ZGD-1O Amendment: Changes in Corporate Governance and Sustainability Reporting
The Act Amending the Companies Act (ZGD-1O), which entered into force in July this year, introduces a new framework for multiple-vote shares, significantly changes the scope of entities subject to sustainability reporting requirements and supplements the rules governing reciprocally participating companies. The key changes and the timeline for their application are outlined below.
Key Changes at a Glance
Area |
What is changing? |
Multiple voting rights |
The articles of association of a public limited company may provide for registered shares carrying up to ten times the voting rights of an ordinary share. Their introduction requires a majority of at least three quarters of the share capital represented and, where there is more than one class of voting shares, the consent of each class. |
Sustainability reporting |
The obligation applies to a company or group that cumulatively exceeds EUR 450 million in net turnover and an average of 1,000 employees. The new framework will apply to financial years beginning in 2027. |
Protected undertakings |
An undertaking in the value chain with no more than 1,000 employees may refuse to provide information exceeding the European standards for voluntary sustainability reporting. |
Reciprocally participating companies |
The existing exception for the company that first notified the existence of reciprocal participation is abolished, and additional restrictions on voting rights are introduced in cases prescribed by law. |
Introduction of Multiple-Vote Shares
The amendment departs from the previous principle that each share carries one vote and permits the articles of association of a public limited company to provide for registered shares carrying multiple voting rights. Such a share may carry no more than ten times the number of votes attached to an ordinary share.
A general meeting resolution on the issue of multiple-vote shares or the conversion of ordinary shares into such shares must be supported by at least three quarters of the share capital represented when the resolution is adopted; the articles of association may require a higher majority. If there is more than one class of voting shares, the consent of each class is also required.
In companies whose shares are traded on a regulated market or in a multilateral trading facility, multiple voting rights lapse upon transfer of the shares. In any event, they lapse ten years after admission to trading, unless the articles of association prescribe a shorter period. The period may be extended by an amendment to the articles of association for no more than a further ten years, but not earlier than one year before its expiry and subject to the required majorities being met.
When deciding on certain matters of particular importance, including the appointment of a special auditor or the enforcement of claims for damages, a multiple-vote share carries only one vote. Companies with such a share structure must also provide additional disclosures in the management report or the notes to the financial statements, including the total number of votes by share class and information on specified holders of multiple voting rights.
Changes to Sustainability Reporting
ZGD-1O transposes Directive (EU) 2026/470 and significantly narrows the scope of companies and groups required to prepare a sustainability report. Under the amended Article 70c of ZGD-1, a company must prepare a report if, at its balance sheet date, its net turnover for the financial year exceeds EUR 450 million and its average number of employees exceeds 1,000. Both conditions must be met cumulatively. The same thresholds apply to consolidated sustainability reporting by parent companies.
The report remains a separate section of the management report and must contain the information necessary to understand the undertaking’s impacts on sustainability matters and how sustainability matters affect its development, performance and position. The amendment also provides limited grounds for omitting specific information, for example where it constitutes a trade secret or protected information, or where its disclosure would, subject to the statutory conditions, seriously prejudice the company’s commercial position. Any omission must be appropriately disclosed in the report.
Transitional Provisions
The amended Articles 70c and 70č of ZGD-1 will apply to financial years beginning in 2027. Until then, the existing rules will in principle continue to apply to companies in the first reporting wave; however, ZGD-1O provides for a specific exemption for the financial year beginning in 2026.
A company in the first wave is not required to report on sustainability if its net turnover does not exceed EUR 450 million, either on an individual or consolidated basis, or if its average number of employees does not exceed 1,000, likewise on an individual or consolidated basis. As the statutory wording is framed in the alternative, a company must exceed both thresholds for the reporting obligation to continue to apply.
For companies in the second wave that will no longer fall within the scope of the new framework, the reporting provisions will cease to apply for the financial year beginning in 2027. For companies in the third wave that will no longer fall within its scope, the obligation will cease to apply for the financial year beginning in 2028.
The amended rules on reporting by third-country groups and branches will apply to financial years beginning in 2028. For certain subsidiaries in the European Union controlled by a third-country undertaking, the amendment permits transitional consolidated reporting at the level of a selected EU subsidiary until 6 January 2030, subject to the conditions laid down by law.
Protected Undertakings in the Value Chain
A particularly important development is the introduction of the concept of a “protected undertaking”.
A protected undertaking is an undertaking whose average number of employees in the preceding financial year did not exceed 1,000 at the balance sheet date and which forms part of the value chain of a company subject to individual or consolidated sustainability reporting.
For sustainability reporting purposes, a protected undertaking may refuse to provide information exceeding the European standards for voluntary sustainability reporting. When arranging contractual or other relationships, the reporting entity may not require a protected undertaking to provide a broader set of data; any provisions to the contrary are null and void. If the reporting entity nevertheless requests broader information, it must inform the protected undertaking which requests exceed the voluntary standard and that the undertaking may refuse them.
Reciprocally Participating Companies
With respect to reciprocally participating companies, the amendment abolishes the existing exception linked to which company was the first to give notice of the reciprocal participation. It further provides that one reciprocally participating company may not exercise voting rights attached to its holding in the other where the same third party directly or indirectly holds more than one quarter of the shares in both companies. Voting rights may likewise not be exercised in decisions on the appointment or removal of members of the management or supervisory bodies of the other reciprocally participating company.
Looking Ahead
ZGD-1O brings simultaneous changes to two areas of Slovenian company law. The introduction of registered shares carrying multiple voting rights creates new options for structuring ownership and accessing capital markets, while the sustainability reporting changes significantly narrow the scope of reporting entities and introduce specific limitations on the collection of information from the value chain. Given the different application dates and detailed transitional rules, each company will require an individual assessment based on its size, position within the group and the stage at which it has entered the reporting regime.
Should you require further information on the changes introduced by ZGD-1O or on any other company or corporate law matters, please do not hesitate to contact us.
