SLOVENIA Law and Practice Contributed by: Blaž Ogorevc, Miha Štravs and Blaž Murko, Odvetniki Šelih & partnerji, o.p., d.o.o.
proceedings. The law prescribes no additional steps that must be taken to give priority to the lender’s security interest over real estate over the interest of other creditors. In certain limited cases, real estate can also be sold in an out-of- court sale with a notary’s assistance. If only enforcement proceedings are necessary, official statistics show that the average time needed to successfully enforce and realise on property security is 2.7 months. Differently, if litigation proceedings also need to be initiated, the average time needed to successfully enforce and realise on property security significantly increases and is likely to exceed 12 months. There are no ongoing restrictions on a lender’s ability to foreclose or realise on collateral in real estate lending that would be implemented by governmental entities in response to the pan - demic. In the current market, lenders have been rather lenient with debtors and tend to forbear before foreclosing. 3.7 Subordinating Existing Debt to Newly Created Debt In principle, earlier rights defeat later rights. Nev - ertheless, existing secured debt can be subor - dinated both by agreement and under the law. By way of agreement, creditors can allow sub - ordination of their existing secured debts to later debts of other creditors. A note of subordination in favour of another mortgagee can be registered in the land register. Moreover, under the Companies Act, a share - holder of a limited liability company who made a loan to the company at a time when the shareholder knew or should have known that the company was facing financial and/or eco -
nomic difficulties may not enforce a claim for the repayment of the loan against the limited liability company in bankruptcy or compulsory settle - ment proceedings. A bankruptcy court will con - sider whether the shareholder, acting as a good manager, should have provided its own capital to the company instead of giving a loan. Under such circumstances, the loan is considered to be part of the company’s bankruptcy estate. Repayments of such loans made during the year prior to a company’s bankruptcy must also be returned to the bankruptcy estate. Similar rules apply to shareholder loans to public limited com - panies, where the shareholder holds more than 25% of the voting rights. 3.8 Lenders’ Liability Under Environmental Laws Under the Environmental Protection Act, lend - ers cannot be held liable for pollution of real estate by merely holding or enforcing security over such real estate. Theoretically, however, a lender could be held liable for any pollution of real estate caused by it. 3.9 Effects of a Borrower Becoming Insolvent Under the Financial Operations, Insolvency Proceedings and Compulsory Dissolution Act, security interests created by a borrower in favour of a lender may be set aside or annulled, if they were established in the look-back period and if, at that time, the debtor was insolvent and further objective and subjective conditions were satis - fied. The objective condition is satisfied if the debtor’s actions resulted either in the decrease in the net value of its assets, resulting in reduced payments to creditors other than the (benefit - ed) person, or if the other (benefited) person acquired more favourable payment conditions for its claim against the debtor. The subjective condition is met if, at the time of the debtor’s
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