CMS Expert Guide for taking security in Slovenia

Yes, a person or legal entity may provide a guarantee as security for obligations of another person or legal entity. However, non-bank guarantees are not specifically regulated under Slovenian law. As a rule, publicly available Slovenian case-law interprets (corporate) guarantees issued by a person or other legal entities as a surety (poroštvo).      

Yes.

No.

Yes, subject to limitations (financial assistance, insolvency and capital maintenance rules). See comments in section 4. 

Yes. 

Yes, subject to limitations (financial assistance, insolvency and capital maintenance rules). See comments in section 4. 

Capital maintenance rules: According to capital maintenance rules, a limited liability company (LLC) must not pay to its shareholders any assets necessary for the maintenance of the company’s registered capital (osnovni kapital) and restricted reserves (vezane rezerve). An up-stream guarantee is therefore allowed if it does not contravene the capital maintenance rules and therefore does not reduce the assets of a subsidiary below the company’s capital (i.e. registered capital (osnovni kapital) and restricted reserves (vezane rezerve)). Compared to capital maintenance rules applicable to limited liability companies, much more rigorous capital maintenance rules apply to joint stock companies (JSC) – protected are all assets of the joint stock company and not just the registered capital and restricted reserves as in a limited liability company. The only permitted payments to shareholders are payment of dividends and payments in accordance with permitted acquisition of treasury shares.

Financial assistance: According to financial assistance rules, a limited liability company (LLC) and a joint stock company (JSC) may not provide loans to its shareholders for the purposes of paying any shareholders’ contribution to the company’s share capital or to finance their purchase of the company’s shares.

Transfer pricing rules: According to transfer pricing rules, the transactions between related parties should be conducted at arm’s length terms (i.e. consistent with what unrelated parties would agree to in a similar transaction).

Rule of tax deductibility (thin capitalisation rule): The tax deductibility of interest payments on loans granted by a related party (i.e. a party that owns at least 25% of the shares or voting rights in the taxpayer or vice versa) is generally restricted, where the amount of loans exceeds a certain multiple of the shareholder’s share in the equity of the taxpayer in a particular tax period.

Loans from third parties for which the shareholder issues a guarantee, and loans granted by a bank that are linked to a deposit of the shareholder in the same bank, are also subject to thin capitalisation rules. The size of the shareholder’s share in the equity of the loan recipient is calculated as the average of the subscribed capital, retained net profits and the capital reserves held on the last day of each month in the taxation period.

A guarantee (as a surety) must be in a written form. No notarisation, registration or translation into Slovenian language is necessary to ensure validity of a guarantee. However, for the purposes of efficient enforcement, conclusion of a guarantee in a form of a directly enforceable notarial deed is recommended.  

Yes, a guarantee/security may be created to secure a future or contingent claim, provided that the claim is determined or at least determinable.

Yes, the validity of a (corporate) guarantee/security is dependent on the validity of a principal obligation, since it is not an independent obligation, but an accessory one, meaning that it is not capable of existing by itself and depends on the existence of the main obligation. The only exception is a bank guarantee (or guarantee of another financial institution), which can be an abstract security.

The indemnity is not regulated by law, but the parties may determine the indemnity in their contract (contractual freedom of the parties).

Yes, the guarantee/security can be continuing for as long as secured obligations remain outstanding due to its accessory nature. A definite term and a maturity date is, however, usually required for registration purposes.   

Yes. 

These structures (in particular, parallel debt) are not regulated by law and are not expressly recognised. However, they are commonly used in cross-border transactions, where such structures are established under foreign-law governed documents.   

Note, however, that there is no publicly available case-law in relation to such structures. Therefore, it is not certain how courts would decide if such security structures would be challenged.

This depends on types of security established. Accessory securities (e.g. pledges, surety) are automatically transferred together with the secured debt. However, to achieve publicity effect, changes of a creditor need to be registered with the relevant register (e.g. Register of Non-Possessory Pledges on Movable Property or Land Register). In practice, a short-form deed is usually executed between the parties, based on which changes with respect to a creditor are done in the relevant registers.

For non-accessory securities (e.g. fiduciary transfer of receivables, fiduciary assignment of claims), a separate agreement on fiduciary transfer/assignment to a new creditor is required. 

This depends on the type of the amendments of the guaranteed/secured obligations. For example, amendments that increase the liability of a guarantor, require the consent of the guarantor, otherwise these increased obligations are not covered by the guarantee agreement. The addition of another debtor to the loan agreement does not affect the existing security package if the new debtor is not a party to such security package. Otherwise, amendment agreements to the existing security documents would have to be concluded. Furthermore, if the amendments of the obligations relate to the terms reflected in the public registers, amendment agreements need to be concluded and the changes registered in the public registers.     

However, a novation of the principal obligation may result in the termination of the security and must be assessed on a case-by-case basis depending on the nature and terms of the novation.

Yes, the security documents that must be concluded in a form of a notarial deed (e.g. mortgage agreement, non-possessory movables pledge agreement, share pledge agreement) must be governed by Slovenian law.

Other security agreements may be governed by foreign law, the choice of which should be recognised and enforced in Slovenia to the extent such foreign law is not contrary to public policy of Slovenia.

With respect to enforcement, under the Brussels I Regulation (Regulation (EU) No. 1215/2012 of the European Parliament and of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (recast)), judgments in civil and commercial matters delivered within an EU member state are (with very limited reasons for rejection) automatically acknowledged in all EU member states.

The designation of the foreign courts as courts having exclusive jurisdiction to settle any dispute arising out of or in connection with the respective security document would be recognised and upheld by the Slovenian courts in accordance with Brussels I Regulation (Regulation (EU) No. 1215/2012 of the European Parliament and of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (recast)).

The exclusive jurisdiction of the Slovenian courts is, however, mandatory if the dispute relates to real estate property, insolvency of a Slovenian party.

Submission to arbitration is valid and enforceable. 

No.

The hardening period for all debtor’s transactions and legal acts (including providing guarantee/security) is 12 months (or 36 months for gratuitous disposals) prior to insolvency proceedings. Transactions and legal acts (including providing guarantee/security) can be challenged even beyond these periods, if it can be proven that the debtor was already insolvent at the time of the respective transaction or that such transaction caused the insolvency. 

The description of collateral shall be sufficient for its clear identification. Mortgage is a pledge over immovable property. 

Yes, a security can be created over multiple assets by one security document. However, in practice separate security documents are usually concluded since a copy of a security document needs to be submitted to each public register. A floating security is possible in a case of a non-possessory pledge of inventory (goods in turnover).

Yes, downstream security can be granted without limitations, whereas upstream and lateral security can be granted with certain limitations (as described in answers to questions 3 and 4).   

Yes, for certain types of security; for example, mortgage, non-possessory pledge of movables, pledge of a business share in a limited liability company, fiduciary transfer of movables, fiduciary assignment of receivables require involvement of a notary – in some cases notarisation of signatures suffices, while in others an agreement needs to be concluded in a form of a notarial deed. Certain types of security do not require notary’s involvement, for example pledge over receivables or other rights under contracts. 

Depending on the type of security (e.g. registrations are done in case of mortgages, non-possessory pledges of movables, and pledges of shares). The registrations do not require renewals.  

Any notarised security must be executed in Slovenia (a translation to any other language can be enclosed). For non-notarised security, translation may be needed if a security agreement is submitted as evidence in court.

Depending on the type of security (e.g. pledge of receivables or other rights under contracts require notification to the debtor of such pledged right). If the real estate is not registered in the land register, publication in the Official Gazette of the Republic of Slovenia is necessary. In case of a possessory pledge of a movable (pignus) or a pledge on the bearer materialised securities, handing over of the asset to the pledgee is required.

Yes.

Depending on the type of security, e.g. on the same asset several pledges/mortgages may be created with different rank, while in case of fiduciary property or assignment in security no additional security interest can be granted by the debtor over such asset.

The ranking / priority of registered encumbrances is determined by the date/time of the registration. Nevertheless, holders of security are free to contractually agree on change of ranking of security. 

Establishment of security and level of security regulation is generally:

Security easily established and encumbrances easily checked.

No, the guarantee/security documents are executed only with handwritten (wet-ink) signatures.

The electronic forms have recently been introduced into Slovenian legislation. However, the system is still being implemented. Plans are in place to make it possible to execute notarial deeds in electronic form using Qualified Electronic Signatures (QESs). Such notarial deeds will be treated as written agreements signed with a wet-ink signature. Standard electronic signatures, scanned versions of wet-signed agreements, click-on agreements will not be acceptable. 

Yes. The Land Register, Register of Non-Possessory Pledges and Court/Business Register (the latter with respect to encumbrances over shares in limited liability companies) are publicly available and accessible online. Anyone can obtain the information from these registers online.

Either the security holder or the security provider may apply for registration (through the notary), subject to contractual agreement. In practice, in case of notarial involvement, registrations are taken care of by a notary right after conclusion of notarial deeds/notarisations on the basis of instructions received by the security holder.

The application for registration in the relevant register must be submitted through a notary, who must submit an application, the security document and also the main obligation document (all in Slovenian). The documents are submitted in electronic form.

Quick – everyone can check in the publicly available registers. Official extracts can be obtained through the notary (usually within a day) or from the respective register (up to one week). 

The costs are low (e.g. notary’s fee for official extract from the Land Register is EUR 10 per extract; a state fee is EUR 3.28 per extract from the Land Register).

Depending on the type of security and the workload of the respective register.

Low – notary’s services (usually, up to EUR 100 per registration) plus potential registration costs.

The notarial fee for notarial deeds is generally determined on the basis of the value of the principal obligation. For notarisation of the signature on the security document, the notary fee can be up to EUR 114.

For certain security, tax and registration costs apply. 

Yes.

Yes, if this is specified by the guarantee/security agreement as a default.  

Yes, if this is specified by the guarantee/security agreement as a default.

Yes, if this is specified by the guarantee/security agreement as a default. After insolvency proceedings are initiated, only certain securities may still be enforced by the creditor.  

Any event contractually determined in the pledge/security agreement as a default.

There are no other formalities in case the creditor has a (directly) enforceable title. Otherwise, an enforceable title (final judgment) must be obtained before proceeding to enforcement.

In case of out-of-court enforcement, the mandatory notification period prior to the out-of-court sale is eight days (i.e. the out-of-court sale can take place eight days after the day the creditor has warned the debtor of the intended sale). 

Yes, the assets may be sold by public auction, on the stock exchange or at market price, if such an agreement between the parties is included in the security document. (However, in the case of agreements concluded between legal entities, the existence of an out-of-court sale agreement is presumed). The real estate over which the mortgage was created in a form of a directly enforceable notarial deed may also be sold in a notarial sale. Security created under the Financial Collateral Act (implementing the EU directive on financial collateral arrangements) may also be sold in another appropriate manner.

Yes, but such agreement between the parties can be agreed only after the maturity of the claims.

Yes, depending on the type of security and if parties agreed so in a security document.

Notarial writs do not exist under Slovenian law. However, we do have a procedure for the notarial sale of real property on which a mortgage is established on the basis of a directly enforceable notarial deed, concluded between certain legal entities (at least one of the parties must be a credit institution). 

N/A

Yes, in certain cases they are recommended.  

N/A.

Security enforcement is in practice fairly easy and balanced, but long in terms of timing. 

No, the legislation in this area is rarely amended and when it is, no major changes are made (only to the extent necessary to improve the regulation and to remove or properly clarify inconsistencies brought to light by case-law).