Lex Mercator Passed In Slovenia In Response To Agrokor's Distress

On 25 April 2017, the Conditions for the Appointment of a Special Management Board Member in Companies of Systemic Importance for the Republic of Slovenia Act (the "Act", also commonly referred to as Lex Mercator) was adopted by the Slovenian National Assembly (the upper house of the Slovenian Parliament). The Act will still need to be confirmed by the lower house of the Slovenian parliament - the National Council. It will enter into force the next day after publication in the Slovenian Official Gazette.

Whereas the Act appears to be directed at any company of systemic significance for the Republic of Slovenia (defined as a company having at least 6,000 employees in Slovenia and annual revenues exceeding EUR 1 billion)1 , the real reason for its adoption is to protect Poslovni Sistem Mercator, d.d., Slovenia's largest retailer with consolidated annual revenues of approx. EUR 2.5 billion and approx. 21,000 employees, against possible actions by its financially troubled ultimate majority owner Agrokor Group, the largest privately owned company in Croatia, with consolidated annual revenues of approx. EUR 6.5 billion and almost 60,000 employees.

The adoption of the Act follows a recent (7 April 2017) enactment of a Croatian law aiming at rescuing Agrokor. Contrary to Croatian rules which provide for comprehensive measures within Agrokor, the Slovenian Act entirely aims at shielding Mercator against its majority owner Agrokor through the appointment of an extraordinary management board member.

The following provisions of the law are of particular significance for the prospective relationship between Mercator and Agrokor.

APPOINTMENT OF AN EXTRAORDINARY MANAGEMENT BOARD MEMBER: If the majority owner (or its affiliated company) of a company of systemic significance is in an insolvency or restructuring procedure, the Slovenian Government may request the District Court of Ljubljana to appoint an extraordinary management board member ("extraordinary member") to the company of systemic significance. The government shall establish in its resolution that the insolvency of the majority owner is threatening to endanger the company of systemic importance and thus the economic, social and financial stability in Slovenia. COMPETENCES OF THE EXTRAORDINARY MANAGEMENT BOARD MEMBER:

The members of the management board and the extraordinary member jointly represent the company and unanimously adopt decisions on any transactions with the majority owner or its...