Answer ... 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.

Answer ... 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.

Answer ... 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.

Answer ... 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).

Answer ... 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.

Answer ... 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.

Answer ... 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.

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

Answer ... 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.

Answer ... 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.

Answer ... 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.

Answer ... 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.

Companies which are subject to an obligatory auditing requirement must also include a corporate governance statement in their business reports. One of the issues to be addressed in this statement is a description of:

• the company’s diversity policy with regard to representation on the management and supervisory bodies, in terms of gender and other characteristics, such as age, education and professional experience;
• the goals of this policy;
• the way in which the policy is implemented; and
• the results of implementation of the diversity policy during the reporting period.

If no diversity policy is being implemented, the company must explain the reasons for this in its corporate governance statement.

Answer ... In the case of a one-tier board structure, the general meeting appoints the board of directors. The board of directors may appoint provisional executive directors. The board of directors usually has an uneven number of members (three or five).

In the case of a two-tier board structure, the members of the supervisory body are elected by the general meeting. The members of the management board and the chair are appointed by the supervisory board. Besides the elimination of conflicts of interest, there are no other official requirements in this regard. However, each company can specify requirements for members of the board.

Answer ... Individual members or the chair of the management board may be removed by the supervisory board:

• if they are in serious breach of their duties;
• if they are incapable of conducting business;
• if the general meeting passes a motion of no confidence in them, except where the motion of no confidence is passed based on reasons which are clearly unfounded; or
• for other economic and business reasons (eg, significant changes in the shareholder structure or reorganisation).

Answer ... Members of the management bodies shall be appointed for a period which is specified in the articles of association and which may not exceed six years, with the possibility of reappointment.

Any natural person with the capacity to contract may be appointed as a member of a management or supervisory body, with the exception of a person who:

• is already a member of another management or supervisory body of the company;
• has been convicted in a final judgment of a criminal offence against:
• • the economy;
  • employment relationships and social security;
  • legal transactions;
  • property; or
  • the environment, spatial planning and natural resources.

Such a person may not be appointed as a member of a management or supervisory body for five years after the judgment becomes final and for two years after serving a prison sentence;

• is subject to a preventive measure prohibiting him or her from pursuing his or her profession, for the duration of the prohibition; or
• as a member of the management or supervisory body of a company for which bankruptcy proceedings have been initiated, has been convicted in a final judgment and is thus required to compensate creditors in accordance with the Act on Financial Operations of Companies for damage liability, for a period of two years after the court ruling becomes final.

Answer ... Effective boards reflect the strategic priorities of the company. The board of directors must be composed of members who understand the board’s unique areas of risk and the diversity of its stakeholders.

Members must be independent. Boards and their nominating committees should:

• be objective in their choices;
• base their choices on the candidates’ merits; and
• be able to explain the reasoning for their choices.

Board should have an uneven number of members.

Answer ... The management board directs the business operations of the company independently and at its own liability. The management board represents the company and acts on its behalf.

The management board has special powers and liabilities in respect of the general meeting, such as the following:

• prepare measures that fall within the powers of the general meeting at the request of the general meeting;
• draw up contracts and other acts which require the consent of the general meeting in order to be valid;
• carry out the resolutions of the general meeting; and
• report to the supervisory board at least once a quarter.

Answer ... Unless otherwise set out in a resolution of the general assembly, the articles of association or any other contract, board members usually exercise their roles and responsibilities individually, especially in relation to everyday business. However, some companies impose restrictions on their power to represent the company and act on its behalf. Board members can be appointed for a specific area within the company (eg, sales supply), in which case they can represent the company only within that area of work.

If the management board has more than one member, the members will adopt decisions unanimously, unless the articles of association provide otherwise.

Answer ... (a) Strategic planning?

The management board develops the strategy of the company. In drafting the strategy, the board will work closely with the supervisory board. After reaching agreement with the supervisory board, the management board will ensure the implementation of the strategy. It will usually discuss strategic planning with the supervisory board at regular intervals.

(b) Risk management?

The management board will usually work closely with the supervisory board in order to ensure the survival of the company.

(c) Major and related-party transactions?

The management board can act independently in relation to major and related-party transactions. However, the articles of association commonly require the consent of the supervisory board or the general assembly in order for a transaction to proceed.

In addition, certain legislative requirements apply to the transfer of specific assets. For example, contracts and other legal transactions under which a public limited company undertakes to transfer at least 25% of its assets, which do not constitute a transfer in accordance with the provision of the Companies Act on changes of legal status, require that a resolution of the general meeting be passed.

(d) Conflicts of interest?

See question 4.3.

Answer ... If the management board has more than one member, the members shall represent the company jointly, unless the articles of association provide otherwise. In the case of joint representation, an expression of will provided by any member of the management board will take effect against the company as a whole if all members of the management board are authorised to represent the company. The articles of association or the supervisory board, where so envisaged by the articles of association, may provide that members of the management board individually, or at least two members of the management board together, or a single member of the management board together with the procuration holder, are authorised to represent the company. This practice is common in large and medium-sized companies.

Answer ... In performing their duties on behalf of the company, individual board members must:

• act with the diligence of a conscientious and honest businessperson; and
• safeguard the trade secrets of the company.

These duties are owed to the company (ie, the shareholders). However, board members must also consider interests of employees and other stakeholders.

Answer ... Civil liability can arise for damages occurred as a result of breach of fiduciary duties (duty of loyalty and duty of care). Board members can be also criminally liable for numerous criminal offences, such as:

• business fraud;
• defrauding of creditors;
• disclosure and unauthorised acquisition of trade secrets; and
• abuse of position or trust in business activity.

Answer ... The most common shareholders’ rights are:

• voting power;
• ownership;
• the right to transfer ownership;
• the right to dividends;
• the right to inspect corporate documents; and
• the right to sue for wrongful acts.

Various major measures and transactions require the approval of the general meeting, such as:

• squeeze-out (where 95% of the shares are held by one shareholder);
• consent to a business agreement (at least 75% of the shares represented at the general meeting);
• agreement to merger by absorption (75% of the shares represented at the general meeting);
• changes to the articles of association (75% of the shares represented at the general meeting); and
• increase of share capital (75% of the shares represented at the general meeting)

Answer ... Shareholders exercise their rights relating to matters concerning the company at the general meeting.

A general meeting will be convened in the circumstances laid down by law or in the articles of association, and whenever this would be beneficial for the company. The management will decide by simple majority on whether to convene a general meeting. A general meeting will be called if shareholders whose combined interests account for one-twentieth of the share capital make a written request to the management to convene a general meeting. The request must be accompanied by an agenda, with the resolution proposal for each suggested agenda item to be decided upon by the general meeting or, if the general meeting will not be adopting a resolution regarding a particular agenda item, an explanation of such item. The articles of association may also restrict the right to request the convening of a general meeting to a smaller proportion of the interest in the share capital.

Answer ... In a two-tier board system, the shareholders have indirect influence on the appointment and operation of the board. In particular, they have a right to elect the members of the supervisory board, which is responsible to the shareholders. The supervisory board appoints and dismisses the members of the management board, retains full control over them and advises on the business of the company. Therefore, the shareholders can influence the board through members of the supervisory board.

Answer ... Shareholders must refrain from all activities that could potentially influence members of the management board or the supervisory board. A controlling shareholder may not use its influence to cause the company to enter into a legal transaction which would be detrimental to it, or to take or refrain from taking any measure that would be to its disadvantage, unless the damage is compensated.

Answer ... Company members can assume liability for the obligations of the company in the following cases (piercing the corporate veil):

• if they have abused the company as a legal person in order to achieve an objective that is forbidden to them as individuals;
• if they have abused the company as a legal person, thereby causing damage to their creditors or creditors of the company;
• if, in violation of law, they have used the assets of the company as a legal person as if they were their own personal assets; or
• if, for their own benefit or for the benefit of some other person, they have reduced the assets of the company when they knew or should have known that the company would be incapable of meeting its obligations to third parties.

Shareholders can also be responsible for offences such as business fraud, disclosure and the unauthorised acquisition of trade secrets.

Answer ... A decision to increase the share capital through contributions requires a majority of at least three-quarters of the share capital represented at the meeting, unless the articles of association stipulate a different majority; although in any event, this cannot be less than a majority of the shares represented at the meeting – the articles of association may only stipulate a larger majority of the capital and additional requirements for the issue of non-voting preference shares. The share capital may be increased only through the issue of new shares. New shares will be subscribed by drawing up a written statement from which their proportion can be made out based on their number; where shares with a nominal value are being issued, the nominal value will also be included. If several share classes are to be issued, the share class will also be shown.

Existing shareholders have a pre-emption right to subscribe for new shares in proportion to their interests. This right may be exercised within at least 14 days. The pre-emption right may be excluded in part or in full only in the resolution on the increase of the share capital. In this case, in addition to all applicable legal requirements and requirements set out in the articles of association regarding an increase in capital, the resolution requires at least a three-quarters majority of the share capital represented at the meeting. The articles of association may also stipulate a larger majority of the capital and other requirements.

Answer ... In accordance with the Management Code for Publicly Traded Companies, such companies must continuously disclose changes in their ownership structure – in particular, the direct or indirect acquisition or disposal of a 5% share of its share capital (qualifying share) and/or voting rights. The company should publicly announce at least once a year any cross-links with other companies (ownership of at least a 5% qualifying holding in another company, which also owns shares in the first company). The company should disclose acquisitions or disposals of its own shares on an ongoing basis, or at the latest at the point at which the acquired or disposed shares reach 1% of the issuer’s share capital and each additional percentage.

Answer ... Institutional investors play an increasingly integral role in monitoring the corporate governance of companies. Institutional investors usually depend on:

• the assurance of a level playing field;
• access to complete and reliable information; and
• the ability to exercise their rights as shareholders.

As yet, however, the role and influence of institutional investors are not as great as in the United States, for example.

Answer ... The Market in Financial Instrument Act states that institutional shareholders are ‘professional clients’ which have obtained the appropriate authorisation from the competent supervisory authority of an EU member state or a third country, or have otherwise acquired the right to operate in the financial markets. They include:

• credit institutions;
• investment firms;
• other supervised financial companies;
• insurance, reinsurance and pension companies;
• collective investment undertakings and management companies;
• pension funds and the companies that manage them; and
• persons trading in commodities and commodity derivatives.

As these players are considered to have sufficient knowledge in conducting their business, they must exercise greater diligence.

Answer ... Activist shareholders may attempt to influence the company to:

• make certain operational or governance decisions;
• adopt goals or causes that they value; or
• undergo a merger, acquisition, divestment or other structural change.

Answer ... During the COVID-19 pandemic, risk governance is the key area of focus. This refers to the institutions, rules, conventions, processes and mechanisms through which decisions on risk are taken and implemented. It can be both normative and positive, as it analyses and formulates risk management strategies to avoid and/or reduce the human and economic costs of COVID-19.

Answer ... No.

Answer ... Shareholder activism in general does not play a major role in Slovenia, unlike in the United States. However, the situation is evolving slowly.

Answer ... Management board and supervisory board members must consider the interests of stakeholders such as employees and creditors, and to some extent the public interest.

The participation of employees in the management of companies is achieved through representation on the management and supervisory bodies, as follows:

• in a two-tier management system:
• • through employee representatives on the supervisory board, in the case of both companies and cooperatives; or
  • through an employee representative on the management board (company) or the board of directors (cooperative) (‘employee director’); and
• in a one-tier management system:
• • through employee representatives on the board of directors and the committees of the board of directors; and
  • through an employee representative among the executive directors of the company or cooperative.

The number of employee representatives on the supervisory board is determined by the articles of association, but may not be less than one-third of the members and not more than half of all members. At least one member of the board of directors must be an employee representative. The number of employee representatives on the board of directors is determined by the articles of association, but may not be less than one employee representative from each of the three supplemented members of the board of directors.

Answer ... Executive compensation is mainly regulated by the Companies Act. However, some specific rules govern executive compensation in publicly traded companies.

In general, when determining the total amount of remuneration of an individual management board member (salary, reimbursement of expenses, benefits and performance bonuses, such as share and option bonus schemes, participation in profits, severance pay and other payments), the supervisory board must ensure that the total remuneration is:

• proportionate to the tasks carried out by individual members of the management board and the financial position of the company; and
• in accordance with the remuneration policy

Answer ... Please see question 9.1. In addition, if, after the remuneration has been determined, the operations of the company deteriorate to an extent that threatens its economic position or that could cause damage to the company, the supervisory board may reduce the remuneration accordingly.

Shareholders may adopt a remuneration policy for members of the management or supervisory bodies, in which case any remuneration paid to members of the management or supervisory bodies must accord with this remuneration policy.

Answer ... When the general meeting is deciding on the distribution of profits, the management must notify the shareholders of the remuneration received by members of the management or supervisory bodies for the performance of their duties in the past financial year. This information must include the remuneration for each individual member, broken down into at least:

• fixed and variable remuneration;
• participation in profits;
• options and other bonuses;
• reimbursement of expenses;
• insurance premiums;
• commission; and
• other additional payments.

This information must also include the remuneration received by members of the management or supervisory bodies for the performance of their duties in subsidiaries. This information must be included in the business report together with the remuneration policy for members of the management or supervisory bodies, where this has been adopted by the general meeting.

Under the Corporate Governance Code for Listed Companies, a listed company must disclose the remuneration of each member of the management board and the supervisory board. Additional disclosure obligations are set out in the Act Governing the Remuneration of Managers of Companies with Majority Ownership held by the Republic of Slovenia or Self-Governing Local Communities, although these are limited in scope. The act requires that information be provided on whether a member of the supervisory or management board benefits from use of a company car, a company credit card, payment of social, health and other insurance and so on.

Answer ... Slovenian law provides that no one can be discriminated against because of his or her sex. However, there is no requirement that men and women be paid equally. There are initiatives and recommendations to ensure that both sexes are equally represented on management and supervisory bodies, and that members have comparable salaries regardless of their gender.

Answer ... If a remuneration policy has not been adopted by the general meeting, the determination of remuneration of an individual management board member (salary, reimbursement of expenses, benefits and performance bonuses such as share and option bonus schemes, participation in profits, severance pay and other payments) falls to the supervisory board.

Executive performance is monitored and managed through reporting to the supervisory board. The supervisory board may also require a report on other issues. The management board must notify the supervisory board of all issues concerning the operations of the company and affiliated companies. The supervisory board may at any time request a report from the management board on issues relating to the operations of the company which have or may reasonably be expected to have a significant effect on the position of the company.

The supervisory board may also request that all or part of a bonus that has been paid for performance be returned:

• if the annual report is found void for reasons involving items or facts that were used as the basis for determining the bonus; or
• on the basis of a special auditor’s report which establishes that:
• • the criteria for determining the bonus were not applied correctly; or
  • key accounting, financial or other data and indicators were not properly established or considered.

Answer ... The executive performance and compensation system must be sufficient to attract members of the appropriate calibre to the management board, given the company’s needs, while also ensuring that the management board’s interests are aligned with the company’s long-term interests. In addition to the company’s successful operation, performance criteria should facilitate its sustainable development and include non-financial criteria relevant for generating long-term value, such as abiding by valid regulations and ethical standards. The fixed component of the remuneration should be sufficient to allow the company to withhold variable components if the performance criteria are not met. It is highly recommended that a management board prepare quarterly reports for evaluation by the supervisory board.

Answer ... Companies must send their annual report to the Agency of the Republic of Slovenia for Public Legal Records and Related Services (AJPES) within three months of the end of the business year for small companies and within eight months of the end of the business year for medium and large companies. The annual report comprises the balance sheet, a profit and loss statement and a business (management) report. The AJPES publishes annual reports on its website, which anyone can access. The same rules apply for consolidated annual reports.

Regarding conflicts of interest, please see question 4.3.

Answer ... The board usually collaborates with accountants and auditors and prepares any necessary explanations for them. To prevent conflicts of interest, each board member has a duty to report to the board a potential conflict of interest and to remove himself or herself from the position if necessary.

Answer ... The biggest role that accountants and auditors play is in preparing the necessary reports and statements. Accountants prepare the balance sheet, the profit and loss statement and the business (management) report. Auditors prepare a report which contains the following:

• the name of the company whose annual or consolidated financial statements are the subject of the audit, the annual or consolidated financial statements that have been audited together with the relevant dates and periods, and the financial reporting framework used to draw up the report;
• a description of the scope of the audit, containing at the very least an indication of the auditing standards which were used to carry out the audit;
• an auditor’s opinion, which is either unqualified, qualified or adverse, and in which the auditor’s opinions on the following are clearly stated:
• • whether the annual financial statements provide a true and fair view in accordance with the appropriate financial reporting framework;
  • where necessary, whether the annual financial statements comply with the applicable regulations; and
  • the issue of a disclaimer of opinion, where the auditor is unable to express an opinion;
• references to any other matters which the auditor deems necessary to emphasise, but not in a way which would cause its opinion to change;
• an opinion on:
• • whether the business report is consistent with the financial statements for the same financial year; and
  • whether the business report was drafted in accordance with the applicable legal requirements;
• an indication of whether, based on the knowledge and understanding of the company and its environment which the auditor has gained while performing the audit, the auditor has established the existence of material misstatements in the management report, as well as the nature of such indications;
• a statement on any material uncertainties relating to events or circumstances that may cast significant doubt on the company’s ability to continue its operations;
• an indication of the registered office of the auditor; and
• the date of the report and the auditor’s signature.

Answer ... At least once a year, the supervisory board and management board must evaluate their composition and performance, and potential conflicts of interest of individual members, as well as their functioning and cooperation with other bodies. During this process, the supervisory board will also assess the work of supervisory board committees. It is highly recommended to engage accountants and auditors which are not directly connected to the members of any of these bodies.

Answer ... The audit committee is appointed by the supervisory board. 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 committee should be composed of a chair and at least two members. The supervisory board will appoint the chair of the committee from among its members.

The remuneration of members of the committee who are not also members of the supervisory board shall be determined by resolution of the supervisory board. The mandate is usually for four years. Each auditor can be removed by the supervisory board.

Answer ... Auditors must conduct their work with the greatest possible diligence. Usually, auditors also provide other assurance services and tax consultancy services. However, an audit firm, any member of a network to which it belongs and any person related to the audit firm may not provide non-audit services to audit clients that could constitute a violation of the requirements for audit independence and impartiality. The Catalogue of Prohibited Non-Audit Services in Mandatory Audits of Public Interest Entities includes a non-exhaustive list of services which may be considered as prohibited non-audit services, including:

• services that involve any management or decision-making role in the audited entity;
• bookkeeping, including the preparation of accounting records and statements, and the accounting of remuneration;
• valuation services, including valuations performed in connection with actuarial or litigation support services; and
• legal services relating to the provision of general advice, negotiation on behalf of the audit client and representation as counsel in litigation.

Answer ... There are no rules on payment for the provision of non-audit services. However, if non-audit services are offered to contracting authorities within the meaning of the Public Procurement Act, the principles of economy, efficiency and effectiveness must be considered. Contracting authorities include:

• authorities of Slovenia;
• authorities of self-governing local communities;
• other bodies governed by public law;
• public undertakings which pursue one or more activities in the field of infrastructure; and
• other entities that pursue one or more activities in the field of infrastructure, operating on the basis of special or exclusive rights granted by a competent Slovenian authority.

Answer ... Corporate governance has been improving in recent years, especially since the 2008 financial crisis in 2008 and Slovenia’s accession to the Organisation of Economic Co-operation and Development in 2010. In the private sector, the financial crisis resulted in changes in the control of many management-owned companies. In addition, the government introduced changes to the regulatory framework in order to combat specific practices, such as acting in concert and ‘share parking’. Transparency and professionalism are increasing in state-owned companies.

Answer ... Proposed amendments to the Companies Act would implement the Second Shareholders’ Rights Directive (2017/828) amending Directive 2007/36/EC regarding the encouragement of long-term shareholder engagement. The directive also obliges public joint stock companies to adopt a remuneration policy for management boards, supervisory boards and boards of directors. Shareholders will be entitled to a consultative vote on the remuneration policy at the general meeting. The directive also allowed member states to introduce legislation on binding voting, although the Slovenian legislature declined to do so.

The provisions on transparency and approval of company transactions with related parties have also been tightened. For example, according to an explicit provision, the consulting contract between a company and a member of the supervisory board must be approved by the supervisory board (with the member in question abstaining from the determination).

The proposed amendment to Act ZGD-1K would enforce another key principle of the directive – the ‘know your shareholder’ principle. This principle derives from the reality of modern corporate shareholdings, where the ultimate shareholders often exercise their rights through a series of authorised financial intermediaries. For example, a company will have the explicit right to identify its shareholders (including the ultimate shareholders that stand behind such intermediaries); and such intermediates will also be subject to information obligations regarding the exercise of shareholders’ rights.

Answer ...

• The independence of members of the supervisory board and management board should be assured.
• Remuneration criteria should be transparent and within best practice standards.
• Remuneration committees are not obliged to respect formulas, but must provide sufficient justification for vesting.
• Employee complaint procedures should be made available to all employees. Employees should be made aware of the company’s non-retaliation policy and that complaints can be anonymous.
• An employee code of conduct should be documented and provided to all employees.
• The corporate governance committee should make recommendations to the board on new members and monitor board performance.
• The members of the audit committee should be independent and include a financial expert. The supervisory and management boards should be strong and highly qualified.
• Transparency should be ensured.