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Forms of security

What are the main forms of security over moveable and immoveable property and how are they given legal effect?

The main forms of security over real estate are mortgages and maximum mortgages. Mortgages are perfected with their entry in the land register. A mortgage agreement must be concluded in a written form with the signature of the pledgor notarised; however, mortgages are generally concluded in the form of a directly enforceable notarial deed. Maximum mortgages, which may be used for securing several existing and future claims of an individual creditor (up to a maximum secured amount), may also be concluded under Slovenian law, in which case the same perfection requirements apply.

The main forms of security over movable property are pledges, fiduciary transfers of title and retention of title arrangements. Possessory pledges, which require the delivery of pledged items are rare in practice; non-possessory pledges are more common. For certain assets (eg, motor and rail vehicles, equipment, stock and livestock), registration in a public register is required for a pledge to be perfected.

Pledges are also created on shares. For shares in a limited liability company, the pledge agreement must be concluded in the form of a notarial deed and entered into the court register. Shares in corporations are validly created by their registration in the securities register.

Receivables are also commonly pledged, either by the pledge of receivables or by the fiduciary assignment of claims. The former is created by notification of the underlying debtor and the latter by a written agreement. If the creditor wishes to obtain the right to a separate settlement in insolvency, the fiduciary assignment of claims must be concluded in the form of a notarial deed.

Ranking of creditors

How are creditors’ claims ranked in insolvency proceedings?

Creditors’ claims in insolvency proceedings are ranked as follows:

  • secured creditors (as the same collateral may be used for securing several creditors’ claims, creditors’ claims are also ranked in relation to individual collateral);
  • priority unsecured claims (eg, costs of bankruptcy proceedings; six-month back salaries, wage compensations and other employment-related payments, as well as taxes relating to such payments and social security contributions);
  • unsecured claims;
  • subordinated claims; and
  • shareholder claims and equity interests.

Can this ranking be amended in any way?

In general, individual creditors of an insolvent debtor have few legal ways in which to improve their ranking to the detriment of other creditors without the latter’s consent. Nonetheless, individual creditors may decrease the rank of their own claim (ie, any creditor can subordinate their claim in agreement with the debtor). Intercreditor agreements, concluded between all creditors of a particular type (eg, all banks or agreements where a pari passuclause is agreed) are common. These may also include provisions on changes to a particular creditor’s rank.

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