SLOVENIA Law and Practice Contributed by: Vid Kobe and Peter Gorše, Schoenherr Slovenia
acknowledge the security over bank accounts and confirm that it will comply with the secured party’s instructions as regards the assets comprising the collateral. Security over most asset classes in Slovenia can, gen- erally, be established within a relatively short time - frame, with the main bottlenecks being the registration procedures (in particular with respect to real estate) and response time of certain debtors whose acknowl- edgement of security interest is recommendable and sought as a market practice (eg, banks maintaining the bank accounts over which security is established and insurance companies issuing policies that are subject to security). In terms of costs, these predominantly comprise the notarial fees for drawing up/recording security agree- ments in the form of a notarial deed, which typically range from EUR1,000 to EUR2,000 per agreement (depending on the specifics of the transaction and scope of the security package), and notarial fees for registrations with various registers and the issu- ance of certified counterparts. If direct enforceability is agreed, the safe-side approach is to translate the principal loan documentation into local language, typi- cally resulting in significant translation costs. 5.2 Floating Charges and/or Similar Security Interests Certain Slovenian law security instruments have elements of a floating charge. By way of example, global fiduciary assignment of receivables ( globalna fiduciarna cesija ) encompasses all existing and future receivables, whereas a registered pledge over cer- tain movables may be established over all movables located in a specific area from time to time. However, the concept of a floating charge (ie, lien over all obligor’s assets) as such is not recognised under Slovenian law, and a separate security interest normally needs to be established over each relevant asset (class). 5.3 Downstream, Upstream and Cross- Stream Guarantees While downstream guarantees are generally permis- sible (subject to tax/arm’s length considerations),
upstream and side-stream guarantees are subject to certain limitations under Slovenian law, most notably under capital maintenance rules and group-of-com- panies rules ( koncernsko pravo ). The restrictions are stricter for joint stock companies ( delniška družba (JSCs)) compared to private LLCs. Consequently, there is typically more flexibility for LLCs acting as guarantors or security providers. JSCs – Capital Maintenance In general, any provision of value upstream or side- stream outside permitted dividend distribution by a JSC, including granting a guarantee or security for a debt of its shareholders (whether direct or indirect), may be considered a violation of mandatory capital maintenance rules if not conducted at arm’s length. In practice, the inflexibility of the rules applicable to JSCs is sometimes addressed by way of conversion into LLCs. LLCs – Capital Maintenance In the case of LLCs, the capital maintenance rules are somewhat more lenient. The restriction on transfer- ring value upstream or side-stream generally applies in so far as the transaction impairs the company’s (i) registered share capital ( osnovni kapital ) and/or (ii) restricted reserves, which comprise capital reserves ( kapitalske rezerve ) and statutory reserves ( zakon- ske rezerve ). Additionally, it is widely acknowledged that such transactions must not lead to the insol- vency of the company. Although the statutory pro- visions explicitly mention “distribution” or a “loan to the shareholder”, legal literature argues that similar restrictions, with some modifications, also apply to upstream/side-stream guarantees/security due to their equivalent consequences. A balance sheet test, factoring in the likelihood of debt default, is typically necessary to ascertain whether there is a risk that enforcing the guarantee or secu- rity could impair the aforementioned “tied-up” capi- tal categories of the guarantor or security provider. If necessary, the effects of the transaction must be offset by establishing (and documenting) an appropri- ate recourse claim against the borrower and/or provi- sion of a security interest securing such. Transactions violating the capital maintenance rules are at risk of being declared null and/or void and may result in man-
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