Incorporation of new legal entities and registration of shareholders in Slovenia

Pursuant to Article 10.a of the Slovenian Companies Act (Zakon o gospodarskih družbah, hereinafter: ZGD-1), the following persons (natural persons or legal entities) shall not be eligible to become a founder or a shareholder in Slovenia:

1.    a person who has been sentenced to imprisonment for crimes concerning economy, employment, social security, legal transactions, property, the environment, space and natural resources, health and general safety of individuals and property;

2.    a person who, pursuant to the Slovenian Tax Procedure Act, was publicly listed in the last 12 months by the Slovenian tax authorities as a perpetrator of the following tax offences: (i) failure to submit tax returns, (ii) failure to pay taxes or (iii) ex-officio termination of identification for VAT purposes in Slovenia due to suspected misuse of such identification or because of findings of the tax authorities that the taxable person in question used identification for VAT purposes to allow other taxpayers to unjustifiably deduct VAT;

3.    a person who is directly or indirectly participating, with more than 25%, in the share capital of a company that the Slovenian tax authorities publicly listed in the last 12 months pursuant to the Slovenian Tax Procedure Act as a perpetrator of the tax offences stated under previous point;

4.    a person who was fined at least twice in the last three years by a final decision of the Labour Inspectorate of the Republic of Slovenia or the Financial Administration of the Republic of Slovenia for an offence concerning remuneration for work or an offence concerning undeclared employment

(hereinafter jointly referred as: restrictions).

With regard to natural persons and legal entities residing or established in Slovenia, registration authorities and notaries are assigned to check whether any of the above restrictions apply. This is done electronically upon incorporation of a new entity or upon registration of a new shareholder via the already established information exchange system (eVem), which, upon request, provides information about any restrictions that would prohibit the registration of a new entity/shareholder.

Prior to the adoption of the new amendments, such enquiries were performed for both domestic and foreign investors, but only for the territory of Slovenia, which meant that the registration authorities and notaries were able to check for restrictions, through electronic enquiries via the information exchange system, with the Slovenian authorities (criminal court, tax authorities, labour inspectorate, etc.).

The latest amendments of the ZGD-1 envisage checking for potential restrictions also in relation to the territory in which foreign investors have a permanent residence/registered office. The act states that such examination may be done electronically via the information exchange system established between Slovenia and the respective foreign investor’s country (if such a system is established at all). If no such system is in place (as is currently the case with most of the countries), the founder or the new shareholder shall provide the following documents based on which the (non-)existence of restrictions can be verified:

• ­an extract from relevant the registry or, failing that, an equivalent document issued by a competent judicial or administrative authority in the Republic of Slovenia, another EU Member State, country of residence or the country in which the legal entity has its registered office, from which it is evident that there are no restrictions preventing the foreign investor from establishing a new entity or registering as a shareholder in Slovenia;
• a certificate issued by a competent authority in the Republic of Slovenia, another EU Member State or a third country, from which it is evident that the respective foreign investor has no outstanding tax liabilities (as set out under points 2 and 3 above) in their country of residence or the country in which the legal entity investing in Slovenia has its registered office

(hereinafter jointly referred to as: certificates).

The above documents may not be older than 30 days, counting from the day of their submission to the Slovenian court register.

Although the new regulation has already been in place for over six months now, some unresolved issues persist since the very adoption of the new provisions and pose an administrative challenge for most of the foreign investors. To this end, we provide a brief summary of the key administrative challenges concerning the obtainment of the required extracts/certificates, which foreign investors must now submit when incorporating a new entity or when registering as a new shareholder:

Competent authority

The new amendments do not provide any further explanations and/or criteria to help identify the correct authority, especially in cases where certain countries may have more than one authority competent to issue a certain certificate. It is therefore possible to conclude that it has been left to the foreign investors to identify the authority competent to issue the necessary certificates in their home country.

Generally, the restrictions themselves already provide certain guidance as to the state departments one might request to issue the certificates. In other words, the competent criminal courts/judicial departments, tax and labour state authorities would be the first point of contact.

Another genuine dilemma involves the lack of clarification for cases of foreign investors coming from federated states (i.e. USA), namely whether the required certificates need to be obtained on a federal or state level.

An issue also arose with regard to natural persons acting as foreign investors who are citizens of one country but have a permanent residence in another country.

Form and content of certificates

Considering that the restrictions are drafted under Slovenian law, it is difficult to expect that restrictions with identical or even similar content would be stipulated under any foreign law. It is therefore difficult to expect foreign countries to keep registers able to issue certificates verifying the (non-)existence of a particular restriction stipulated under Slovenian law. This raises the question of what to do when a foreign investor from a certain country is unable to obtain the required certificates at all.

Since the act does not cover this, Slovenian authorities published guidelines that provide some clarification in the period following the adoption of the act. Nevertheless, evaluations will have to be made on a case-by-case basis, especially since it is safe to expect that the ability of the foreign investor to obtain and provide the required certificates will also depend on the regulations and practices in their home country.

Legalisation of foreign documents

For foreign investors coming from countries that are the signatories of the Hague Convention of 5 October 1961 Abolishing the Requirement of Legalisation for Foreign Public Documents (the Apostille Convention), this means that any certificate obtained in their home country shall have an Apostille stamp attached to it in order for such a certificate to be accepted by the Slovenian authorities.

Although the Apostille requirement is generally already known to foreign investors from most countries and should not represent a significant burden, it must be pointed out that this may not be the case in respect to the new certificates.

Since the certificates may not be older than 30 days from the day of their submission to the Slovenian court register, the requirement to obtain an Apostille may prove to be a challenging task in countries where the procedure to obtain an Apostille takes longer than what is usual in most countries. As this varies from one case to another, we would advise foreign investors to make enquiries domestically and to consult with their Slovenian advisors to find practical solutions before initiating any procedures to obtain the required certificates.