M&A – Main differences between Share Deal and Asset Deal in Slovenia

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Slovenia

What are the main features of a share transfer agreement in Slovenia?

  • The Share Purchase Agreement (SPA) needs to be carefully tailored to include appropriate representations, warranties and indemnities specific to the deal at hand.
  • The acquisition process (in particularly the due diligence process) must be fully compliant with competition rules and GDPR regulations.
  • Transferability is subject to any prior shareholders’ consent if such consent is required under the articles of association/bylaws. Unless provided otherwise under the Articles of association, the shareholders in a limited liability company (LLC) have a statutory pre-emption right on shares (there is an obligation for the seller to notify other shareholders on the intended sale and the terms and conditions of sale and the shareholders have 1 month to respond).
  • SPA for transfer of shares in an LLC must be in a notarized deed form and notification of the share transfer to the management of the company and registration in the register of companies is required.

What are the main features of an asset transfer agreement in Slovenia?

  • The parties are free to determine which assets are to be transferred (either individual assets or a group of assets which form a business unit and are intended (required) for the transferred business). The asset purchase agreement must specify in detail the transferred assets (there is no automatic transfer of all the assets and liabilities regarding the transferred business).
  • Each asset must be properly transferred to the purchaser. The form of an individual asset transfer depends on the type of asset (transfer of certain assets requires written form, notarization, registration or other formalities). Specific regulations govern the transfer of certain assets, such as real estate (where, among others, a pre-emption right of the state or municipality may exist).
  • The transfer of any business relationship or contract requires the consent of the relevant counterparties to the business relationship or a contract, as applicable.
  • Some public licenses, permits or authorizations held by the selling company with respect to the transferred business may not be transferred and must be applied for by the purchaser anew.
  • In certain circumstances, transferability is subject to prior shareholder’s approval or consent that needs to be obtained by the management of the selling company for the execution of an asset transfer agreement.
  • Transfer of (or a part of) a business triggers statutory assumption of joint and several liability of the purchaser (together with the seller) for the obligations related to transferred assets up to the amount (value) of the transferred assets (this does, however, not apply in case of transfer of an individual asset).
  • Transfer of (or a part of) a business triggers statutory transfer of employees (the employees are transferred to the purchaser automatically on the basis of the law itself if the transferred assets form an economic entity; the provisions of Directive 2001/23/EG (Transfer of Undertaking) are transposed properly into Slovenian legislation).

What is the process to transfer the shares of a company in Slovenia?

General features relating to the sale and transfer of shares of an LLC (in Slovenian: d.o.o.) are described below:

  • obligation to notify the employees’ representative body (or all the employees if no representative body has been appointed) of any corporate changes at least 30 days before the decision with respect to the deal is adopted and consultation with the employees’ representative body (to be performed at least 15 days before the adoption of a decision with respect to the deal). The trade unions, if involved, should be timely informed and consulted.
  • SPA to be concluded in a notary deed form before the notary public.
  • approval of the Slovenian Competition Authority (and in certain cases of other authorities, considering the business area involved) must be obtained if the preconditions/thresholds set forth under competition laws are met. This is to be obtained prior to closing of the transaction.
  • change of ownership shall be registered with the Slovenian court/business register.
  • notification of the share transfer to the management of the company is required.
  • new ultimate beneficial owners need to be registered with the Slovenian Ultimate Beneficial Owners Register within 8 days upon occurrence of the change.

For joint stock companies, different rules apply as well – the transfer of shares shall be registered in the central securities registry (ownership right over securities is acquired with the registration of change of ownership into the registry). The SPA shall be in writing and rules regarding the information obligation and the consultation obligation with respect to the employees also apply.

What is the process to transfer the assets/business of a company in Slovenia?

  • Obligation to notify the employees’ representative body (or all the employees if no representative body has been appointed) of the changes at least 30 days before the decision with respect to the deal is adopted and consultation with the employees’ representative body (to be performed at least 15 days before the adoption of a decision with respect to the deal). The trade unions, if involved, should be timely informed and consulted.
  • Asset Transfer Agreement to be concluded in writing; depending on the type of transferred assets, other formalities may be required – for example, for certain transaction documents notarization or other formal requirements may apply.
  • Each asset is transferred in its specific way as prescribed by Slovenian law. Change of ownership over specific assets is to be registered with appropriate registers (e.g. real estate in the land registry, etc.)
  • Consent of the relevant counterparties to the business relationships/contracts shall be acquired.
  • Permits, licenses or authorizations which cannot be transferred must be acquired anew.
  • Approval of the Slovenian Competition Authority (and in certain cases of other authorities, considering the business area involved) must be obtained if the preconditions/thresholds set forth under the competition laws are met. This is to be obtained prior to closing of the transaction.
  • Registration of the transfer agreement with the local tax authorities may be required.

What are the transfer taxes for a share deal in Slovenia?

  • Share deals are not subject to a special transactional tax.
  • Individual’s (natural person’s) capital gain will be taxable at a fixed rate of 27,5%; however, tax rate decreases after lapse of certain time period after acquisition of the capital share; namely, to a fixed rate of 20% after five years, 15% after ten years, 10% after fifteen years and finally, to 0% after twenty years after acquisition of such capital share (as of 1.1.2020).
  • In case of a sale by a legal entity, capital gain shall be taxable with a company profit tax at the rate of 19%;
  • Both, personal capital gain tax and corporate profit tax are paid by the seller.
  • No VAT is applicable to such transfer of capital shares.

What are transfer taxes for an asset deal in Slovenia?

  • No special transactional tax (e.g. in the form of duty stamps).
  • Sale of real estate is subject to a fixed 2% transfer tax;
  • VAT at the rate of 22% applies in case of a real estate transaction, but only in specific cases. In such event, transaction is taxed with VAT only, without obligation of 2% real-estate transfer tax; VAT taxation applies in case the seller acquired the real-estate with VAT in the first place; further, VAT always applies if certain developed real-estate has not yet been in use (first sale of a building or part of the building) and in case that real-estate is a buildable lot that has not yet been developed;
  • Importantly, transfer of assets, which represent part of or even the entire undertaking (business) of the seller, could be exempt of VAT under strict conditions as set forth by tax authority’s regulation and case-law. Buyer is exempt if it continues to run the business operation as if transfer of title did not occur (e.g. transfer of shopping mall with all the lease contracts) AND the buyer has met all requirements to continue such undertaking; tax-authority can subsequently review transaction and decide that VAT shall apply, if it is concluded that conditions were not met.
  • All other asset transfers shall, normally, be taxed with either regular 22% VAT or reduced 9,5% VAT rate, depending on the tax status of the seller; VAT non-registered sellers (if their annual income is below 50.000 EUR) are VAT exempt.
  • The capital gain on the sale of assets will be taxable with a standard corporate profit tax at the rate of 19% in case of corporate transaction.
  • Individuals (natural persons) shall be taxed the same way as in the case of a share capital transaction; 27,5% fixed rate on capital gains; however, the tax rate decreases after lapse of certain time period after acquisition of the asset; namely, to 20% after five years, 15% after ten years, 10% after fifteen years and finally, to 0% after twenty years upon acquisition of such asset (as of 1.1.2020). • All taxes are due to be paid by the seller, however actual payment burden can be contractually transferred to the buyer;
  • If VAT applies, it is paid by the buyer but actually deferred by the seller, unless it is specified in the list of exemptions where VAT is reversely charged to the seller (e.g. real-estate).
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