Corporate Governance Comparative Guide

• Published date: 29 September 2021
• Subject Matter: Corporate/Commercial Law, Corporate and Company Law, Directors and Officers, Corporate Governance, Securities, Shareholders, Executive Remuneration
• Law Firm: Leonardo Rok Lampret
• Author: Mr Leonardo Rok Lampret

1 Legal and enforcement framework

1.1 Which legislative and regulatory provisions and codes of practice primarily govern corporate governance in your jurisdiction?

The main legislative code governing corporate governance in Slovenia is the Companies Act. This governs the key relationships between shareholders and the management and supervisory bodies, and with the company. It also contains rules regarding groups of companies.

Other codes and provisions also regulate specific aspects of corporate governance, as follows:

• The Prevention of Restriction of Competition Act governs the exercise of voting rights to prevent competition abuses. This is a key regulation that contains market manipulation rules and sets out the consequences of competition abuses.
• The Worker Participation in Management Act governs the conditions and models for worker participation in the management of a company.
• The Slovenian Sovereign Holding Act
• • governs the operation of Slovenian Sovereign Holding and pension and disability companies, and investment management;
  • sets out measures to enhance integrity and accountability; and
  • limits the risk of corruption, conflicts of interest and illegal inside trading.
• The Financial Operations, Insolvency Proceedings and Compulsory Dissolution Act governs the responsibilities of the management and supervisory bodies regarding the financial operations of a company. It also provides for the joint and several liability of these bodies if damages to creditors occur.
• The Investment Funds and Management Companies Act regulates the corporate governance of investment funds and management companies.
• The Banking Act regulates the corporate governance of credit institutions established in Slovenia.
• The Insurance Act regulates the corporate governance of insurance and reinsurance companies established in Slovenia.
• The Takeover Act regulates the actions of management and supervisory bodies regarding takeover bids.
• The Corporate Governance Code for State-Owned Enterprises governs the corporate governance of state-owned companies. It also applies to their subsidiaries.

1.2 Is the corporate governance framework in your jurisdiction primarily based on hard (mandatory) law and regulation or soft (eg, 'comply or explain') codes of governance?

It is primarily regulated by hard law. Soft law (the 'comply or explain' principle) usually arises from hard law and assists in the interpretation of the rules governing corporate governance (ie, it defines certain concepts in more detail). Soft law is not legally binding, but it has a significant influence on the appointment of members of the management and supervisory bodies and the exercise of their function. It also serves as a possible basis for determining liability.

1.3 Which bodies are responsible for drafting and enforcing the rules and codes that make up the corporate governance framework? What powers do they have?

The legislature, in the form of the National Assembly. However, there are also some institutions that issue instructions and explanations of certain concepts. For example, the research and guidelines of the Slovenian Directors Association promote and develop corporate governance in Slovenia.

2 Scope of application

2.1 Which entities are captured by the rules and codes that make up the principal elements of the corporate governance framework in your jurisdiction?

The most common type of entity to be governed by the rules and codes of the Slovenian corporate governance framework is the publicly traded joint stock company. However, all other entities are also governed by hard law and must act in accordance with it (eg, limited liability companies).

2.2 What exemptions, if any, from the principal elements of the corporate governance framework are available in your jurisdiction?

Besides the general rules applicable to all entities, each entity is subject to specific rules regarding its operations. For example, the Takeover Act does not apply if the target:

• is not a publicly traded joint stock company; or
• is a private traded joint stock company with fewer than 250 shareholders or less than '4 million in total equity as shown in its most recent annual report.

2.3 What are the principal issues covered by the codes of governance in your jurisdiction?

Corporate Governance Code for State-Owned Enterprises: This code sets out principles and recommendations for good practice in the corporate governance of state-owned enterprises. Among other things, it covers:

• the relationship between shareholders and Slovenian Sovereign Holding and state-owned enterprises;
• the management of assets under the ownership of Slovenian Sovereign Holding and assets of Slovenia managed by Slovenian Sovereign Holding;
• asset management documentation; and
• measures to enhance integrity and responsibility, and to mitigate risks relating to corruption, conflicts of interest and abuse of inside information in the management of capital assets which are owned by Slovenian Sovereign Holding and assets of Slovenia managed by Slovenian Sovereign Holding.

Other codes: Other codes adopted by different bodies primarily govern issues such as:

• the conduct of members of the supervisory board in the event of political or other pressures or unethical influence on independent decision making;
• guidelines on the work of audit committees;
• measures for the enhancement of integrity and responsibility;
• measures on preventing corruption;
• the conduct of board members in case of conflicts of interest;
• the professional experience of board members; and
• the handling of inside information.

3 Ownership and control

3.1 What are the typical ownership structures in your jurisdiction?

In the case of state-owned stock companies, Slovenia is a majority shareholder (whether directly or indirectly through other companies, such as Slovenian Sovereign Holding).

Many limited liability companies are owned by a single shareholder or at most three people.

3.2 How are companies typically controlled in your jurisdiction, both structurally and in practice?

The Companies Act separately governs two-tier and one-tier board structures. Therefore, a company has discretion to choose either board structure as appropriate.

4 The board: structure and appointment

4.1 How is the board typically structured in your jurisdiction?

This will depend on whether the company has a one-tier or two-tier board structure. Usually, a management or supervisory body will have at least three members, unless otherwise provided by the Companies Act. Members of the management or supervisory bodies are appointed for a period which is specified in the articles of association and which may not exceed six years, with the possibility of reappointment.

If for any reason one or more members of the management or supervisory bodies are absent, such member can be appointed in urgent cases by the court at the request of the interested parties. The position of a court-appointed member of a management or supervisory body will end once a new member is appointed to replace him or her, in accordance with the articles of association.

4.2 Are board committees recommended or mandated? If so, which areas should/must they cover?

There are no mandatory committees. The supervisory board can appoint different committees, such as:

• an audit committee;
• a remunerations committee; and
• an appointment committee, whose function is to draw up the resolution proposals of the supervisory board and provide for their execution, and perform other expert activities.

However, there is one exception to this: in a company that is a public interest entity, the supervisory board is obliged to establish an audit committee.

A committee may not decide on issues which fall within the powers of the supervisory board. A committee must be composed of a chair and at least two members. The supervisory board will appoint the chair of the committee from among its members.

If the supervisory board appoints an audit committee, at least one member must be an independent expert in accounting or auditing. Only members of the supervisory board who are independent from the audited entity may be appointed as other members of the audit committee. The main tasks of the audit committee are:

• monitoring the financial reporting procedure and the preparation of recommendations and suggestions for ensuring the integrity of the company; and
• monitoring the efficiency and effectiveness of the company's internal control, internal audit (where relevant) and risk management systems.

4.3 Are there any requirements or recommendations to appoint independent board members? If so, how is 'independence' defined?

Yes. A board member must always eliminate any conflicts of interest. Where a conflict of interest occurs, the relevant person must provide written notification to the body of which he or she is a member, as well as the supervisory body, within three days. If the company has no supervisory board, the company members must be informed at the next general meeting.

A conflict of interest exists when a board member's impartial and objective performance of duties, or independent decision making in carrying out his or her functions, is jeopardised due to the existence of:

• a personal economic interest;
• the interest of a family member; or
• a special favour or other interest connected to any other natural or legal person.

4.4 Do any diversity requirements or recommendations apply with regard to board composition?

There is no hard law on diversity requirements. However, the Management Code for Publicly Traded Companies stipulates that the supervisory board of such companies must formulate, adopt and implement a diversity policy with regard to representation on the management and supervisory bodies.

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