SLOVENIA: An Introduction
Economic Overview
Slovenia, marking 20 years of European Union (EU) membership, has seen its trade value quadruple since joining the EU. In 2022, exports reached EUR52.6 billion, a significant increase from EUR12.8 billion in 2004, while imports grew to EUR56.6 billion from EUR14.1 billion during the same period, according to Statistical Office information. Year-on-year inflation fell to 3% in April, the lowest since October 2021, as reported by the Institute of Macroeconomic Analysis and Development in the Slovenian Economic Mirror. The economic performance of companies in 2023 indicated a return to pre-pandemic levels, with all sectors recording profits. Notably, the energy sector drove the overall profit increase, showing substantial improvement in business results related to electricity, gas, steam, and air conditioning supply. However, net profits in energy-intensive manufacturing activities, although still higher than pre-pandemic levels, declined markedly.
Environmental and Infrastructural Developments
In 2023 and 2024, Slovenia faced significant environmental and infrastructural developments. The country experienced its worst-ever natural disaster in August 2023 with severe floods causing over EUR500 million in damages and extensive recovery efforts underway to enhance flood resilience. Infrastructure projects like the Second Rail (Drugi tir) aim to improve the rail network, boosting economic growth by enhancing logistics between the Port of Koper and inland Europe. Additionally, plans for a second unit at the Krško Nuclear Power Plant are progressing to ensure energy stability (NEK2). The expansion of the Karavanke Tunnel is also notable, aimed at increasing traffic capacity and safety, facilitating better cross-border transport with Austria.
M&A Market Overview
The M&A market in Slovenia has remained dynamic into 2024, despite rising interest rates and weaker post-pandemic activity. Most M&A activity involved private transactions, with several high-profile deals in the banking sector. There has been an increase in spin-offs and demergers of companies headquartered in Slovenia, along with more group reorganisations at the European level. In recent years, notable deals have occurred in telecommunications, off-patent pharmaceuticals, software solutions and retail. The trend of private transactions has continued in 2024, with limited liability companies being the primary targets. M&A activity is expected to remain relatively consistent with previous years, although higher interest rates, an increased minimum wage, and rising fixed costs such as electricity are likely to impact the market.
Legislative Landscape Dynamics
Corporate
Several regulations are relevant to the M&A sector; primarily involving limited liability and joint-stock companies. For the latter, the central corporate regulation, the Companies Act (ZGD-1), is central to corporate regulation and has recently undergone significant changes. The ZGD-1L amendment introduced significant changes to Slovenian corporate law, such as online company formation, cross-border conversions, mergers, and divisions, and enhanced court registries. It enables online establishment of capital companies, transposes EU directives for cross-border operations, and allows virtual shareholder meetings. It also links business registers for better transparency and provides legal remedies for creditors and minority shareholders.
Further changes are expected this year with the ZGD-1M amendment, which aims to align with three European Union Directives. These include public reporting of tax information by large companies, expanded sustainability reporting requirements for all large companies, and measures for balanced gender representation in leadership positions. Additionally, businesses must prominently display their names at their premises, and the Financial Administration of the Republic of Slovenia will oversee the maintenance of core capital.
In addition to the Companies Act amendments, changes are expected in the rules governing investments, corporate insolvency, employment relations and tax obligations. During the COVID-19 pandemic, several emergency laws were in effect, including measures for the review of direct foreign investments. The Investment Promotion Act of 2023 transferred the obligation to notify foreign investments for the (in)direct acquisition of at least 10% participation in capital or voting rights.
In the field of insolvency, the past year has seen some fluctuations between higher and lower numbers of insolvency proceedings. However, the overall trend of a decreasing number of initiated proceedings, which has been ongoing since 2018, continues, according to data from the Agency of the Republic of Slovenia for Public Legal Records and Related Services. The central law, the Financial Operations, Insolvency Proceedings, and Compulsory Dissolution Act (ZFPPIPP), has also undergone some changes, most notably, a new restructuring procedure was introduced to address imminent insolvency, and stricter obligations for management when the company faces potential insolvency were established.
Employment
In employment relations, the Employment Relations Act has been amended. Notable changes include extending the period for using unused annual leave, allowing employees to propose improvements to working conditions with mandatory employer responses, and enhancing protections for work-life balance. Additionally, employees can now make a statement before receiving a written warning prior to termination for culpable reasons.
Antitrust
The new Act on the Prevention of Restriction of Competition (ZPOmK-2) in Slovenia introduced significant changes, including administrative sanctions on companies, standardised conditions for investigations, and enhanced international co-operation. It limits the use of information from leniency statements to judicial purposes and prohibits the disclosure of specific agency-prepared documents. Under the Act, the Slovenian Competition Protection Agency (AVK) can impose monetary fines, consider appeals against investigation orders, and collect information prior to proceedings. The Act also addresses the waiver or reduction of sanctions, the statute of limitations and international enforcement. Despite these changes, Slovenia received a formal notice from the European Commission in early 2023 for not fully implementing Regulation (EU) 2019/1150/EU, prompting a draft amendment to ensure compliance with Regulations 2019/1150/EU and 2022/1925/EU, assigning the AVK to monitor their implementation.
In Slovenia, according to data from the AVK, there is currently a gradual increase in the number of cases handled, particularly those initiated at the request of parties, which involve the assessment of concentrations based on company notifications. These proceedings constitute the majority of cases handled by AVK. In recent years, the processes have been relatively positive, with the vast majority of cases complying with competition rules. Typically, only a handful of cases reach the courts, where, if irregularities are found, the matter is usually returned for reconsideration.
Tax
Changes in the tax area are highly anticipated, including the extension of the scope of VAT exemptions and the introduction of VAT group identification. In the area of corporate income tax, limitations on the possibility to claim tax loss carry-forwards are expected, along with changes to the absolute threshold for the recognition of excess borrowing costs and relief linked to the digital and green transition.
Future Outlook
Slovenia continues to prepare for future disruptive global trends such as digitalisation, climate change and aging populations. The country remains a highly attractive place for investment, with its participation in the EU’s internal market providing privileged access to a market of over 500 million inhabitants. Slovenia continues to make its business environment increasingly attractive to foreign investors and fully utilise its competitive strengths in the global economy. The anticipated legislative changes in tax, corporate governance, and environmental policies are expected to further enhance the country’s investment appeal and economic stability.