Amendment to the Companies Act

Amendment to the Companies Act

Author: Tim Mušič Kralj

We are living in the time of the digital transformation of society, which brings along many changes; its impacts are visible in all subsystems of society – to a large extent also in the economy. The development of digital technology will contribute to economic development by increasing the efficiency and competitiveness of the economy, thus creating jobs and attracting foreign investment. The importance of the digital transformation is also recognized by the European Union, which is showing its support through a number of strategic documents, legislative and other initiatives, as well as through the European financial plans, in which a large part of the financial resources is dedicated to strengthening digital capacities that create opportunities for both companies and individuals. The rapid technological development in the field of digitization also requires the establishment of new legal frameworks, which has led to the adoption of several directives at EU level to pursue objectives such as the creation of a digital single market, the digital transformation of the economy, the creation of digital public administration, etc.

With the adoption of directives at the EU level, there is a need to update and harmonize national regulations, including those governing company law. The area of company law in Slovenia is regulated primarily by the Companies Act (Official Gazette of the Republic of Slovenia, No. 65/09 – Official consolidated text, 33/11, 91/11, 32/12, 57/12, 44/13 – CC decision, 82/13 and 55/15, 15/17, 22/19 – ZposS, 158/20 – ZintPK-C and 18/21) (hereinafter: ZGD-1), which is considered the fundamental system law in the field of company law and lays down the basic company status rules for the establishment and operation of companies, sole proprietorships, associated persons, economic interest associations, branches of foreign companies and their status transformation. With the amended ZGD-1L, the legislator will transpose two directives supplementing and amending previously applicable rules of European company law into the Slovenian national legal order, namely (i) Directive (EU) 2019/1151 of the European Parliament and of the Council of 20 June 2019 amending Directive (EU) 2017/1132 as regards the use of digital tools and processes in the field of company law and (ii) Directive (EU) 2019/2121 of the European Parliament and of the Council of 27 November 2019 amending Directive (EU) 2017/1132 as regards cross-border conversions, mergers and divisions.

To facilitate the establishment of companies, ensure minimum standards and unify the rules relating to the digitization of existing procedures, the amended ZGD-1L contains provisions that will enable the online establishment of capital companies without the need for the founders to be physically present at the notary or registration authority. The establishment of a simple, single-person limited liability company will continue to be possible directly through the state portal SPOT using a qualified digital certificate, while for all other cases of establishment where a notary is competent as the applicant’s authorized representative to draw up the proposal for entry in the register, the amendment to the law provides for the possibility of concluding the deed of incorporation as a notarial deed in electronic form using video-electronic means, thus completely eliminating the need for the founders to be physically present at the notary’s office. In this part, the amendment also relates to the Notarial Act, which already allows for the signature of notarial deeds in electronic form with a qualified electronic signature, but it should be noted here that this signature option has not yet been put into practice and there is no indication that it will be any time soon.

For joint stock companies (and consequently also for limited partnerships), the amended ZGD-1L also introduces the possibility of holding a virtual general meeting without the physical presence of shareholders, their proxies and other persons. A virtual general meeting will only be possible if it is provided for in the company’s articles of association and if the following conditions are met: (i) the company will have to ensure transmission of image and tone in real-time for the entire general meeting; (ii) the company will have to ensure the conditions for the identification of shareholders or their proxies; (iii) the possibility for shareholders or their proxies to vote at the general meeting using electronic means and the conditions for secure electronic communication will have to be established; and (iv) the possibility to exercise the shareholders’ right to information under 305. Article of ZGD-1 by electronic means. In relation to the virtual general meeting, the Act also anticipates the potential inconveniences of digitization and thus contains a specific provision which provides that a challenge to a resolution of a general meeting cannot be based on a breach of the shareholders’ rights resulting from technical interference in the use of technical means at the virtual general meeting, unless the technical interference is the result of gross negligence or willful misconduct of the person in charge of the company for which the meeting was held. For limited liability companies, it will now also be possible to hold a general meeting by telephone or by image and tone transmission, provided that all the members conclude that in a written declaration. It will also be possible to convene a general meeting by electronic means.

Finally, it is important to point out that the amendment provides for a similar multi-stage procedure for all types of cross-border operations (conversions, mergers and divisions) and for certain common rules in order to unify and regulate cross-border operations in an integrated and structured manner. These changes, which are included in the amendment, present an important possibility for companies to adapt to a rapidly changing market, find new opportunities and enable economic growth in the transition to the digital age.