Foreign exchange regime
The foreign exchange regime is fully liberalised. It is regulated by the Foreign Exchange Act and several other regulations enacted pursuant to the Act by the Bank of Slovenia or the Ministry of Finance, as well as by some other sectoral laws.
Investment in securities portfolios
Non-residents are free to purchase all types of securities in Slovenia.Residents are free to purchase all types of securities abroad.
Residents, natural and legal persons are free to take credits abroad or extend credits to non-residents. This relates to all types of credit, including consumer and mortgage loans. The freedom to perform credit operations relates to collateral and the sale of claims, as well as factoring and leasing transactions between residents and non-residents.
Deposits and current accounts
A non-resident may open foreign currency and euro accounts in banks and other payment institutions in Slovenia but the banks and other payment institutions must establish and verify the customer’s identity, i.e. the non-resident’s identity.
If a non-resident is a legal person, they may authorise those natural persons, residents or non-residents who are their resident employees or authorised agents to conduct operations involving their bank account.
Residents may open payment accounts abroad without restriction.
Payments and transfers
There are no restrictions on current and capital transfers.
Branches of third-country credit institutions seeking to provide payment services in Slovenia must establish a company (in one of the prescribed forms) in the EEA and apply for authorisation in order to become a payment institution and conduct payment services.
Cash payments between residents and non-residents
Residents (legal persons or self-employed entrepreneurs) may receive cash payments from non-residents in line with the measures applying to domestic cash transactions. According to the Prevention of Money Laundering and Terrorist Financing Act, the following measures apply:
- cash payments in the sale of goods and performing of services are limited to EUR 5,000;
- in other cash transactions, the rules on reporting apply. Reporting entities (credit institutions, financial institutions, brokerage and management companies, post offices, real estate agencies, casinos, lawyers and other entities with reporting obligations) must report to the Office for Money Laundering Prevention all cash transactions above EUR 15,000. Suspicious transactions must also be reported, regardless of the amount.
Cross-border cash transfers
There are no restrictions on the amount of cross-border cash transfers, but both residents and non- residents must report to the Customs Service every transfer in and out of the EU of cash (cash means currency (banknotes and coins in circulation as a medium of exchange) and bearer-negotiable instruments including monetary instruments in bearer form such as travellers’ cheques, negotiable instruments (including cheques, promissory notes and money orders) that are either in bearer form, endorsed without restriction, made out to a fictitious payee, or otherwise in such a form that title thereto passes upon delivery and incomplete instruments (including cheques, promissory notes and money orders) signed, but with the payee’s name omitted) when the amount of cash equals or exceeds EUR 10,000.
Cross-border transfer of securities
There are no restrictions regarding the amount of the cross-border transfer of securities, but both residents and non-residents must report to the Custom Service every transfer in and out of the EU of bearer negotiable securities (bearer shares or bonds) when the amount equals or exceeds EUR 10,000.
Transfers of privately-owned capital
There are no restrictions on the transfer of capital owned by residents or non-residents.
Foreign exchange transactions between residents
Slovenia introduced the euro as its own currency in 2007. After this date, there are no restrictions relating to foreign exchange transactions between residents and they are free to conduct transactions and payments between themselves in either euros or any other currency.
Foreign exchange market
Residents (with the exception of banks) and non-residents may only purchase and sell foreign currency at authorised banks and at contractual currency exchange operators.
Authorised participants in the securities market
According to the Financial Instruments Market Act, investment services and activities may only be conducted by:
- brokerage companies authorised for such services by the Securities Market Agency (Agencija za trg vrednostnih papirjev, hereinafter: ATVP);
- investment firms and banks authorised for such services in EU states;
- branches of foreign investment firms authorised for such services by the ATVP;
- branches of foreign banks authorised for such services by the Bank of Slovenia;
- banks authorised for such services by the Bank of Slovenia;
- asset management companies (UCITS) authorised for portfolio management and ancillary services of investment advice by the ATVP or by a competent authority in EU states; and
- alternative investment fund managers from the RS or the EU authorised by the ATVP for portfolio management and ancillary services of investment advice, safekeeping and administrative services connected by units of investment funds and reception and transmission of orders in relation to one or more financial instruments.
A brokerage company may be organised in the legal form of a public limited company, a European public limited company or a limited liability company registered in Slovenia which obtain appropriate authorisation from the ATVP.
A brokerage company may provide the following services: investment services and activities; ancillary investment services and activities; mutually recognised financial services; auxiliary financial services; custodian and other services or activities with similar features to the previously mentioned services. A brokerage company may also provide individual investment fund management services for investment funds that meet the conditions for marketing and sales in Slovenia.
The minimum amount of a brokerage company’s capital stock is EUR 730,000 (EUR 125,000 where the brokerage company does not provide services related to an initial public offer for underwriting nor provides services relating to trade in securities for its own account, and EUR 50,000 where the brokerage company is regarded as a local company and only entitled to provide investment advice services).
The shares of a brokerage company can only be registered to a name wholly paid up in cash prior to entry in the companies’ register, its establishment or recapitalisation. There are no restrictions on non-residents in terms of their establishment and participation in the operations of such companies.
A brokerage company may choose a two-tier management system by appointing a management and a supervisory board or a one-tier management system by appointing a board of directors.
The management of a brokerage company must consist of at least two members who act jointly as agents and representatives of the brokerage company in the conduct of legal operations. No member of the management of a brokerage company can be authorised to operate independently as an agent or representative of the brokerage company for the overall operations within their scope of work. At least one member of the management board shall have working knowledge of the Slovenian language necessary to properly perform the duties of a management board member. The supervisory board shall decide on appointing individual persons as management board members before such persons file a request for authorisation to perform this function. Only those people who receive approval from the ATVP can be members of the management. In the event a brokerage company chooses a two-tier management system the board of directors must appoint at least two executive directors (and not more than half the members of the board).
Branches of investment firms
An investment firm from an EU member state may perform business operations in Slovenia either directly or through a branch it has established.
Investment firms from third countries may properly perform business operations in Slovenia through their branch. The branches of investment firms must obtain authorisation from the ATVP. The ATVP is responsible for supervision of a third-country investment firm’s branch while, in order to acquire authorisation, it may also require that the parent investment firm deposits within Slovenia a specific amount of cash or other appropriate financial asset or presents other appropriate insurance as a guarantee for the settlement of liabilities arising from transactions concluded within Slovenia. A branch in Slovenia may only provide investment services and activities whose description was attached to the application to obtain authorisation from the ATVP.
Securities Market Agency (ATVP)
The ATVP supervises and performs tasks and obligations defined by the Financial Instruments Market Act, the Investment Funds and Management Companies Act, the Alternative Investment Fund Managers Act and the Takeovers Act. The tasks of the ATVP are also determined by the Book Entry Securities Act, the Banking Act, the Pension and Disability Insurance Act, the Prevention of Money Laundering and Terrorist Financing Act, the Companies Act, the Financial Conglomerates Act, the Macro-prudential Supervision of the Financial System Act and several other acts.
The ATVP performs duties and tasks intended to ensure the observance and implementation of provisions of the above laws, their amendments and the regulations issued on their basis, as well as to create the conditions for the efficient functioning of the securities market so as to provide incentives to potential investors and strengthen their confidence in the Slovenian capital market.
The ATVP is a legal entity of public law that is fully independent in performing its tasks and responsibilities. The ATVP’s bodies are the Council and the Director. The Council consists of five members, of whom one is the Director. The Director is also the President of the Council.
Slovenia currently has one operator of the organised securities market – the Ljubljana Stock Exchange (Ljubljanska borza, d.d., hereinafter the LJSE).
The LJSE is a full member of the International Association of Stock Exchanges (FIBV) and a member of a co-operation project involving the stock exchanges of South-East Europe (SEM-ON.NET). In 2018, the LJSE joined the UN Sustainable Stock Exchange Initiative. The partnership initiative’s purpose is to promote and stimulate the capital market in certain key areas: transparency of the business of public companies, promotion of gender equality, promotion of the market of small and medium-sized enterprises, and the development and promotion of the capital market for financing environmentally-friendly projects.
|LJSE – general information|
|Firm||Ljubljana Stock Exchange|
|Owners||The only shareholder of the Ljubljana Stock Exchange is Zagrebačka burza d.d. (Zagreb Stock Exchange)|
|No. of member firms||11|
|Market segmentation||Equity market (Prime Market, Standard Market), Bond market (Bonds, T-bills, Commercial papers)Standard products market (Closed-end fund shares, Fund market, Certificates, Warrants, Rights)|
|MTF – SI ENTER market||Segment Basic (listed OTC stocks on LJSE initiative)Segment Advance Equity (listed on issuer’s application)Segment Advance Bonds (listed on issuer’s application)Segment Advance Commercial Papers (listed on issuer’s application)Segment Progress Equity (for SME issuers with greater operational transparency)Segment Progress Bonds (for SME issuers with greater operational transparency)Segment Progress Commercial Papers (for SME issuers with greater operational transparency)|
|Trading hours||Opening auction: 8.15 a.m. – 9.15 a.m.Open market: 9.15 a.m. – 2.20 p.m.Closing auction: 2.20 p.m. – 2.30/2.33 p.m.|
|Trading method||Traders authorised by LJSE member firms use the Xetra electronic trading system. Continuous trading methodAuction trading method|
|Settlement||Standard T+2 settlement cycle, Central Securities Clearing Corporation (KDD)|
|Trading system||Xetra – LJSE electronic trading system|
|Capital market regulator||Securities Market Agency (ATVP)|
|International ties||The LJSE is a member of:WFE – World Federation of Stock ExchangesFESE – Federation of European Securities ExchangesSSE – UN Sustainable Stock Exchange InitiativeCooperation with stock exchanges of South East Europe at road-shows. The regional investor conferences aim to promote regional capital markets and leading listed companies,while strengthening relations between international investors and companies.|
|Legal framework||Financial Instruments Market ActTakeovers Act Companies Act Book Entry Securities ActInvestment Funds and Management Companies ActAlternative Investment Fund Managers ActEU legislation|
The LJSE uses a securities market segmentation based on types of listed securities and the size of the issuers. The core division includes: Stock market (organised market) and the MTF (Multilateral Trading Facility) market SI ENTER.
The stock market is divided into: an equity market (Prime and Standard), a bond market (bonds and T-bills) and a standard products market (closed-end fund shares, fund market, certificates, warrants and rights).
The SI ENTER market is divided into the Basic Equity segment, Advance Segments, and Progress segments (see the above table).
The LJSE is a shareholding company authorised by the Financial Instruments Market Act to organise trade. Banks and brokerage companies meeting the conditions set by the Financial Instruments Market Act, the Articles of Association and the Rules of the Stock Exchange can be members of the LJSE. Members of the LJSE employ brokers/experts with the exclusive right to trade securities.
The LJSE prime and standard markets
The Prime Market is the most prestigious LJSE market segment and lists larger companies renowned for their liquidity and transparent business operations. For investors, investing in Prime Market shares is a certain guarantee of quality, making it a relatively safe investment. Another important factor is the lower transaction costs with the purchase or sale of Prime Market shares due to the higher liquidity in this segment. The Prime Market lists shares of issuers that meet special qualitative, quantitative and liquidity criteria. Prime Market issuers comply with the requirement of additional disclosure in the English language (apart from Slovenian), they publish their business results in line with the International Financial Reporting Standards (“IFRS”) and provide quarterly reports, all in an effort to bring Slovenia’s capital markets ever closer to the international investment community.
Provisions of the Financial Instruments Market Act stipulate the level of investor protection and the informing of investors, especially regarding their knowledge and experience in financial matters. It thus distinguishes between three categories of clients, from the highest level of protection and disclosure down to the lowest. The investor decides which category they wish to be treated as when they open their trading account. Client categories are retail client, professional client and eligible counterparty (only for certain investment services).
Custody services are intended for foreign investors investing in Slovenian securities. Custody services are subject to a special custody agreement which investors can enter into with a Slovenian bank authorised to render custody services or with a bank co-operating with the local custodian bank.
The Standard Market is intended for larger companies with a dispersed ownership structure, whose operations are characterised by higher levels of transparency.
LJSE trading system
The LJSE uses the Xetra electronic trading system in its operations. Orders may only be placed by Xetra traders authorised by LJSE member firms. This makes the Slovenian capital market easily accessible, internationally comparable and competitive, since the Xetra system:
- simplifies remote members’ access to the LJSE and thus attracts international portfolio investors;
- fosters new listings of financial instruments and thereby widens the scope of LJSE-listed financial instruments;
- facilitates additional and improved services (providing liquidity etc.); and
- enables LJSE members’ easier access to other markets.
On the basis of meeting the LJSE liquidity criteria, securities are traded according to the continuous or auction trading methods.
The continuous trading method is intended for those securities that meet the LJSE liquidity criteria regarding the number of executed trades, turnover and market depth.
The less liquid securities which do not comply with the LJSE liquidity criteria are traded according to the auction trading method.
The two trading methods ensure greater market integrity, improve best-price-forming mechanisms, and enable the Exchange and its members to set up internal controls and thus help identify potential cases of market manipulation.
LJSE activities to promote and develop the local capital market
By providing supportive/training programmes – namely, the Partner Programme, the LJSE took on the initiative in the area of activities for developing the SME segment. Relying on remediation processes, the Partner Programme seeks to ensure SMEs are able to grow sustainably by renovating their business strategies/models and financial optimisation.
Support for the SME market’s development also comes from the EBRD together with the EU and the ATVP via the SME Pre-Listing Programme. The objective is to help SMEs access capital market finance through initial public offerings or issuing corporate bonds.
By establishing the MTF SI ENTER Market, the LJSE offers SMEs ‘user-friendly’ access to alternative financing using the various financial instruments available in the SI ENTER Market.
One of the LJSE’s key roles in the local capital market’s future development is to promote responsible investment in sustainable development and advance corporate performance in terms of environmental sustainability. For these purposes, it operates the LJSE Green Exchange – a market intended for issues of Green Bonds and other environmental securities.
Clearing and settling trades executed on the LJSE
For trades transacted on the LJSE, securities and cash from trades executed on a specific trading day (T+0) become irrevocably eligible for settlement on that same day at 16:30. The settlement is performed on the second business day following the execution (T+2). The settlement of trades made on the regulated market is guaranteed through the guarantee fund operated by the central securities depository (CSD), which in Slovenia is the Central Securities Clearing Corporation (KDD – Centralna klirinško depotna družba; hereinafter: KDD).
Clearing and settlements – KDD
The settlement cycle for on-exchange trades is T+2. All trades are cleared and settled via a book entry made by KDD. KDD maintains a register for all Slovenian shares of joint-stock companies and for publicly offered debt securities.
KDD operates and provides its services according to the unified requirements of Regulation (EU) No 909/2014 of the European Parliament and of the Council of 23 July 2014 on improving securities settlement in the European Union and on central securities depositories and amending Directives 98/26/EC and 2014/65/EU and Regulation (EU) No 236/2012 (CSDR).
The KDD’s own independent regulations (KDD Rules of Operation) govern the implementing procedures and detailed methods and deadlines for specific activities which the KDD, its members, issuers or other entities are obliged to perform.
In 2017, the KDD successfully migrated to TARGET2-Securities (T2S), the Eurosystem’s single platform for securities settlement.
Joining T2S provides the Slovenian environment of financial instruments with continuity in its participation in harmonisation and integration processes across Europe in the post-trade area. Slovenia’s inclusion in the T2S pan-European settlement platform facilitates easier access to the Slovenian securities market and fosters the harmonisation and standardisation of operational and technical solutions.
Types of securities traded on the LJSE
The following securities may be traded on the LJSE:
- closed-end funds; and
- structured products (certificates; warrants; rights; T-bills, commercial papers).
Conditions for admission to the regulated market
The only securities which may be traded on the organised market are:
- fully paid-up;
- freely transferable;
- issued in dematerialised form (registered at KDD); and
- those for which the ATVP has issued either an authorisation for an initial public offering or an authorisation for organised trading.
When the abovementioned conditions are met, a security may be admitted to trading on the organised market. The LJSE is legally obliged to admit any security which meets the conditions provided by law to the free market. For admission to a listing on the prime market, some further quantitative and qualitative criteria set by the LJSE need to be satisfied (as mentioned already in the above chapter “LJSE prime and standard markets”).
Public offer of securities
In relation to the Financial Instruments Market Act which determines fundamental rules for the offer of securities to the public and the admission of securities to trading on a regulated market1, the Financial Instruments Market Act indicates that no person is allowed to offer securities to the public in Slovenia without first publishing the appropriate prospectus in line with this act, unless otherwise specified by law in individual cases. The Financial Instruments Market Act further indicates that securities are not allowed to be admitted to trading on the stock exchange market without an appropriate prospectus having first been published in line with this act, unless otherwise specified by law in individual cases.
Financial Instruments Market Act determines several exceptions from the obligation to publish the prospectus:
- general exceptions refer to certain securities (such as units issued by collective investment undertakings that are not of a closed-end type and certain debt securities);
- other exemptions refer to certain types of offer of securities or certain types of securities as well as for admission to trading on a regulated market of certain types of securities.
The issuer or offeror must inform the ATVP of the application for exemption from the obligation to publish the prospectus three business days prior to the start of the public offer or the admission of securities to trading on a regulated market.
The prospectus shall be valid for a period of 12 months following the date of the ATVP’s approval.
When the prospectus is approved, it must be published prior to the start of the offer of securities to the public or admission to trading on a regulated market.
Further, an issuer with its registered office in Slovenia is obliged to formally request the KDD to issue in dematerialised (electronic) form those securities that were the subject of a public offer.
Public offer of securities issued by a foreign issuer
The Slovenian market offers free access to securities. Two regimes apply: a regime for issuers from EU member states and a regime for third-country issuers.
Issuers from EU member states
Prospectuses for an initial public offer or admission to trading already approved by the competent authority of another member state and ‘passported’ to Slovenia to ensure mutual recognition need no additional approval or changes in accordance with the provisions of the European Prospectus Directive (hereinafter: Prospectus Directive) as implemented in the Financial Instruments Market Act.1
The system of the single European passport for issuers applies to issuers from member states under the Prospectus Directive. Within this framework, standards for the complete disclosure of information are harmonised. This should on one hand contribute to the enhanced integration of the capital market in the EU and, on the other, to greater security for investors.
The prospectus of an issuer from a member state must be approved by a regulatory authority of the home country before it is published and prior to the commencement of issuing the securities. As soon as the prospectus is approved by the regulatory authority of the home country, it can also be used in other member states based on prior notification. In accordance with the Prospectus Directive, the regulatory authorities of other member states no longer have the possibility to set new requirements but must automatically accept the prospectus. In addition, they also can no longer require the publication of the prospectus in the local language. The use of language in the prospectus differs with respect to whether securities are offered only in the Republic of Slovenia or admitted to trading on the LJSE stock exchange exclusively or also in other member states, and whether Slovenia is a home or host member state.
However, under the Financial Instruments Market Act is still possible that where the Republic of Slovenia is in the position of a host member state, the ATVP may request from the issuer, offeror or the person demanding the admission of securities for trading on the stock exchange market to provide an adequate translation of a summary of the prospectus in the Slovenian language.
A more restrictive regime applies to third-country issuers. The securities of these issuers may only be the subject of a public offer in Slovenia through the intermediation of a brokerage company that is authorised to provide services in relation to the initial offer and based on the prior approval of the ATVP.
The provisions of the Financial Instruments Market Act relating to the initial and secondary offers of securities also apply to the public offer of securities issued by third-country issuers.
A secondary public offer issued by third-country issuers in the territory of Slovenia is only possible in the organised market. The provisions of the Financial Instruments Market Act relating to the granting of authorisation for organised trade also relate to trade in securities issued by a third-country issuer. Issuers are obliged to submit an application for authorisation to conduct organised trade in securities that is issued upon the receipt of documents establishing the foreign issuer’s right regarding the securities in terms of the validity of issuance and the method and validity of transfers and trade in these securities.
For trading on the stock exchange market, a third country issuer (or an offeror intending to offer such an issuer’s securities or an applicant for the admission of such an issuer’s securities) must authorise, for all the activities related to the public offer or admission to trade on the stock exchange market, a person authorised to perform investment services in Slovenia (authorised investment firm). The authorised investment firm is jointly and severally liable for the fulfilment of obligations stipulated by the law and for any damages arising from the violation of these obligations together with the person that authorised it.
Investment funds and management companies
Investment funds and management companies are governed by the Investment Funds and Management Companies Act (hereinafter: ZISDU-3) which, in line with the EU rules, determines:
- the conditions for establishing management companies;
- the conditions and manner of providing the service of managing investment funds that raise capital from the public;
- delegation of the service of managing investment funds that raise capital from the public to other persons;
- the conditions for marketing in Slovenia the units of investment funds that raise capital from the public, and the conditions for marketing the units of such investment funds established in Slovenia in a member state or a third country;
- the types of investment funds that raise capital from the public, and the conditions for their establishment and the manner of their operation;
- supervision of the management of investment funds that raise capital from the public, and supervision of their operations; and
- cooperation among the supervising authorities.
ZISDU-3 enables Slovenian management companies to manage investment funds in other EU countries and vice versa, introduces master feeder structures and clarifies rules that guide mergers of funds and permits management companies as well as investors to benefit from economies of scale.
Management companies are legal persons that have their registered office in Slovenia that provides the service of managing an undertaking for collective investment in transferable securities (hereinafter: UCITS) on the basis of an authorisation of the ATVP.
A management company may be established as a public limited company, a European public limited company or a limited liability company. The minimum amount of initial capital of a management company that exclusively manages investment funds shall be EUR 125,000. Where the value of the assets of the investment funds managed by the management company exceeds EUR 250 million, the capital of the management company must be 0.02% higher than the difference between the overall managed funds and the set amount of EUR 250 million.
If the management company is organised as a limited liability company, it shall be governed, mutatis mutandis, by the provisions of ZISDU-3 on the acquisition and shareholders of a management company organised as a public limited company. Shareholders seeking a qualified holding in such a company (i.e. 10% or more, 20% or more, 33% or more, 50% or more etc.) must obtain a permit from the ATVP.
A management company may select a two-tier system of management with a management board and a supervisory board or a one-tier system of management with a board of directors. In line with the legally prescribed procedure, the company’s management must consist of at least two members who should have previously acquired the permission of the ATVP. If a management company selects a one-tier system of management, a board of directors comprised of at least two executive directors must be designated.
Prior to being entered in the court register, the founders of management companies must receive an authorisation to manage investment funds from the ATVP. On behalf of the investment fund they manage, management companies must make a contract with the depositories for the provision of custodian services. Pursuant to the law, depositories are:
- a bank having its registered office in Slovenia and authorised by the Bank of Slovenia to perform depositary functions;
- a branch of a member state bank established in Slovenia in accordance with the law governing banking and authorised by the Bank of Slovenia to perform depositary functions; or
- a branch of a third country bank established in Slovenia in accordance with the law governing banking and authorised by the Bank of Slovenia to perform depositary functions.
The depositories must be independent of their management companies. The ATVP is in charge of supervising depositories. The assets of an investment fund must be kept separate from the assets of the management company.
The financial crisis has revealed many vulnerabilities of the financial system, which have required careful reviews of existing control measures for all stakeholders in the European financial market. One of these areas was depositary functions, remuneration policies and sanctions regarding UCITS.
According to the Investment Funds and Management Companies Act, investment funds are undertakings for collective investment whose sole purpose is to publicly collect the funds of investors and invest them, in compliance with an agreed investment policy, in different kinds of investment for the sole benefit of the unit-holders of such investment funds. In Slovenia UCITS may be established as a mutual fund and umbrella fund. Under ZISDU-3 alternative investment funds may also be established that raise capital from the public as an alternative mutual fund, alternative umbrella fund or an investment company with variable capital.
An investment company is an alternative investment fund that raises capital from the public as a limited company with its initial capital divided into freely transferable shares of the same class. The management company shall manage the investment company’s assets on behalf of and for the account of the investment company. The minimum amount of initial capital of an investment company is EUR 1,000,000. An investment company may increase its initial capital with contributions provided that the issue price of shares is at least equal to the book-entry value of shares on the date of publication of the invitation to subscribe and pay for shares, increased by any costs associated with the increase in the initial capital of the investment company that the management company is entitled to claim. Notwithstanding the scope of participation in the capital of the investment company, no single person or persons acting in accordance with the Takeovers Act shall have more than 33% of all voting rights of the investment company and more than 33% of participation in the profit of the investment company.
Investment companies’ shares can only be paid up in full prior to the investment company’s entry in the Court Register. Prior to entering its foundation in the Companies Register, the investment company needs to acquire the ATVP’s approval of its statute.
An investment company has no management board. The management functions are performed by the management company that conducts the operations of the investment company and acts as its representative in all matters, except those for which the supervisory board of the investment company is authorised. The supervisory board of an investment company performs all functions like in other shareholding companies. It represents the investment company vis-à-vis the management company. The relations between a management company and an investment company are regulated by a contract on investment company management in which the management company assumes the obligation to manage the investment company and the task of conducting all activities related to management of the investment company’s financial assets in the name and on behalf of the investment company, and with the aim of securing conditions for the management and operation of the investment company. The investment company also assumes the obligation to pay compensation for the services provided by the management company.
A mutual fund is an UCITS whose assets are separate from the assets of the management company and from other assets managed by the management company, which is divided into units. Upon a unit holder’s request, the value of his units is payable out of the fund’s assets. Mutual funds consist of assets including investments in transferable securities, that are generated by the funds of natural or legal persons and which are, therefore, owned by those natural and legal persons. The assets owned by mutual funds must be kept separate from the assets owned by the management company which manages that fund. Mutual funds are established and managed only for the benefit of their owners and, consequently, they do not have the status of legal persons.
Natural or legal persons become the owners of a proportionate share in the mutual fund when they buy investment coupons of that mutual fund. Investment coupons are registered securities related to one or more units of the property owned by the mutual fund and issued by the management company. Such coupons may be transferable or non-transferable (depending on the rules of management of the mutual fund).
The owners of investment coupons may at any time request in writing to have their investment coupons purchased by the management company in the value of a unit of the mutual fund. The value of a mutual fund unit is calculated by dividing the net value of the fund’s assets by the number of units in circulation. Management companies must make the payment of investment coupons in cash within five working days of the day the value of mutual fund units is calculated.
Management companies are the only bodies allowed to establish mutual funds. Mutual funds are considered to be established with the acceptance of regulations on the management of the mutual fund and the entering into an agreement with the depository, as well as when the ATVP issues its permit. The rules of management of a mutual fund must be confirmed by the ATVP. These rules define the most important parameters of the management of funds, e.g. commissions for the purchase and sale of investment coupons, compensation for the management of a fund and other costs related to the property of a mutual fund as well as the investment policy etc. Management companies may only issue investment coupons when the ATVP receives authorisation to manage such funds. The authorisation is issued upon the written request of the management company.
Mutual funds can be merged pursuant to conditions defined by law. A merger can be either domestic or cross-border. After the merger has been completed, the merging mutual fund shall cease to exist without a liquidation procedure; all of its capital and rights and obligations shall be transferred to the receiving mutual fund.
Alternative investment funds
The alternative investment funds are governed by the Alternative Investment Fund Managers Act (hereinafter: ZUAIS) which, in line with the EU rules, determines:
- the conditions for and method of management of alternative investment funds (hereinafter: AIFs);
- the conditions for the establishment and operation of private alternative investment funds with the status of a specialised investment fund (hereinafter: SIF);
- the conditions for the marketing of units of AIFs in Slovenia and the conditions for the marketing of units of AIFs established in Slovenia, another member state or a third country;
- the supervision of the management of AIFs and the operation of SIFs; and
- cooperation between competent authorities.
In addition to management companies governed by ZISDU-3, ZUAIS introduces three new categories of managers of AIFs: alternative investment fund managers (authorised by the ATVP to manage AIFs), registered alternative investment fund managers, who may voluntarily submit an application for authorisation to manage AIFs, and the operator of a specialised investment fund manager (managed by one of the predefined shapes of an SIF).
State financial assets
Slovenia’s regime of corporate governance of state capital investments is in line with OECD standards.
The methods of managing, governing and disposing of state financial assets are governed by the Slovenian Sovereign Holding Act (hereinafter: SSHA-1), which aims to separate the state’s function as an owner of assets from other state functions, ensure the effective management of assets (consistent with international guidelines), centralise the management of state assets, to reduce the influence of interest and political groups, and decrease the risk of corruption and conflicts of interest.
The corporate governance of state financial assets is performed by the Slovenian Sovereign Holding (Slovenski državni holding, hereinafter: SSH).
In 2015, the first State Asset Management Strategy was adopted. The Strategy’s objectives are to increase the value of the state assets, provide for the highest possible yield to the owners and attain other potential strategic objectives. The Strategy classifies 24 state-owned companies (SOEs) as “strategic” (for which the state will maintain a minimum level of ownership of over 50 percent), 21 companies as “important” (where the state will keep a minimum level of ownership of over 25 percent) and 46 “portfolio” companies (which the state aims to privatise). The Strategy has not affected the ongoing privatisation processes of 15 companies that were endorsed in 2013.
Based on the Strategy, the SSH prepared the Criteria for measuring the effectiveness of companies with a state asset and the annual asset management plan for 2016, 2017, 2018 and 2019.
In line with the SSHA-1, the performance criteria are created relative to the type of asset. The criteria for strategic assets consider the strategic objectives determined by the Strategy and also define economic and financial objectives. The criteria for evaluating the performance of important assets and portfolio assets are mainly financial and economic in nature. They are all corporate performance criteria. Economic criteria are mainly Return on Assets, Return on Equity, EBIT, EBITDA, CAPEX, added value per employee and some more specific (e.g. for electro distribution companies – SAIDI, SAIFI, MAIFI). Non-financial or strategic criteria are for example: safety of the highway or railway network, safety of the nuclear power plant, development of port infrastructure, cargo and passengers transported, improvement of business processes, share of NPLs. Performance targets for individual SOEs are set in the annual management plan. On this basis, the SSH monitors the fulfilment of the main objectives of an individual company and respond in case of any significant departures in accordance with the SSHA-1 and the Companies Act.
The annual management plan is an asset management document based on the adopted Strategy. The SSH uses the annual plan as a basic tool for the management, acquisition (e.g. recapitalisation) and disposal of assets. The plan contains the main management goals from the Strategy and defines the detailed objectives of the SSH regarding the management of individual important and strategic assets, measures and guidelines for attaining these objectives.
The adoption of the Strategy, performance criteria and the annual management plan constitute key elements of the state corporate governance system and assure full implementation of the SSHA-1 in line with the OECD’s guidelines for the corporate governance of state-owned enterprises.1 On 21 July 2019, provisions of the Financial Instruments Market Act related to public offers were mostly replaced and repealed by those of the New Prospectus Regulation (Regulation EU 2017/1129).
Mergers and acquisitions
Acquisitions according to the Takeovers Act
The Takeovers Act regulates the manner, conditions and procedure for making a takeover bid. The Act’s main purpose is to protect minority shareholders. The Act regulates voluntary and mandatory takeover bids and gives minority shareholders the option to exit the ownership structure of the offeree company in which the takeover threshold has been reached. The Takeovers Act is based on the principle of the equal treatment of domestic and foreign legal and natural persons. It does not contain any special provisions concerning foreign investors.
A takeover involves a situation in which the offeror, either alone or together with persons acting in concert with it, achieves the takeover threshold. The takeover threshold is 1/3 of the voting rights in the company.
Provisions of the Takeovers Act apply if the offeree company is:
- a public corporation whose voting shares are traded on the regulated market; or
- a joint-stock company whose shares are not traded on the regulated market if such a company has at least 250 shareholders (on the last day of the preceding year that is relevant for the purpose of assessing the application of the Takeovers Act); or total equity capital of more than EUR 4 million (as evident from the most recent public announcement of the annual report of the company concerned, according to the Companies Act).
A takeover bid is a publicly announced proposal to enter into a contract that has been addressed to everyone holding securities of the offeree company whose acceptance would represent the conclusion of a contract for the sale of these securities between the offeror as the buyer and the accepting party as the seller. The object of a takeover bid shall be all securities of the offeree company not held by the offeror.
Mandatory takeover bid
A mandatory takeover bid shall be made by an offeror achieving the takeover threshold, which is 1/3 of the voting rights in the offeree company.
If the takeover bid is successful, the offeror is obliged to make a renewed takeover bid after having acquired an additional 10% share of the voting rights (the additional takeover threshold). The obligation to make a renewed bid ceases when, following a successful takeover bid, the offeror acquires a 75% share of all the offeree company’s shares with voting rights (the final takeover threshold).
Voluntary takeover bid
A voluntary takeover bid may be made by an offeror which has less than 1/3 of the voting rights prior to announcing the intended takeover bid.
Successful bid threshold
The offeror may, if it wants, define a successful bid threshold in its takeover bid. The successful bid threshold is the lowest percentage of all securities the bidder is obliged to acquire, together with securities already in its possession, on the basis of a takeover bid in order to make the bid binding upon it. In case of a mandatory takeover bid, the offeror must define the successful bid threshold, which may not be less than 50% share of all of the target company’s voting shares plus one share, unless the acquirer’s share has already reached 50% of all of the target company’s voting shares.
Compensation and fair price
A takeover bid shall indicate the type of compensation involved. Compensation can be made by way of cash or securities (cash, substitute, combined and alternative bids).
The price in the takeover bid shall not be lower than the highest price at which the offeror acquired securities in the last 12 months prior to publication of the bid. If the offeror acquires securities within one year of the expiry of the time limit for accepting the successful takeover bid at a price higher than the price in this bid, it shall pay the accepting parties the difference in price within eight days of the acquisition.
Persons acting in concert are persons acting on the basis of an explicit or implicit oral or written agreement and whose aim is to acquire or consolidate their control of the offeree company or to prevent the offeror from making a successful takeover bid.
Persons acting in concert and together achieving the takeover threshold in the offeree company must jointly announce a mandatory takeover bid for shares of the offeree company unless they reach an agreement that only one or some of them will announce the takeover bid.
Exemptions from the obligation to make a takeover bid
The Takeovers Act specifies the cases in which persons which have achieved a takeover threshold shall not be required to make a takeover bid if this threshold was achieved through the acquisition of securities, for example, by inheritance or by transferring securities from the offeror after making a takeover bid to persons who acted or are considered to have acted in concert in making such a bid, or to groups of companies etc.
Suspension of voting rights of an unlawful offeror
An offeror which achieves the takeover threshold or an additional takeover threshold and has not made a takeover bid in accordance with the law may not exercise the voting rights arising from the shares in its possession until it has:
- made a takeover bid pursuant to the provisions of the Takeovers Act;
- disposed of securities and call options for shares or forward contracts that are not included in securities so that it no longer achieves the takeover threshold or the additional takeover threshold; or
- disposed of securities and share call options or futures contracts which are not included in securities, at least in the proportion of voting rights which resulted in the obligation to submit a takeover bid.
The takeover procedure
The takeover procedure starts with the offeror declaring its intention to make a takeover bid to the Securities Market Agency (ATVP), the Competition Protection Agency (CPA) and the management of the offeree company and publishing it on the same day in a daily newspaper circulated throughout the territory of Slovenia.
An offeror which has already achieved the takeover threshold (mandatory bid) is obliged to declare its takeover intention within three business days of the date when it achieved this threshold. In the case of a voluntary bid, no time limit is set.
The offeree company’s management shall inform the ATVP about arrangements or negotiations on the takeover with the offeror or that there are no such ongoing arrangements or negotiations.
If the offeror withdraws its takeover intention after it has been published without the ATVP’s approval, it cannot make another takeover bid within one year of the withdrawal. Conversely, a new bid can be made if the withdrawal was approved by the ATVP.
The ATVP may ask an offeror to issue an explicit statement of its takeover intention within 24 hours of receipt of the ATVP’s request if it is evident from the situation in the capital market that the offeror intends to take the company over and, in particular, if there is any agreement between two persons to take over a company, if the price of a security on the regulated market rose significantly and it can therefore be assumed that a takeover bid will be made, or if the competent body of the offeror has finally set the price of the takeover bid that has not yet been published.
The offeror must announce its takeover bid simultaneously with the prospectus within 10 to 30 days of publishing the takeover intention and must obtain the ATVP’s authorisation prior to publishing the takeover bid.
The prospectus shall comprise all necessary information so that the shareholders can make appropriate decisions regarding the takeover bid.
Once the takeover bid has been published, the offeror may only change it by offering a higher price, a more favourable conversion rate or by establishing a lower successful bid threshold if one was specified in the takeover bid.
The offeree company’s management shall publish and substantiate its opinion on the takeover bid within 10 days of its announcement. The offeree company’s management must communicate its opinion to employee representatives or employees.
Prior to announcing a cash bid, the offeror must make a cash deposit in a special cash account with the KDD, which is required for the payment of all securities subject to the takeover bid, or a bank guarantee. If the subject of a substitute, alternative or combined takeover bid is issued substitute securities, the KDD shall accept such securities by way of a deposit.
|Takeovers step by step|
|Takeover intention||the offeror||declares its intention to makea takeover bid||ATVPCPAofferee company||mandatory bid: within 3 days of achieving the takeover threshold voluntary bid: no time limit (unless an explicit statement of takeover intention has been requested)|
|Publishing notice of the takeover intention||the offeror||publishes notice of the takeover intention||a daily newspapercirculated throughoutthe territory of Slovenia||the same day as it declares the takeover intention|
|Notice regardingthe negotiations||the offereecompany’smanagement||informs about the negotiations (or the absence of them)||ATVP||within 2 business days of publishing notice of the takeover intention|
|Cash deposit or bank guarantee||the offeror||cash deposit or a bank guaranteefor the payment of all securitiessubject to the takeover bid||a special cash accountwith the KDD||prior to announcement of the takeover bid and before the ATVP grants itsauthorisation|
|Takeover bid and biddocument – prospectus||the offeror||submits the takeover bid and prospectus||ATVP||as soon as possible after the takeover intention is announced|
|Authorisation toannounce the takeoverbid||ATVP||grants the authorisation to launch the takeover bid||offeror||prior to announcement of the takeover bid|
|Publishing the takeover bid||the offeror||publishes the takeover bid||a daily newspapercirculated throughoutthe territory of Slovenia||within 10 to 30 days of the publishing notice of the takeover intention and after the ATVP grants its authorisation|
|Opinion on the takeover bid||the offereecompany’smanagement||publishes its opinion andcommunicates it to the employees||usually in a newspaper||within 10 days of announcing the bid|
|Acceptance of the offer||Shareholdersof the offereecompany||make a written statement of acceptance of the takeover bid||brokerage companythat maintains a bookentry securities account||not less than 28 and not more than 60 days after publication of the offer|
|Publishing the takeover bid results||the offeror||publishes a notice on results of the takeover bid||a daily newspapercirculated throughoutthe territory of Slovenia||within 3 days of the expiry of the time allowed for acceptance of the takeover bid|
|Notification of the takeover bid results||the offeror||notifies the results of the takeover bid||ATVPCPA||within 3 days of the expiry of the time allowed for acceptance of the takeover bid|
|Decision onannouncement of the takeover bid results||ATVP||issues a decision on the announcement of the takeover bid outcome||offeror, the offeree company, the KDD and the securitiesmarket regulator||within 3 business days of the day the ATVP received the notice|
|Publishing the decisionon announcement of the takeover bidresults||the offereecompany||publishes the decision on announcement of the takeover bid results||a daily newspapercirculated throughoutthe territory of Slovenia||within 3 days of receiving it|
From the date of receiving the notice of intended takeover or, if the management does not receive such a notice prior to publication of the takeover intention, until the date of publication of the decision on the announcement of the takeover bid results, the company’s management or supervisory bodies shall only be allowed to perform certain activities subject to a resolution of the general meeting of shareholders, such as an increase in capital.
The offeror may not acquire shares that are the subject of the bid outside the procedure associated with the bid by the Takeovers Act from the date of the announcement of the takeover bid until the expiry of the time allowed for acceptance of the bid.
The accepting party shall accept the bid by sending a written statement of acceptance of the takeover bid to the brokerage company (having the status of a registration member) that maintains a book entry securities account to which all securities that are the subject of the statement of acceptance of the bid are credited. The deadline for accepting the takeover bid depends on the closing date for submitting the takeover bid stated in the offer, but it may not be less than 28 days or longer than 60 days and not more than 60 days from the day of publication of the first takeover bid (the final deadline). The deadline for accepting the takeover bid can be extended in certain cases, but not beyond the final deadline.
An offeror acting as a natural person or members of the offeror’s management board and supervisory board, and members of the offeree company’s management and supervisory authorities shall send the ATVP information about all securities transactions carried out by themselves, their immediate family and legal entities in which they have a majority holding or a share of voting rights in the 12 months prior to beginning the time period allowed for acceptance of the takeover bid.
After the announcement of the takeover bid and before it expires, the offeror may, if the prospectus provides for such a possibility, cancel its bid and withdraw from the contracts concluded by accepting such a bid in the case of a competitive bid or if circumstances arise that would no longer meet the offeror’s expectations and maintaining the validity of the contracts would be generally deemed unfair. The offeror shall notify the ATVP and the KDD of the withdrawal of the takeover bid on the day of its announcement.
Outcome of the takeover bid
A takeover bid shall be deemed unsuccessful if the offeror withdraws it, if the ATVP annuls the bidding procedure, if a resolute condition becomes effective, if the offeror fails to demonstrate to the Agency that: a) for the payment of securities subject to the takeover bid he did not in any way, directly or indirectly, give or pledge as collateral, or insured securities of the offeree company that are not the property of the offeror; and b) for the payment of securities of the offeree company he did not in any way, directly or indirectly, give or pledge as collateral, or insured assets of the offeree company, if the offeror’s bid defines a successful bid threshold and that threshold has not been achieved or if the offeror fails to fulfil its obligation to deposit the difference in cash within the time limit defined. A takeover bid is successful when none of the above situations arises.
Within three days of the expiry of the time allowed for accepting the takeover bid, the offeror shall publish a notice on the results of the takeover bid. The offeror must notify the ATVP and the CPA about those results. The ATVP shall issue a decision upon the announcement of the takeover bid outcome to the offeror, the offeree company, the KDD and the organiser of the regulated market.
Special treatment of minority shareholders
The exclusion of minority shareholders in the event the offeror has already made a successful takeover bid and acquires at least 90% of all the offeree company’s voting shares is settled by the Companies Act.
Acquisitions according to the Competition Act
The Prevention of the Restriction of Competition Act (Competition Act) contains, in addition to the classic anti-trust provisions that prohibit restrictive agreements and the abuse of a dominant position, provisions regulating concentrations. It prohibits concentrations which significantly impede effective competition in the Republic of Slovenia or its significant part, in particular as a result of the creation or strengthening of a dominant position.
The concept of concentrations
According to the Competition Act, a concentration arises when a change of control over an undertaking on a lasting basis occurs as a result of, namely:
- two or more previously independent undertakings or parts of undertakings merging; or
- one or more natural persons already controlling at least one undertaking, or one or more undertakings, acquiring, whether by purchase of securities or assets, by contract or by any other means, direct or indirect control of the whole or parts of one or more other undertakings; or
- two or more undertakings creating a joint venture performing on a lasting basis all the functions of an autonomous economic entity.
Rights, contracts or any other means that confer upon persons or undertakings which are the holders of these rights or have the power to exercise them, the possibility of exercising a decisive influence on an undertaking, form control of an undertaking. The concept of concentration does not include cases where banks, insurance undertakings, savings banks, or other financial organisations whose normal activities include transactions and dealing in securities hold on a temporary basis securities which they have acquired in an undertaking with a view to reselling them, provided that the disposal of those securities takes place within one year of the date of acquisition and provided that they do not exercise voting rights in respect of those securities with a view to determining the competitive conduct of that undertaking in the market or providing that they exercise such voting rights only with a view to preparing the disposal of those securities and that any such disposal takes place within one year of the date of the acquisition, which can be extended by the CPA.
Concentrations must be notified to the CPA by the participants in the transaction not more than 30 days from the conclusion of the agreement or the announcement of the public bid, or acquisition of a controlling interest if:
- the combined aggregate annual turnover of all the undertakings concerned, including affiliated undertakings, exceeds EUR 35,000,000 in the Slovenian market in the preceding year; and
- the annual turnover of the acquired undertaking, together with other undertakings in group, exceeds EUR 1,000,000 in the Slovenian market in the preceding financial year; or
- in cases of joint ventures, the annual turnover of at least two undertakings concerned, exceeds EUR 1,000,000 in the Slovenian market in the preceding financial year.
In addition, in cases involving concentrations, which do not meet above stated thresholds, but where undertakings concerned, including affiliated undertakings, as a result of the concentration jointly achieve more than 60% market share in the Slovenian market, undertakings concerned have to inform the CPA of such concentration and the CPA can within 15 days request that they notify this concentration.
Procedure on concentrations
The notifying party has to be submitted to the CPA on a special application form determined by governmental decree.
Procedure for the appraisal of the concentrations usually begins with the notification, but in some cases it can also be initiated by the CPA ex-officio.
Until the concentration is declared compatible with the Competition Act it cannot be implemented by the parties. The CPA can also issue a special decision requiring the undertakings participating in the concentration and the competent bodies to suspend implementation of the concentration until a final decision is issued. That does not, however, prevent the implementation of a public bid which is notified to the competent body in accordance with the Takeovers Act, provided that the acquirer does not exercise the voting rights attached to the securities, or does so only to maintain the full value of those investments and on the basis of an approval granted by the CPA. Undertakings concerned can also apply for permission to implement concentration in a limited scope prior to the final decision on the compatibility of the concentration.
The CPA is obliged to examine the received notification as soon as it receives it. If the notification is not complete, the CPA will request the notifying parties to amend their notification in set time. If parties do not fulfil this request the concentration shall be deemed not notified.
At the outset, the CPA examines whether a concentration falls within the scope of the provisions of the Competition Act. If it finds that it does not, then such a finding is recorded by means of a special decision. Although a notified concentration falls within the scope of the provisions of the Competition Act, it may not raise a serious doubt as to its compatibility with the competition rules. In this case, the CPA issues a non-opposition decision declaring the concentration compatible with the competition rules. This decision may also include remedies. Only when a notified concentration that falls within the scope of the provisions of the Competition Act raises a serious doubt as to its compatibility with the competition rules does the CPA issue an order to commence the procedure. The decisions referred to above, which are published on the CPA’s website and served immediately on the participants, and an order to commence the procedure, must be issued within 25 working days of the receipt of the complete notification, which is extended for additional 15 working days in cases where notifying parties propose remedies.
The CPA has the following powers of decisions:
When a notified concentration is not incompatible with the provisions of the Competition Act, the CPA issues a decision declaring the concentration compatible with the competition rules. This decision may also include remedies that notifying parties have proposed during the appraisal procedure and which eliminate any serious doubts about the compatibility of the concentration with the competition rules.
When a notified concentration is incompatible with the provisions of the Competition Act, the CPA issues a decision declaring the concentration incompatible with the competition rules. The CPA may attach additional measures to its decision that aim at the eliminating the effects of a prohibited concentration that have already occurred. The Competition Act provides the following examples of such measures: a de-merger of undertakings and the disposition of all the acquired interests.
The CPA issues the decisions referred to above within 60 working days of the day on which the order to commence the procedure was issued. This time limit is extended for 15 working days in cases where notifying parties offer remedies.
Prior to the issuing of the decision declaring the concentration incompatible with the provisions of the Competition Act, the CPA has to deliver to the notifying parties the statement of objections, in which it states its findings and sets a time limit within which the notifying parties can respond to these objections.
The CPA can revoke the decision finding the concentration compatible with the competition rules within:
- three years following the issuing of the decision in cases where the decision was based on the incorrect, incomplete or misleading information provided by one of the undertakings concerned; or
- two years following the expiration of the date for the implementation of the remedies imposed in the decision in cases where the undertaking commits a breach of an obligation attached to the remedies.
Judicial protection against decisions issued by the CPA is ensured in judicial proceedings in the Administrative Court of the Republic of Slovenia.