On 22 November 2024, the National Assembly of the Republic of Slovenia adopted an amendment to the Companies Act, which was published in the Official Gazette of the Republic of Slovenia on 3 December 2024 (“ZGD-1M Amendment”) and entered into force on 18 December 2024. The ZGD-1M Amendment introduces significant changes for the operations of companies, particularly regarding reporting, transparency, and the promotion of gender balance.
Key changes introduced by the ZGD-1M Amendment include:
- measures to ensure balanced gender representation in management and supervisory bodies of companies;
- adjustment of criteria for classifying micro, small, medium, and large companies or groups to relieve certain companies;
- additional obligations for companies concerning sustainability reporting; and
- the obligation for some companies to publicly disclose specific tax information related to income.
Below, the new features introduced by the ZGD-1M Amendment are detailed, which are likely to significantly affect companies’ operations in the future. Consequently, it is advisable for companies to promptly adapt their operations to the changes introduced by the ZGD-1M Amendment.
Gender Balance in Management and Supervisory Bodies of Companies
Based on Directive (EU) 2022/2381 (“Directive on Gender Balance”), the ZGD-1M Amendment aims to promote balanced gender representation in decision-making positions in the economy. To this end, the ZGD-1M Amendment introduces specific obligations to ensure representation of the underrepresented gender in management and supervisory bodies and among executive directors.
Regarding the promotion of balanced gender representation, the Directive on Gender Balance obliges companies whose securities are traded on the market, employ more than 250 employees, and have net sales revenue exceeding EUR 50,000,000 or assets exceeding EUR 43,000,000 (“Large Companies”) to adopt measures. The ZGD-1M Amendment extends this obligation to companies with a majority capital investment by the state or local self-government, where the state or local self-government directly or indirectly holds a majority share or voting rights, employ at least 250 employees, and meet other conditions for a Large Company under the Companies Act (“Obliged Companies”).
Obliged Companies must achieve one of the following targets by 30 June 2026:
- individuals of the underrepresented gender occupy at least 40% of positions among members of supervisory bodies, or;
- individuals of the underrepresented gender occupy at least 33% of positions among members of management and supervisory bodies and executive directors.
The Obliged Companies determine which target to achieve in their diversity policy, adopted by the supervisory body. As the exact percentages are often difficult to achieve, the number of leadership positions required to meet the target is calculated as the number closest to the 40% or 33% threshold, but it must not exceed 49% in any case.
The workers’ council is also required to ensure that at least 33% of its representatives appointed to management and supervisory bodies and executive director positions represent the underrepresented gender. An exception is allowed only if, at the time of appointment, no candidates of the underrepresented gender are available.
If Obliged Companies fail to meet the statutory targets, they must adapt their candidate selection process accordingly and ensure its transparency. If two candidates are equally suitable, qualified, and competent in terms of job performance, preference must be given to the candidate of the underrepresented gender, except in exceptional circumstances.
The ZGD-1M Amendment also grants non-selected candidates important rights to ensure proper oversight of selection processes in judicial and administrative proceedings. Non-selected candidates of the underrepresented gender can request information from the Obliged Company about the criteria regarding qualifications on which the selection was based, an objective comparative assessment of candidates based on these criteria, and other data regarding the justification for the exception to the rule. They can also challenge the appropriateness of the selection process before competent judicial or administrative authorities (e.g., the relevant inspection authority, court, the Advocate of the Principle of Equality) if they believe they were equally qualified as the selected candidate who is not a representative of the underrepresented gender. However, even in the event of a proven violation in the process, the appointment will not be void; instead, it will be deemed valid, and the non-selected candidate will be entitled to compensation under general civil law rules and redress for discrimination.
The ZGD-1M Amendment also imposes an additional obligation on Obliged Companies to annually report on the (under)representation of genders in company bodies and the measures taken to achieve these targets.
The Advocate of the Principle of Equality is primarily responsible for monitoring, promoting, analysing, and supporting efforts to ensure balanced gender representation among members of management and supervisory bodies and executive directors. The Advocate of the Principle of Equality will also assess the appropriateness of the candidate selection process for management, supervisory, or executive director positions.
Reclassification of Companies by Size
Directive 2013/34/EU introduces another significant change, namely new thresholds for the classification and reclassification of companies by size. The ZGD-1M Amendment aligns the criteria for determining company size with the effects of inflation in recent years. This alignment is particularly important for the preparation of consolidated annual reports and annexes to financial statements, bringing simplifications especially for micro-companies. The classification of companies or groups under the revised criteria is based on new thresholds for assets and net sales revenue (both criteria increase in value by approximately 25%), while the average number of employees during the financial year remains unchanged.
The ZGD-1M Amendment also introduces changes in the preparation, auditing, and publication of annual reports, reducing the number of companies required to report, which will positively impact the reduction of burdens and costs.
Sustainability Reporting
The purpose of the ZGD-1M Amendment, which transposes Directive (EU) 2022/2464 into Slovenian law, is to ensure better awareness of risks posed to companies by sustainability issues and the impact of companies on the environment and broader society through reporting.
Significant new features of the ZGD-1M Amendment in this area include:
- expansion of the range of entities required to report, encompassing all large companies as well as medium and small companies;
- imposition of sustainability reporting obligations on subsidiaries controlled by a parent company from a third country;
- expansion of the scope and content of sustainability information that must be reported; and
- requirement to publish reports in a unified electronic format within the business report, granting auditors a more significant role in providing assurance regarding sustainability reporting.
Public Reporting for Multinational Companies
In line with Directive 2021/2101/EU, public reporting for multinational companies primarily pertains to tax information related to income. Some of the largest companies, their subsidiaries, and branches will be required to disclose certain tax data, previously sent only to tax authorities, to the public through an income-related report, which will be published as part of the annual report and as a separate report on the company’s website.
The ZGD-1M Amendment encourages transparency regarding the activities of companies required to prepare consolidated annual reports for the broadest range of companies within the group, whose group-level revenue exceeds EUR 750,000,000 in each of the last two consecutive financial years at the balance sheet date. Companies not forming part of a group but still achieving the mentioned revenue threshold are also required to prepare a report on tax information related to income. This report must include information about the entire company’s operations that are not part of the group or controlling company, including the operations of all affiliated companies covered by the consolidated annual report. Specific exceptions apply to subsidiaries and branches of foreign companies from third countries based in Slovenia if their income-related tax report meets certain criteria.
Each company has its own specific characteristics, meaning that the ZGD-1M Amendment can have varying effects on individual companies. We recommend consulting experts regarding the potential implications of the ZGD-1M Amendment on your business, as they can provide tailored solutions based on the unique features of your company. Our law firm has extensive experience in corporate law and can assist you in assessing the impact of the ZGD-1M Amendment on your business as well as in preparing the necessary legal documents your company might require. For further information or advice, you can contact partner Maja Menard, attorney Martin Čarni, or other experts featured on our website.
All information contained in this document is based on applicable legislation or adopted regulations and has been obtained from publicly available sources. This document is prepared for information purposes only and is not a substitute for legal advice. Fatur Menard, o.p., d.o.o. does not guarantee the accuracy of the information and assumes no liability for any damages or costs in connection with any use of the information presented in this document.
