In short: formalities for the reorganization of companies in Slovenia
Formalities
Date of reorganization
Can a reorganization of a company be considered retroactive or is it already considered to have taken place, for example since the beginning of the financial year?
As the entry in the register has a constitutive effect on the consequences of the reorganization, interfering with the documents required for the transaction would be inadvisable and could even hinder the reorganization process. From an accounting and tax point of view, the cut-off date (in our experience related to the date of entry in the register) will be determined by the tax advisor when the new balance sheets of the reorganized company are prepared. According to the Companies Act (ZGD-1), it is not allowed to set a cut-off date more than nine months before entry in the register. We strongly advise you to consult a tax advisor or an accountant or both on this matter, depending on the specifics of the case at hand.
Documentation
What documentation is needed to reorganize a company?
The required documentation depends on the type and extent of reorganization and the participating companies. Changes in the legal form from a joint stock company to a limited liability company or vice versa will require a resolution of the General Meeting, a document with the name of the members of the management and supervisory boards and audit reports with some additional details depending on the type of change. Assets and stock transactions require a sales contract in combination with accompanying documentation, which allows for subsequent registration of ownership. Mergers and divisions require either a merger agreement or a division plan, a management report on the merger or division, a resolution of the general meeting and a review of the proposed reorganization by the auditor. In the case of reorganization of a company with a cross-border element, all foreign entities or citizens must obtain a Slovenian tax number before they can be entered in the court register as shareholders or directors, etc. In the case of a limited liability company with a sole shareholder, the resolution of the General Meeting is replaced by a resolution of the sole shareholder.
Representations, guarantees and damages
Should clients provide representation, guarantees or damages when reorganizing a company?
Slovenian legislation does not regulate in detail representation, guarantees and damages, as is the case in some other jurisdictions. As a result, the company’s reorganization documentation usually does not contain provisions for this type of protection, which is more common in M&A transactions with third parties. However, even in these transactions, a very limited list of agents and guarantees can be used, which usually relate to the existence of encumbrances or rights of third parties that may hinder the reorganization process or offset the potential beneficial effects of these transactions.
Remedies against a going concern
Does it matter whether the assets or the company are transferred as a going concern?
In the case of a property transaction, difficulties may arise in the transfer of contracts, as the validity and enforcement of the transfer requires the consent of the contracting parties of each contract being transferred. In addition, an important shortcoming of the Slovenian regulation on property operations is the provision that stipulates that the party to whom the property is transferred, together with the transferor, is jointly and severally liable for all debts arising from this property or. of any work, up to the value of the assets.
On the contrary, the transfer of the company as a going concern in the event of a share transaction or change of legal form would not require the consent of the counterparty and the acquiring company would automatically take over all contractual relationships of the target company. However, control modification clauses or provisions on third party notifications may still apply.
The status of employees and their inclusion in pension plans is subject to the same regulatory regime, regardless of whether assets or operations are transferred as a going concern.
Entity types
Explain any differences between public, private, government or non-profit entities that need to be considered when reorganizing a business.
Corporate reorganizations of public entities usually have stricter rules than those involving private entities. The revision (review) of the merger agreement is not mandatory for a limited liability company, as is the case for the supervision of the merger with the Supervisory Board. Requirements for the preparation and implementation of the General Meeting and a possible increase in share capital are less stringent. In addition, financial aid is prohibited for a public limited company, but not in the same way for a limited liability company. Special provisions on takeovers and financial instruments may also apply to listed traders.
Entities under state control, such as public companies, may be in one of the forms of private or public companies, as prescribed by the Companies Act (ZGD-1). A special reorganization procedure, called the transfer of assets, is used when the transferring company decides to transfer all or part of its assets to Slovenia or the local community in exchange for monetary compensation or bonds. Similarly, the rules for the reorganization of a public limited company with regard to the general meeting and the rights of shareholders apply.
Reorganizations of companies in relation to non-profit entities are subject to less stringent rules than public and private companies.
Steps after reorganization
Do any applications or other measures need to be taken after the reorganization of the company?
Again, it depends on the type of reorganization of the company. As a rule, the reorganization is considered to have entered into force on the day of entry in the court register. Therefore, most of the reorganization steps will be completed before this entry and all liabilities after this event are considered an exception. Some changes must be registered with the competent registration authority in order to be effective and have legal consequences.
As an example of an exception, shareholders of the acquiring company who objected to the resolution of the General Meeting on the merger may claim monetary compensation in exchange for shares of the acquiring company and offer the monetary compensation to the acquiring company for two months from the date of merger.
Another possible duty after the reorganization is the obligation to obtain and provide data on actual ownership under the ‘4th AML’ EU directive, which was transposed into national legislation by the Slovenian Anti-Money Laundering and Terrorist Financing Act (ZPPDFT-1). ). This obligation requires notification of a change of beneficial owner within eight days if such a change has occurred.
In addition, a mechanism for verifying foreign direct investment was introduced in Slovenia in 2020. Acquisitions of 10% of the share capital or voting rights may already constitute foreign direct investment, including the reorganization of companies. There is currently no clear exception for intra-group transactions and the competent authorities have not yet published guidance on this topic. It is therefore advisable to notify the reorganization, which should take place within 15 days of the completion of the transaction.
Act specified date
Fix it
Please indicate the date when the law stated here is correct.
January 2022.