Background of the current status of implementation

As the 17 July 2022 deadline for Slovenia to implement the Directive (EU) 2019/1023 on Restructuring and Insolvency ("the Directive") is fast approaching, it is still not entirely clear exactly when and how its provisions will be transposed into Slovenian law.

A draft amendment of the main Slovenian insolvency law, the Financial Operations, Insolvency Proceedings, and Compulsory Dissolution Act ("Insolvency Act") that (among several other topics) provides for transposition has been in circulation among various state authorities and the interested public for over a year. This draft was prepared under the previous government; however, it has not been finally confirmed by the executive, nor has it been proposed to the National Assembly for adoption.

The necessity for insolvency law reform has been mentioned as necessary by the newly elected Government; nevertheless, whether or not it will adopt the draft in its current form remains to be seen.

In the course of public consultations, there have been notable criticisms to the proposed changes. The re-composition of the Government and National Assembly may offer those voices an opportunity to revisit these issues and pressure for different solutions.

The new Government and National Assembly would have to move quickly, if the deadline for transposition of the Directive is to be respected. However, Slovenia has missed such deadlines in the past, and it is conceivable that it may happen again, considering the broad scope of other legislative reforms announced by the Government.

Against this backdrop, it is impossible to accurately predict if, when and in what form the current draft amendment of the Insolvency Act will be adopted. Nevertheless, it remains possible that the mechanism of implementation of the Directive provided under the draft may survive any potential redrafts.

Contemplated scope of implementation

The current Insolvency Act already provides for a preventive restructuring mechanism for companies at risk of becoming insolvent within one year. The preventive restructuring process was introduced in late 2013 and provides for the restructuring of financial receivables of small, medium and large companies.

The process is a mix of contractual and court restructuring. It is formally initiated by the court and stops all enforcement of financial receivables. The debtor proposes the initiation of the process; however, creditors holding over 30% of all financial receivables must consent to it, and creditors holding over 30% of all financial receivables may validly oppose it.

The product of a successful preventive restructuring process is a financial restructuring agreement. This agreement, however, needs to be confirmed by the court in order to take effect. If creditors holding over 75% of the financial receivables consent to the financial restructuring agreement, it is confirmed. Thereafter, it bindingly regulates all financial receivables of the company, regardless of whether an individual financial creditor provided their consent or not.

Under the available draft amendment of the Insolvency Act, the above process would remain as is. However, a second, broader process would be introduced that expands the scope of preventive restructuring to companies of all sizes (with the exception of banks and insurance companies) all types of receivables.

This so-called "court restructuring process due to threat of insolvency" essentially mirrors the existing compulsory settlement model, applicable in situations where the debtor has already become insolvent. There are, however, three notable differences between the compulsory settlement and the new court restructuring process:

  • there is no possibility of a debt-to-equity swap under the court restructuring process;
  • unlike with compulsory settlements, creditors cannot initiate the court restructuring process;
  • if the court restructuring process is unsuccessful, the court does not automatically initiate bankruptcy proceedings (which is the case in compulsory settlement proceedings).

When would a court restructuring process be initiated?

The draft amendment of the Insolvency Act provides that a court restructuring process may be initiated, if the debtor is at risk of becoming insolvent within a year. The aforementioned condition is deemed as fulfilled if creditors holding over 30% of all receivables against the debtor agree with the initiation of the process.

The process may not be initiated if:

  • less than three years have passed since the debtor has fulfilled its obligations under a confirmed compulsory settlement;
  • less than two years have passed since (i) the debtor withdrew a proposal for compulsory settlement or (ii) such a proposal was rejected by the court (and bankruptcy proceedings were not initiated);
  • the debtor has not fulfilled their duties in respect to submission of annual reports in accordance with the Slovenian Companies Act;
  • the debtor submitted false, incorrect or incomplete data to the tax authority, which resulted in a subsequent imposition of additional tax obligations exceeding EUR 4,000;
  • the debtor was convicted of a criminal offence in relation to employment relationships, assets, the economy or transactions.

The initiation of the process may be proposed by the debtor or by the personally-liable shareholder(s) of the debtor.

What would be the effects of initiation?

Once the court restructuring process is initiated, all ongoing enforcement and security proceedings against the debtor would be stopped, and new proceedings would not be initiated for a period of up to four months following initiation. It is possible to extend this period for up to 12 months.

The management of the debtor would become supervised by the court and a court-appointed administrator. Further, contracts essential for the ongoing operation of the debtor could not be terminated during this period.

Which documents would be required?

With its proposal for the initiation of the court restructuring process, the debtor would have to provide the following documents:

  1. a report on the financial situation and operation of the debtor;
  2. an auditor's report on the above containing an opinion with no reservations;
  3. a financial restructuring plan;
  4. a report from a certified business appraiser with a positive opinion.

The financial restructuring plan could offer creditors a reduction of their receivables and interest rates and / or an extension of the term of repayment.

How is the restructuring voted on and what is the result?

The voting on the restructuring plan would be the same, as in the compulsory settlement proceedings. Each individual receivable is multiplied by a particular quotient, depending on the nature of the receivable (secured, unsecured, conditional unsecured, etc.). The restructuring is confirmed, if creditors holding an amount of at least 60% of the multiplied total of the receivables against the debtor vote in its favour.

The restructuring would be confirmed by the court and would regulate all the receivables covered under the plan. The court decision would also constitute a directly enforceable title for such receivables in the event that the debtor fails to meet its obligations under the confirmed restructuring.

Is there a simplified restructuring procedure?

The Insolvency Act provides for a relatively simplified procedure for the restructuring of financial receivables with less procedural burdens and formal requirements, as well as less court interference.

In respect to the court restructuring process, the rules for a simplified compulsory settlement for small businesses would also apply to court restructurings of such enterprises (no auditor or certified business appraiser's opinion would have to be obtained, among other simplifications).


The Insolvency Act is already considered one of (if not the most) complex and challenging pieces of legislation due to many inconsistent and unclear rules. This is particularly the case with respect to rules governing compulsory settlements, where courts and legislators alike have struggled to strike an adequate balance between ensuring the continued operation of the debtor and the interests of creditors.

The draft amendment of the Insolvency Act contains very few provisions specifically regulating the new court restructuring process; instead, the process is governed almost exclusively by the existing rules of compulsory settlement proceedings. This approach may be problematic in several ways:

  • all the issues of compulsory settlement proceedings that have not been properly addressed either in legislation or judicial practice will be transferred to the pre-insolvency court restructuring process;
  • the compulsory settlement proceeding is a "last chance" proceeding – an alternative to bankruptcy and liquidation, once the debtor is already insolvent. The direct application of its rules to a pre-insolvency situation without clear guidance or proper re-calibration opens an entirely new set of challenges and uncertainties that will take a considerable amount of time to uniformly resolve through the courts;
  • larger creditors holding decisive influence over the outcome of any restructuring effort would appear to have very little incentive to agree to such process or vote in favour of such restructuring, as they are likely to find existing alternatives of voluntary out-of-court contractual restructurings and compulsory settlements much more attractive 1;
  • the process would be as cost-, effort- and time-intensive for the debtor, as a compulsory settlement proceeding. However, a court restructuring process does not contain the implied threat of liquidation inherent to a compulsory settlement proceeding, which serves as a motivator for creditors to agree to the proposed settlement terms. Coupled with considerations under point iii., there may be comparatively few incentives for debtors to consider the new court restructuring process as well.

To sum up, while the draft amendment of the Insolvency Act does formally provide new restructuring tools in line with the Directive, their practical value would appear to be severely limited. These tools would appear most useful to companies that have a dispersed debt structure and principally require the restructuring of unsecured commercial claims.


1 Compulsory settlement proceedings provide larger creditors with the possibility to (i) initiate the proceeding and drive the proposed settlement and restructuring measures, (ii) take over the management of the debtor during the proceeding, and (iii) to force a debt to equity swap, which provides them with the opportunity to reap the rewards of a successful turnaround beyond a proportionally higher repayment of their receivables than in the case of bankruptcy. The same may in essence be provided in voluntary out-of-court restructurings; however, this is not the case in the currently envisioned pre-insolvency court restructuring proceeding.

Restructuring frameworks undergoing change - WT (

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.