On 27 January 2021, the National Assembly of Republic of Slovenia adopted the long-awaited Act Amending the Companies Act (hereinafter: »ZGD – 1K«), which is adopting a number of significant changes regarding the rights of (minority) shareholders and their identification, transparency and additional reporting obligations on companies businesses with its associated persons and members of supervisory boards and boards of directors, as well as various transparency and diversity policy requirements and restrictions on setting up companies for convicted persons.
ZGD-1K was published in the Official Gazette No. 18/2021 on 9 February 2021 and is available on the following site.
Implementation of the respectful Amendment
The main reason for the implementation of the respectful Amendment to the Companies Act (ZGD-1) is the mandatory application of the following EU Regulation:
- Directive (EU) 2017/828 of the European Parliament and of the Council of 17 May 2017 amending Directive 2007/36/EC as regards the encouragement of long-term shareholder engagement.
- Commission Implementing Regulation (EU) 2018/1212 of 3 September 2018 laying down minimum requirements implementing the provisions of Directive 2007/36/EC of the European Parliament and of the Council as regards shareholder identification, the transmission of information and the facilitation of the exercise of shareholders rights.
In addition to the implementation of new rules and requirements, the new ZGD-1K also eliminates some shortcomings of the existing regulation and minor inconsistencies in the previously valid ZGD-1.
The main changes implemented with the ZGD-1K cover the areas listed below, where we also prepared a summary of the implications or measures that the companies concerned should adopt and implement within their operations.
New Implementations
Implications and measures
Mandatory identification of shareholders and forwarding information for exercising their rights
Each company may request information on who its shareholders are. This information request of the company is admissible for both registered and bearer shares. The company also has the right to know whether the shareholders own shares for their own or someone else's account and in this case for whose account.
Provisions on the remuneration policy of the Management and Supervisory Board (including consulting contracts from private companies owned by members of the Management Board or their family members)
All Public limited companies are required to formulate a remuneration policy for all members of Management and Supervisory bodies as well as executive directors who are among directors but do not have a management status according to Article 10 of the Companies Act. The remuneration policy must be submitted to the General Assembly for approval.
Transparency in the company’s operations with associated persons (obligation to approve new transactions with associated persons by the Supervisory Board / Board of Directors, mandatory publication of such transactions).
All companies who make transactions with their associated persons are obliged to prepare an internal procedure that defines specific criteria and performs an assessment of the adequacy of transactions with associated persons. These transactions must obtain the prior consent of the Supervisory Board, and it is necessary to formulate a proposal for a decision on consent. After concluding a deal with associated persons, it must be made public and provide all relevant information necessary to assess whether the transaction is appropriate from the point of view of the company and non-related shareholders. This shall include at least information on the nature of the company's relationship to the associated person, the name of the associated person and the date and value of the transaction.
Greater transparency in the exercise of voting rights by institutional investors and other intermediaries
Transparency obligations fall on institutional investors and asset managers who are obligated to publish a cooperation policy on their website or other information system and must do so free of charge. At the same place, they must also annually report on the implementation of the respectful cooperation policy, in particular on voting at the general meetings of the companies in which they invest and on the use of services of voting advisers.
In addition, the institutional investor must disclose how the main elements of his investment strategy are aligned with the profile and duration of his liabilities, in particular long-term ones, and how they contribute to the medium to long-term return on his assets.
Consultants are required to report on their compliance with the requirements or recommendations of the Code of Conduct they have decided to apply, on deviations from these recommendations and any other measures accepted in order to achieve the desired objectives of the Code of Conduct.
Additional restrictions on establishing new companies in the event of past abuses (Article 10a), including a restriction in the case of a fine for an offense of unauthorized interference with share capital (Article 495) and with added international reach
The existence of these restrictions will be supervised by the Registry Court together with notaries ex officio. In the event of a company establishment or the acquisition of shareholder status by a natural or legal person from another Member State or a third country, the persons concerned shall themselves submit the documentation for the purpose of proving the absence of restrictions in question, where the documentation shall not be older than 30 days.
Provisions on diversity policy and the obligation to disclose gender relations in management and supervisory bodies
Companies obliged to audit annual reports will have to emphasize in the diversity policy the gender relationship in the management and supervisory bodies of the company, which is appropriate for the company in terms of its size, the goals pursued by the company and the impact on the procedures for selecting members of the company's management and supervisory bodies and other procedures in the company.
Alignment of the definition of public interest entities with the definition as defined by the Auditing Act
According to this definition, a public interest entity also includes any company subject to a statutory audit in which the state or municipalities, jointly or independently, directly or indirectly, have a majority ownership share.
The amendment to the Companies Act (ZGD-1K) therefore introduces a number of changes that concern large and medium-sized companies, joint stock companies and their shareholders, as well as all other companies obliged to audit annual reports and, to a lesser extent, entrepreneurs.
*** This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, or other professional advice. Please refer to your advisors for specific advice.
How EY can help?
As a company with a wide range of services and rich experience, EY can help you with advice and proper implementation of the new rules of the Companies Act from a tax, financial and legal point of view.
Among other things, our legal advice department, in cooperation with our tax and financial advisers, can advise and also help you prepare internal legal documents and rules (e.g. accepting remuneration policies of members of the Management and Supervisory Boards, rules on transfer pricing, etc.), with which your company will be adequately prepared to meet the new requirements and procedures.
