Prevention of Serious Economic Damage in Slovenia

Tine Mišic, LL.M.Partner, ODI Law Firm - Slovenia

As one of the first measures to prevent serious economic damage in relation to the consequences of COVID-19 declared as an epidemic, on 20 March 2020 the Slovenian National Assembly adopted the Act on the Intervention Measure on Deferred Payments of Borrowers’ Obligations (ZIUOPOK, Intervention Act). The purpose of the Intervention Act is to maintain financial stability in the Republic of Slovenia (Slovenia), to contribute to solving the liquidity problems of companies and to facilitate the position of companies in relation to banks. The Intervention Act shall enter into force on the day following its publication in the Official Gazette of the Republic of Slovenia (yet to be published).

Pursuant to the adopted Intervention Act, banks with registered seats in Slovenia and banks from other EU Member States with a branch office in Slovenia, shall grant the borrowers a deferred payment of their obligations under the credit agreement for a period of 12 months. Payment deferral – moratorium – means the suspension of the maturity of all obligations under the credit agreement until the end of the deferral period. In practice, the borrowers will conclude an amendment to the existing credit agreements, extending thus the maturity date of the credit agreement for the duration of the deferral of payment, that is 12 months.

The deferral of payment of all obligations under the credit agreement, as requested by the borrowers, is subject to the former not falling due prior to 12 March 2020, the effective date of local COVID-19 epidemic declaration.

An application for deferral of payment may be submitted by companies established in Slovenia;  cooperative associations, associations (“društva”), institutes, foundations, natural persons who employ workers, or self-employed persons with registered seat / permanent address in Slovenia. Furthermore, such applications may be submitted by heads of agricultural holdings and heads of supplementary farm activities, or natural persons, Slovenian citizens with a permanent address in Slovenia.

Requests for such payment deferral are to be filed with the banks by no later than 6 months after the local revocation of the COVID-19 epidemic. With such requests, borrowers should establish and substantiate that they cannot fulfil payment obligations under the credit agreements due to circumstances and business reasons related to the consequences of the COVID-19 epidemic.

If such a request is submitted by a company, the company shall also submit:

– A statement confirming payment of compulsory contributions, taxes and other charges, and confirming the settlement of such obligations as of 31 December 2019,

– A description of the business situation resulting from the effects of the COVID-19 epidemic; and

– A management’s plan of action for the establishment of liquidity of the company.

Large companies must specifically state that payment of their liabilities to banks could lead to their insolvency, as they are expected to have more adequate safeguards in place to protect their liquidity.

The borrowers are obliged to report to the bank on a monthly basis on the implementation of the plan on measures for establishing liquidity and eventual other changes in their business position.

The Intervention Act also provides banks with a facilitated customer due diligence when entering into a business relationship under the provisions of the law governing the prevention of money laundering and terrorist financing. In order to ensure smooth operations during the epidemic, the banks may conduct a customer due diligence using a video link. Exceptionally, the banks may carry out the identification and verification of the clients’ identity with his / her personal presence within one month after entering into a business relationship or within one month after the revocation of the COVID-19 epidemic.

By: Katarina Hribovšek, Associate