Entry of a foreign person into a Slovenian company

Are you a foreign entrepreneur with the opportunity of doing business in Slovenia? Do you know what your options for starting and doing business in Slovenia are? Are you familiar with the tax obligations? Which steps need to be considered in order to comply with corporate legislation? Do you have to visit Slovenia to open your business here in Slovenia?

There are several ways to start your business in Slovenia. One of them, which will be the focus of this article, is entering the existing limited liability company as an investor by way of increase of the share capital of such existing Slovenian limited liability company (hereinafter referred to as the “Company”). As an investor you may contribute in cash or in-kind. For the purpose of this article, we will focus on a more common way, increase of the share capital with cash contribution.

Companies Act (Zakon o gospodarskih družbah), Court Register Act (Zakon o sodnem registruI) and Decree on the registration of companies and other legal entities in the register of companies (Uredba o vpisu družb in drugih pravnih oseb v sodni register) need to be observed as a legal basis for the aforementioned transaction.

So what steps should be taken?

1. Power of Attorney

To answer the above question about the need of the physical presence of the investor in Slovenia – there is no need for investor to actually come to Slovenia to sign transaction documentation and/or to close the transaction regarding increase of share capital of the Company. Investor is of course welcomed, but the signing of transaction documents can also be done through an authorised person (proxy) on the basis of Power of Attorney (hereinafter referred to as “POA”). Taking in consideration the specific form required for certain acts comprising aforementioned transaction, POA must be adopted in a form of a notarial deed and apostilled (if necessary).[1] The notarized and apostilled POA shall then be translated to Slovenian language.

2. The entry of a legal person’s data in the Slovenian tax register and obtaining of a tax identification number for the investor (a natural foreign person or a legal foreign person)

A foreign legal person not established in Slovenia is obliged to submit an application (DR-04 form) for entry of a legal person’s data in the Slovenian tax register before taking any activities in Slovenia. Mentioned DR-04 form can be submitted electronically through FURS’s[2] eDavki service as their own document, in person or by post, to any finance office (except to the Special Financial Office and the General Finance Office). A tax identification number shall be assigned on the first entry in the Slovenian tax register.

Natural persons with a permanent or temporary residence in the Republic of Slovenia or who have no permanent or temporary residence in the Republic of Slovenia (foreign individuals) and earn taxable income or own taxable movable or immovable property on Slovenian territory must submit an application (DR-02 form) either:

• within eight days of the occurrence of change in tax register data that the finance office could not obtain ex officio (such as information about accounts abroad (i. e. accounts not opened in the Republic of Slovenia), residency status, representatives, investments abroad, etc.); or
• before their first receipt of taxable income or before first acquisition of taxable movable and immovable property if they have not yet been assigned a tax identification number.

Note that changes in data that are contained in the tax register and cannot be obtained by the finance office ex officio should be communicated to the finance office within eight days of their occurrence.

3. Obtaining of the relevant certificates

In addition to all the above requirements, the following documents[3] will have to be presented to the Slovenian Notary Public:

A) If the investor is a foreign company, then notarized and apostilled extract from the register of companies no older than 3 months must be provided.

B) As the new shareholder is a foreign person, it is necessary to submit certificates proving that there are no restrictions from Article 10.a of the Companies Act (restrictions relate to impunity of the new shareholder, no violations of labor legislation and lack of tax obligations). They must be notarized and apostilled and not older than 30 days.

In principle, the competent registration authority and notary should ex officio verify the existence of these restrictions by means of reciprocal exchanges of information between Slovenia and the Member State, but unfortunately this possibility has not yet been realized in practice. As it is not possible to exchange data yet, the new shareholder  is obliged to prove the absence of these restrictions by submitting the following evidence:

1. An extract from the relevant register or, if there is no such extract then an equivalent document (statement or certificate) issued by a competent judicial or administrative authority in the Member State in which the legal person has its registered office, showing that there are no grounds for restricting the formation of a company or acquisition of a company member status. It must be shown that:

a) the person has not been convicted in a final judgement to serve a prison sentence for committing a criminal offence against the economy, against employment relations and social security, against legal transactions, against property, against the environment, spatial planning and natural resources, against human health and against the general security of persons and property – to apply by analogy for foreign country of the investor, and that

b) the person has not been fined (at least two times) in the last three years by a final decision of the competent authority of the State for an offense relating to payment for work or an offence relating to illegal employment – to apply by analogy for foreign country of the investor.

2. A certificate or statement issued by the competent authority of the Member State stating that the new shareholder of the Slovenian company has no outstanding tax liabilities in his home country or in the country in which the legal entity is established. It must be shown that:

a) in the last 12 months the person has not been published on a public list of companies that have not submitted their declarations, on the list of non-payers or on the list of taxable persons whose identification for VAT purposes has been revoked – to apply by analogy for foreign country, and that

b) in the last 12 months the person does not directly or indirectly participate with more than 25% in the capital of a company limited by shares and that the latter has not been published on a list of companies that have not submitted their declarations, on the list of non-payers or on the list of taxable persons whose identification for VAT purposes has been revoked – to apply by analogy for foreign country.

As the majority of documents related to the investor should not be older than 30 days at the time of submission of the application for increase of the share capital to the Slovenian Court Register, please take into account that requests for emergency treatment for issuance of these certificates will probably have to be sent to the competent authorities in order to obtain necessary documents on time.

However, in practice it is difficult to obtain such specific certificates regarding the non-existence of outstanding tax debt, the impunity of the new shareholder and the lack of violation of labour legislation. If the latter is realistically impossible, then Slovenian public notaries suggest that the new shareholder gives a statement confirming that all these circumstances do not exist (for which it is not possible to obtain a certificate from an official authority). This statement can be signed by the Director of the new shareholder (who is a legal entity) or, in the case that a new shareholder is a natural person, it can be signed by himself/herself.

It is advisable, to provide at least a scan of the required certificates as soon as possible to ensure timely translations by the court interpreter.  

Anyways, it is suggested that this is also discussed with local lawyers in investor’s country how to get these documents as soon as practicably possible.

C) As part of the procedure, the notary public will also check the requirements of the Prevention of Money Laundering and Terrorist Financing Act regarding the identification of the beneficial owner. According to Article 4 of this Act, which determines persons who are obliged before/in accepting, handing over, exchanging, keeping, disposing of or other handling of money or other property and in concluding business relations to take measures to detect and prevent money laundering and terrorist financing. Therefore, it should be checked it the new shareholder belongs to the circle of liable persons under this Act. If the answer is no, no actions shall be needed in this respect.

4. Signing of relevant transaction documentation and paying of the cash contribution

Once the above formalities are finalized or simultaneously with the above activities of the investor, the existing shareholders of the Company shall adopt a resolution on the increase of the share capital with cash contribution.

After the investor is fully identified by the Notary Public, new Articles of Association of the Company can be executed and signed by all shareholders (including new, foreign shareholder or his proxy).

Usually at the same time and in the form of a notarial deed, investor (or his proxy on a basis of POA in notarial deed) gives a statement on the acquisition of the Company’s new business share in the amount that corresponds to his cash contribution.

Prior to submission of the transaction documents to the Court Register, investor has to pay the agreed amount of the cash contribution to the bank account of the Company within the agreed deadline and the bank holding the Company’s bank account shall issue the confirmation letter confirming that the cash contribution of the investor was received and declaring that the Company is free to dispose of with the payment made by the investor.

The process shall continue with the Notary Public filing an application to entry the increase of the share capital with the new contributions to the Slovenian Court Register.

Commonly within a week, a decision by the court is rendered and investor is registered as new shareholder of the Company.

NOTE: A similar procedure is also in the case of a share purchase agreement when transferring the shareholding of a limited liability company to a foreign person with the exception of the transaction documents as described in point 4.

Should you need any assistance, either legal or tax, please do not hesitate to contact our advisors who will provide you with necessary information and also prepare documentation needed for such transaction.

[1] Convention of 5 October 1961 Abolishing the Requirement of Legalisation for Foreign Public Documents (Hague Convention) determining the use of apostille shall apply, unless if the contracting countries signed biliteral treaties relating the mutual assistance in civil matters (among other issues it is possible that the contracting countries agreed that public documents issued by court or administrative authorities do not need to be additionally legalised for the purpose of their use before the courts of the other contracting country).

[2] FURS – Financial administration of the Republic of Slovenia

[3] For the most of these documents an apostille seal is enough as they are issued from an official authority of foreign country.