zakon o udeležbi delavcev pri dobičku), under which the employees may be entitled to certain monetary payments, or to purchase company shares. However, all employees must be treated equally, and no employee may be excluded from the scheme.

Additionally, other, informal types of employee share option plan (ESOP) arrangements and incentive or bonus schemes are spreading fast, mostly due to the increasing number of start-ups, and as demand for mechanisms to motivate key employees keeps growing.

Share Deals

An acquisition of a share in a Slovenian company does not affect any existing employee’s rights or obligations, as following such transaction, the employer (ie, the target company in which investor acquires shares) remains unchanged. However, certain share deals resulting in significant changes of ownership in the employer may also trigger certain obligations to notify the target workers’ representatives of the anticipated transaction and to perform consultations with them (see 10.1 Employment and Labour Framework).

Asset Deals

In contrast to share transactions, asset deals will usually trigger provisions of the transfer of business, and therefore, all employment contracts (along with all rights and obligations thereunder) relating to the transferred business (or part thereof) will automatically be transferred to the acquirer by operation of law. The sale of a company or its material part is considered to be a transaction that triggers notification obligations and consultation obligations with the workers’ representatives under the Worker Participation in Management Act.

The new employer may not terminate the employment contracts due to the transfer and must ensure the same level of rights as guaranteed by the collective bargaining agreement of the former employer for one year following the transfer, unless the collective bargaining agreement ceases to apply, or a new collective bargaining agreement is concluded.

Previous and new employers are severally and jointly liable for transferred employees’ claims that originate from the period precedent to the transfer and for claims related to termination by the new employer.

While the FDI screening regime applies to several critical sectors in which intellectual property plays an important role (eg, patents for medicinal products, artificial intelligence, robotics, etc – see 1.2 Regulatory Framework for FDI), there are no specific provisions applicable to IP rights in FDI legislation. The Ministry’s decisions to date do not appear to deal in any detail with the relevance or importance of intellectual property during the examination of transactions, or to devote any special consideration in assessing whether the transaction affects public security and order.

A prohibition of sale of copyright and related rights owned by the target, acquired or newly established company to natural or legal entities from third countries may be set as a condition for consummation of a foreign transaction, for a maximum period of ten years (see 7.3 Remedies and Commitments).

Slovenian law provides for strong protection of intellectual property rights, covering all major rights, such as patents, supplementary protection certificates, industrial designs, trade marks, topographies of integrated circuits and geographical indications.

Under certain conditions, a compulsory licence for exploiting the invention may be granted to the government or a third party, namely, if public interest is a factor (in particular, if national security, nutrition, health or the development of other vital sectors of the national economy so requires), or if the court has determined that the owner of the patent or their licensee is abusing patent rights (ie, if the manner of exploitation is contrary to the adopted regulations or constitutes a distortion of competition). In such cases, the patent holder is entitled to a consideration.

Certain specific rules apply to work and inventions created by employees. In the case of work created in the performance of an employee’s duties or following instructions given by the employer, the economic rights and other rights of the author (but not moral rights which are inalienable) related to such work are by operation of law exclusively assigned to the employer for a period of ten years from the completion of the work (unless the parties agree otherwise). After the expiry of the ten-year period, the rights are automatically transferred back to the author. Furthermore, certain inventions created during employment are generally at the disposal of the employer, provided that the internal regulations and the process are in line with statutory requirements.

Data protection in Slovenia is regulated by the directly applicable EU General Data Protection Regulation (GDPR) and the Personal Data Protection Act (“ZVOP-2”). The latter came into effect on 26 January 2023 and localises some of the data protection-related questions that the GDPR has left to the member states to regulate and gives the local supervisory authority (ie, the Information Commissioner) the power to issue administrative fines for the GDPR. Moreover, certain sector-specific laws also provide for additional data protection rules (eg, the Patients’ Rights Act).

Under certain conditions, the territorial scope of the GDPR may be broadened to foreign (ie, non-EU) investors, for example, to data controllers outside the EU, who must comply with EU data protection obligations when they process data from individuals in the EU for specific goals.

Slovenian authorities may impose substantial fines for data protection infringements, both on the company (or sole entrepreneur) and its responsible person. However, when selecting the appropriate fine within the prescribed range, the authority must also consider all specific circumstances of the case, such as, whether the offence was committed intentionally or to benefit/harm individuals; whether measures were taken prior to the supervision; and also, whether the fine represents a disproportionately heavy burden for the controllers or processors in relation to other comparable infringements of human rights.