Slovenia recently adopted a number of amendments to the Commercial Companies Act. Besides modifying the existing cross-border mergers legislation and introducing new regulations for the use of the word "Slovenia" in company names, the amendments oblige public-interest companies to provide certain non-financial (corporate governance and other) statements in their annual reports.
Background and Overview
On 21 March 2017 the National Assembly of the Republic of Slovenia adopted another amendment to the Slovenian Commercial Companies Act (Zakon o gospodarskih družbah, ZGD-1J), which harmonises certain aspects of Slovenian corporate law with Directives 2014/95/EU and 2005/56/EC of the European Parliament and of the Council, and introduces some other changes in the national legislation.
Pursuing the aim of the above-mentioned Directives (among others the enhancement of commercial and legal cooperation between EU Member States), one of the main goals of the amendment is to eliminate administrative difficulties in cross-border mergers. The new legislation also introduces an amended approval mechanism for the use of the word "Slovenia" in company names. This is now in the sole discretion of the Slovenian Government, which grants approval based on the company's level of development, growth-orientation and current financial situation, and its interest for the Slovenian economy as a whole.
But the biggest change to the Slovenian corporate law landscape will be brought about by another amendment of the Commercial Companies Act introduced in March 2017, namely the mandatory inclusion of certain non-financial (corporate governance and other) statements in the annual reports of public-interest companies.
Based on the newest amendment of the Commercial Companies Act, large Slovenian public-interest companies (ie listed companies, insurance companies and credit institutions) with more than 500 employees will be obliged to include detailed statements on environmental, social and employee-related matters affecting the company, respect for human rights, and handling of anti-corruption and bribery risks in their annual reports. These statements must include, among other things:
- A brief description of the company's business model;
- A detailed description of the internal policies on the above-mentioned matters, including information on (due diligence and other) checks and processes implemented, and the results of these checks and processes;
- The main legal risks of the company in the above-mentioned areas, including a description of implemented or planned measures to mitigate such risks; and
- An outline of the key (non-financial) performance indicators for measuring the effectiveness of the implemented or planned measures.
In addition, Slovenian commercial companies (save for small and medium-sized companies) must in future include a corporate governance statement in their annual reports, inter alia containing a description of the company's diversity policy applied in relation to administrative, management and supervisory bodies – with regard to aspects such as age, gender and educational/professional background – and the objectives of the diversity policy, planned implementation measures and results in the relevant reporting period.
Compliance with these new requirements and the completeness of the relevant statements shall be checked by auditors, who shall comment on those aspects in their audit opinions.
Although some Slovenian commercial companies already include non-financial (corporate governance and other) statements in their annual reports, the newly adopted additional reporting requirements will likely lead to changes in the mind-set of entrepreneurs in relation to individual aspects, which are still partially underdeveloped in some companies and business areas in Slovenia, such as sustainability of business operations, compliance and diversity / HR.
Other than that – and besides the expected increased level of awareness, transparency, responsibility and prosperity in relation to the above-mentioned "soft" areas of commercial companies' business operations – such changes should also foster the comparability of competing companies across the EU, enabling potential investors to make educated investment decisions based on reliable and comparable information in publicly available records.