Foreign Direct Investments in Slovenia

Practical Guide

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Slovenia

How are foreign investments regulated in Slovenia?

In principle, there are no restrictions on foreign investments in Slovenia. However, in certain business sectors, prior approval of the investment from the competent authority might be required.

Furthermore, the Act Determining the Intervention Measures to Mitigate and Remedy the Consequences of the COVID-19 Epidemic (representing the third package of the COVID-19 support measures) implemented rules on foreign direct investment screening. These rules apply to all foreign (i.e. non-Slovenian) investors – i.e. the investors from the EU, the EEA, Switzerland as well as from third countries - and the rules are intended to protect Slovenia’s strategic assets from unwanted foreign investors. The Ministry of Economic Development and Technology has the right to approve the foreign investment, to determine terms and conditions under which the foreign investment may be performed, to prohibit the investment or to cancel (unwind) the investment for security reasons or public order reasons.

Which foreign investments are subject to clearance in Slovenia?

The prior authorisation processes apply to certain investments in several business sectors (banking, insurance, media, etc.). Where the clearance process applies, there is no single clearance process as the different laws governing the various sectors often impose distinct competent bodies, criteria and processes for issuing the decision on approval/authorization of the transaction or the acquisition of shares.

As regards the foreign direct investment screening implemented under the Act Determining the Intervention Measures to Mitigate and Remedy the Consequences of the COVID-19 Epidemic (applicable as from 1 June 2020 and until 30 June 2023) the Ministry of Economic Development and Technology shall be competent for the screening process. The following investments shall be subject to screening processes: (1) investments of any kind by acquisition of at least 10% participation in the capital or voting rights by a foreign investor aimed at establishing or maintaining lasting and direct links between the foreign investor and the business entity with its registered office in Slovenia, AND (2) the investment is made in one of the following sectors: (a) critical infrastructure, whether physical or virtual, including infrastructure in the fields of energy, transport, water, health, communications, media, data processing or storage, aviation and aerospace sector and defence, electoral or financial infrastructure, and sensitive facilities, as well as land and real estate, which are crucial for the use of such infrastructure or land and real estate in the vicinity of such infrastructure; (b) critical technologies and dual use goods as defined in point 1 of Clause 2 of Council Regulation (EC) No 428/2009, including artificial intelligence, robotics, semiconductors, cybersecurity, aviation and aerospace and defence technology, energy storage technology, quantum and nuclear technologies, nanotechnologies and biotechnologies, and health, medical and pharmaceutical technology; (c) supply of critical inputs, including energy or raw materials, food security, medical and protective equipment; (d) access to sensitive information, including personal data, or the ability to control such information; (e) the freedom and pluralism of the media; (f) projects and programs of EU interest, as set out in Annex I of the Regulation (EU) 2019/452 of the European Parliament and of the Council of 19 March 2019 establishing a framework for the screening of foreign direct investments into the EU.

The screening process applies also to any contract that grants the foreign investor or its Slovenian subsidiary the right to dispose of land or real estate that are material for critical infrastructure or that are located in the vicinity of such infrastructure.

What is the foreign investment clearance process in Slovenia?

The clearance process applicable to certain investments in several business sectors (banking, insurance, media, etc.) differ considering the applicable legislation governing the relevant sector. In principle, acquisition of approval/authorization from the competent authority/body is a condition precedent for the closing of the transaction and the transfer of shares.

As regards the foreign direct investment screening implemented under the Act Determining the Intervention Measures to Mitigate and Remedy the Consequences of the COVID-19 Epidemic (applicable as from 1 June 2020 and until 30 June 2023), the transaction shall be notified with the Ministry of Economic Development and Technology within 15 days after the conclusion of the merger agreement or the publication of a takeover bid (it is however very likely that the obligation applies also to other types of agreements such as share purchase agreements, etc), within 15 days after establishment of a new company or within 15 days after conclusion of the real estate agreement based on which the purchaser acquired the disposal right with respect to the real properties. The notification shall be filed on the form sheet prescribed by the Ministry. The screening is initially performed by a commission (having between 3 and 10 members) who may also ask for opinions from third parties (bodies or entities) and for additional information, clarification and documents from the notifying party. The information obtained shall be used in accordance with the purposes set forth under the Regulation (EU) 2019/452 of the European Parliament and of the Council of 19 March 2019. The commission issues its opinion while the final decision on the foreign investment shall be adopted by the Ministry within 2 months after filing of the notification. At its assessment whether the direct foreign investment may affect the security or public order, the Ministry takes into consideration particularly the following factors: (i) whether the foreign investor is directly or indirectly controlled by the government, including state bodies or armed forces, of a third country, including through ownership structure or significant funding; (ii) whether the foreign investor has already been involved in activities affecting security or public order in an EU Member State; and (iii) whether there is a serious risk that the foreign investor engages in illegal or criminal activities.

The Ministry may decide either that the investment is (i) approved, or (ii) approved subject to fulfilment of certain terms and conditions which shall be applied at its performance, or (iii) prohibited or (iv) cancelled (unwound). The applicant has the right to appeal the decision before the Government of the Republic of Slovenia.

If the foreign investment is either prohibited or cancelled (unwound) by the Ministry’s decision, any and all merger agreements, takeover bids and transaction documents based on which the foreign investor obtained disposal right(s) with respect to the real properties as well as the registry courts’ resolutions shall be null and void. The foreign investment may be prohibited, cancelled (unwound) or conditionally approved only due to public safety or public policy reasons, in particularly when it affects the essential infrastructure.

Are there specific conditions that can be imposed on the foreign investment by Slovenian authorities?

The Ministry can indeed decide that the approval of the foreign direct investment is conditional – the Ministry may approve the investment subject to investor’s fulfilment of certain terms and conditions at the performance of the investment. The law does not set forth further rules on what terms and conditions the Ministry may impose; however, the direct foreign investment shall not adversely affect the public safety and the public order.

What other main challenges do foreign investors face in Slovenia?

Employee rights

In share or asset deals, the companies concerned must inform and consult with their employee representative bodies (work council or work representative) at least 30 days before entering into the transaction/signing the share purchase agreement. The employees, however, do not have the right to block the transaction.

Antitrust clearances

Clearance of the Slovenian Competition Protection Agency is required if the following thresholds are met: (i) the total annual turnover of the undertakings involved in a concentration, together with other undertakings in the group, on the market of the Republic of Slovenia exceeded EUR 35 million in the preceding business year, and (ii) the annual turnover of the acquired undertaking, together with other undertakings in the group, on the market of the Republic of Slovenia exceeded EUR 1 million in the preceding business year; OR if, in the case of the creation of a joint venture by two or more independent undertakings, performing on a lasting basis all the functions of an autonomous economic entity, the annual turnover of at least two undertakings concerned in a concentration, together with other undertakings in the group, exceeded EUR 1 million in the preceding business year. Furthermore, when the concentration does not reach the aforementioned thresholds, the Competition Protection Agency may, no later than fifteen days following the date on which the undertakings involved in the concentration notify the Agency of its implementation, request the undertakings to file the merger notification if the companies involved, together with other undertakings in the group, hold more than a 60% market share on the market of the Republic of Slovenia.

EU antitrust clearance is required if the conditions under the Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings (the EC Merger Regulation) are met.

UBO declarations: Entities registered with the Slovenian Court and Business Register must disclose and keep updated the mandatory declaration on the identity of their ultimate beneficial owners (i.e. all individuals directly or indirectly holding more than 25% of the company or exerting control over it).

Pre-emptive rights: Sale of shares (particularly in a limited liability company) may trigger consent of shareholder(s) of the target. Pre-emptive rights on business share may exist and shares may be subject to limitations on disposal. Furthermore, in case of real estate transactions, potential pre-emptive right(s) of municipality or the state on the land shall be considered as those rights may be exercised (or waived) after the conclusion of the agreement.

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