AMENDMENT TO THE COMPANIES ACT (ZGD-1M)

Author: Kaja Franko
The National Assembly of the Republic of Slovenia adopted an amendment to the Companies Act, ZGD-1M (Official Gazette of the Republic of Slovenia, no. 102/2024), which entered into force on 18 December 2024. The amendment introduces new provisions into the Slovenian legal order, in particular in the areas of reporting, transparency and gender balance, and transposes the following four European directives:
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- Country-by-Country Public Reporting Directive,
- Corporate Sustainability Reporting Directive,
- Directive on Gender Balance in Companies; and
- Accounting Directive.
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NEW FEATURES INTRODUCED BY THE ZGD-1M:
Marking the business address: a sign must be prominently displayed at every location of the business address, indicating the name and registered office of the undertaking (there must be several signs if there are several business entities at the same business address).
The definition of a public interest entity has been amended, which is substantively important from the perspective of the ZGD-1 in order to define which undertakings are subject to specific obligations regarding the preparation of the annual report, as well as other obligations linked to this definition (e.g., the formation of supervisory boards and audit committees). The amendment is primarily intended to exclude medium-sized undertakings, which in practice are established as limited liability companies and, given their size, legal form and capabilities, find it difficult to comply with all the requirements as public interest entities. Exempted undertakings are positively affected by the amendment, as it removes administrative burdens (e.g., the preparation of annual reports) and some legal obligations (e.g., the creation of audit committees).
The Public Reporting Directive encourages increased transparency regarding the activities of large parent undertakings and non-group undertakings with a revenue exceeding EUR 750,000,000 for each of the last two consecutive financial years and which have multinational operations; medium-sized and large undertakings and their subsidiaries are also subject to reporting obligations.
The new feature is a uniform electronic reporting format in which reporters will report certain tax information, usually within the AJPES (Agency of the Republic of Slovenia for Public Legal Records and Related Services.) website, and the information will be available free of charge for anyone.
As regards sustainability reporting, the rules on non-financial reporting have been updated. There is a broader scope and content of the information to be reported, a wider range of reporting obligors (large, medium and small listed undertakings, except micro undertakings) and more control over the content of reporting by auditors. The Sustainability Report replaced the Non-Financial Statement. It must be prepared in a single electronic reporting format in accordance with the electronic reporting format adopted by the European Commission.
In addition to the listed companies in Slovenia, large companies in which the state or a local authority holds a majority stake must also take into account gender balance in management and supervisory bodies. The companies subject to legal obligations are free to determine whether members of the underrepresented sex hold at least 40 % of the members of the supervisory body or at least 33 % of the members of the management and supervisory bodies. The supervisory body shall draw up and adopt a diversity policy setting out one of the two ratios to be achieved by the company. If the proportion is not achieved, it will have to adjust the selection process for candidates for appointment or election to the management and supervisory bodies. The unsuccessful candidate of the under-represented sex will be able to request information from the company on the selection procedure and to seek an assessment of the appropriateness of the selection procedure from the competent authorities (court, equality ombudsman, competent inspectorate, etc.).
Companies are required to report on the gender representation ratios achieved and on the measures taken in the event of non-achievement of the ratios. The Equality Ombudsperson will monitor and promote gender balance in companies and monitor breaches of the law in this area.
The amendment to ZGD-1 amends the rules on determining the size categories of companies to account for the impact of inflation. The classification of companies or groups is still based on the value of assets, net turnover and the average number of employees during the financial year, but the criteria for the value of assets and net turnover are increased by approximately 25%. The change reduces the scope for preparing, auditing and publishing reports and reduces the number of companies required to report, which has a positive impact on them in terms of reducing burdens and costs.
[REMINDER] As of 1 January 2025, a new version of the Standard Classification of Activities – SKD 2025 (Official Gazette of the Republic of Slovenia, No. 27/2024) will enter into force, replacing the current SKD 2008. For activities that will not change under the new classification, the main activity code will be automatically translated into the new system; however, in certain cases, it will be necessary to select a new main activity code for the company via the AJPES application. To help with the translation of activities, a table can be provided which lists current activities on the left side and activities under the new SKD 2025 on the right side – if an old activity can be translated into two or more activities under the new SKD 2025, then a new main activity will need to be selected.