April 30, 2015

The Energy performance certificate (EPC), an integral part of The Directive on the energy performance of buildings (the Directive 2010/31/EU; EPBD) is a European instrument used for the promotion of energy efficiency. The main aim of the EPC is to serve as an information tool for building owners, buyers and tenants on energy efficiency of buildings, expected energy costs as well as possible investments into potential energetic upgrades.

The EPBD has been transposed into the Slovenian legal order by way of the Building Construction Act, the Environmental Protection Act, an amendment of the Energy Act and relating regulations.

According to the Energy Act, an EPC has the status of a public document, meaning it can only be issued by authorised organisations and elaborated by licensed experts. According to the information provided by the Directorate for Energy of the Ministry of infrastructure, which is responsible for licensing of persons who are authorized to produce EPC cards, until December 2014, 268 licences to independent experts were issued. The independent expert’s responsibility is to inspect each building in the process of an energy performance certification, which is concluded with the issuance of an EPC and an entry into a register. The list of licensed independent experts has been made publicly available and is updated by the Directorate of Energy on a regular basis.

Despite setting up a central/regional EPC register not being compulsory under EU law, Slovenia has, much like the majority EU Member States, set up the Register of energy performance certificates, which is maintained by the Directorate of Energy.

Slovenian Rules on the methodology for production and issuance of energy performance certificates for buildings provides for two types of EPCs. A Calculating EPC that may be issued for each building (it is mandatory for residential and new buildings). The second type is the Measured EPC, which may be issued for existing non-residential buildings or non-residential parts of buildings.

An EPC may be issued either for a building as a whole or for part thereof (either a flat or a non-residential part of a building). An EPC for a part of a building can only be issued only when floor ownership is being established and an individual part of the building is being registered in the Land Registry.

The validity of the EPC is limited to 10 years. The building owner may request a new EPC prior to the expiry of the ten-year period in case of a changed energy performance of the building.

The Slovenian Energy Act and relating regulations prescribes that an EPC is mandatory for:

  • Any property that is being put up for sale or rent (to a new tenant for a year or longer),
  • For public buildings with an area of over 500m² (250m² from 9 July 2015),
  • Newly built buildings (an EPC is obligatory for issuing an operating permit).

The law requires that an EPC has to be obtained prior to advertising the sale or rent of a building or a particular part of the building, therefore the owner of the property has to ensure that the advertising agency indicates the energy efficiency of a building or a particular part of the building in the advertisements with regard to said property.

An EPC is not mandatory for:

  • buildings declared as monuments in compliance with the regulations governing the cultural heritage protection provided that the fulfilment of energy efficiency requirements under the building construction regulations would bring about an unacceptable change to their nature or appearance;
  • buildings used for religious rituals or religious activities;
  • temporary buildings with the estimated time of use of two years or less, industrial buildings,
  • workshops or non-residential agricultural buildings;
  • residential buildings for the use of less than four months a year;
  • Independent buildings or individual building parts with a usable surface area of less than 50m2,
  • sale of a building in the course of enforcement or bankruptcy proceedings;
  • sale or rent of the buildings passed into ownership of the Republic of Slovenia or a local community on the basis of a decision on succession,
  • transfer of ownership by way of expropriation (when public interest is present).


The improvement of the energy efficiency of buildings is among the major objectives of EU’s energy and climate policy. For most of the EU Member States, the EPBD was the means of introducing new elements in their respective legal orders prior to which there were no energy performance requirements concerning neither buildings as wholes nor parts thereof. The Directive on the energy performance of buildings (EPBD) and the minimum requirements standards imposed by EPBD are facilitating a much better understanding of energy indicators of buildings and are going to have a strong impact on the construction industry as a whole as well as energy savings stemming from higher overall levels of energy efficiency in the near future.

Contact: Maša Drkušič,


April 29, 2015

The Slovenian legal framework of bank guarantees

Bank guarantees are a well-known and widely used type of security interest intended for the strengthening of the creditor’s position as well as his protection from various risks, especially for securing for the event of non-payment, or as the case may be, non-fulfilment of contractual obligations stemming from commercial contracts (contracts concluded between two business entities). The Slovenian legal framework in this particular field of law is slightly different with respect to comparable legal systems as bank guarantees are subject to legal regulation all the while certain unorthodox measures are used to do so. Namely, the essential legal act in the field of Slovenian law of obligations, the Code of Obligations (Obligacijski zakonik, hereinafter referred to as OZ) refers to the Obligations Act (Zakon o obligacijskih razmerjih, hereinafter referred to as ZOR) in its section on transitional and final provisions with regard to Bank guarantees. The latter is a legal act adopted in the year 1978 and was in force only until 2001. The relevant legal matter hence does not delve deeply into the matter. ZOR simply stipulates that a bank guarantee must be concluded in writing and that with the issuance thereof a bank takes on an obligation to settle a debt that a third party has towards the beneficiary of the guarantee in the event of a default of repayment of said debt pursuant to the fulfilment of the conditions that are stipulated in the guarantee itself.

Prevention of abuses when calling on bank guarantees

Independent, abstract bank guarantees are most widely used in (inter)national business practice. The main characteristic of these is that a bank as a guarantor must pay the guaranteed sum once the beneficiary calls on said guarantee. When deciding on whether or not it shall pay the guaranteed sum, the bank may not look into the underlying relation between the applicant and the beneficiary. Certain documentary conditions may be included in such guarantees despite their independent nature.

Various forms of abuses may occur due to the abstract nature of the relation that is established between the guarantor and the beneficiary based on the issuance of an independent bank guarantee. Unwritten rules of the international business environment entail that a bank must treat each call on a guarantee with the utmost diligence as well as that it may decide, in accordance with the diligence that is to be expected from a banking or financial expert, whether or not the call on the guarantee is justified. Notwithstanding all of this, Slovenian courts have approached the matter in a restrictive manner thus far, stating that, due to the abstract nature thereof, a bank does not need to verify whether an attempt of an abuse of a guarantee has been carried out through a call on a guarantee. The only legal means for preventing maleficent, unjustified calls on guarantees is thus a motion to issue an interim order (injunction) to prevent the bank from honoring a guarantee, which may be filed by the applicant of the guarantee.

The burden of proof in the aforementioned procedure is on the applicant. The applicant must therefore prove that either an infringement of the prohibition of abuse of rights contained in Article 7 of the OZ, or as the case may be, the principle of conscientiousness and fairness in Article 5 of the OZ has taken place. Proving an abuse of rights stemming from a guarantee is considered to be probatio diabolica. Issuances of interim orders are thus rare. Even more so since such interim orders are only effective when the applicant is notified of a call on the guarantee in question before the guarantor disburses the amount guaranteed. In the event of the guarantor paying the guaranteed sum prior to notifying the applicant of this (thereby in effect depriving him of the possibility of recognizing the abuse and potentially preventing it) the applicant is left with no direct legal remedy towards the guarantor. He may, however, in line with the ZOR’s general provisions, file a claim for the repayment of the guaranteed sum aimed at the guarantee beneficiary.

Guarantor’s security by way of pledges on immovables in the event that the applicant is subject to insolvency proceedings

Insolvency proceedings have become frequent in the last few years. Hence a problem in relation to the effects of a concluded insolvency proceeding on the validity of pledges on immovables with which banks have secured their claims of recourse in the event of a call on a guarantee have become apparent. The situation where a pledge was established by a third party on his own real estate for securing a claim of recourse that guarantors filed against an applicant that was subject to an insolvency proceeding presents an especially pressing issue. Because the rights stemming from a pledge have an accessory character, i.e. are wholly dependent on the main claim, the question posed itself whether the guarantor can demand a repayment of his claim of recourse as part of the value of the pledged immovable of a third party providing that the applicant has ceased to exist as a result of the conclusion of an insolvency proceeding.

Legal theory and practice have held different views on this matter. Case law used for its base the hypothesis that all creditors’ claims against the applicant cease to exist upon the conclusion of an insolvency procedure, including the recourse claim of the guarantor stemming from the bank guarantee as well as (consequently) automatically pledges on immovables owned by third parties. Legal doctrine, on the other hand, advocated the position that the purpose of the security is of paramount importance, meaning that by doing so the security is rendered (and unjustly so) wholly ineffective. It has therefore openly lobbied for preserving the pledge on real estate of a third party, no matter what happens to the recourse claim, or as the case may be, what may transpire in the course of an insolvency proceeding.

The Supreme Court of the Republic of Slovenia ended the security crisis in the midst of which banks found themselves because of the aforementioned view of the courts when it issued a legal opinion on principle on 21. 6. 2013. Taking into account the opinions of theoreticians which say that in practice securing claims in the form of pledges on real estate is carried out for the sole purpose of expectance of protection from risks connected to insolvency proceedings, the Supreme Court was of the opinion that the obligations of an insolvent debtor do not cease along with the cessation of the debtor itself. Therefore, ever since this opinion was issued, the existence of the pledge on immovables of third parties has not been in jeopardy any longer.

First instance courts have begun to issue decisions in line with this opinion soon thereafter. With this, the pledge of a guarantor on immovable property of a third party was rendered immune to both, the developments of an insolvency proceeding with respect to the applicant, as well as the legal epilogue of its conclusion. Banks-guarantors no longer have to tremble at the possibility of their security provided by third parties would become useless due to the effects of an insolvency procedure of the applicant of the bank guarantee.

Contact: Tilen Tacol,

April 28, 2015

We would like to inform interested public that based on independent professional assessment of legal professionals of the widely recognized publication Chambers Europe 2015, ODI Law Firm is listed amongst 5 recommended law firms in the field of corporate and commercial law based on its past achievements and results.

Uroš Ilić, ODI founding and managing partner and attorney specialist for corporate and insolvency law, is also listed amongst notable leading practitioners and ranked in band 2 in the field of corporate and commercial law whereas Gjorgji Georgievski, ODI partner is recognized in the field of dispute resolution.

We are proud on the fact that year by year we are noticed and also promoted in this category with strong competition and still able to confirm our market position with our effort, experience and handling important cases. Chambers guides cover 185 jurisdictions throughout the world and has been ranking the best law firms and lawyers since 1990. No other organisation has the strength-in-depth of their editorial and research team when it comes to assessing the world’s business lawyers.

We thank our clients for their trust in our firm. We highlight hereunder some opinions about our team.

The team is known for rapidly growing and increasingly prominent corporate offering, particularly active in the developing field of large-scale Slovenian privatisation. Regularly advises banks and debtors on complex restructuring cases. Notably active with clients in the energy, retail and manufacturing sectors, and on matters involving state-owned companies.”

“The team is strong in insolvency law and M&A, possessing the detailed knowledge required for our case. The lawyers are also responsive, and the advice they provide is straight to the point.”


April 28, 2015

In December 2013, in the wake of financial and economic crisis, the Bank of Slovenia adopted several decisions addressed to major Slovenian banks (among them Nova Ljubljanska banka d.d., Nova KBM d.d.), which introduced emergency measures in order to remedy the instability of financial system in the Republic of Slovenia and to comply the planned state aid with requirements of the EU Commission. These measures included (i) decrease of share capital of banks and writing-off their hybrid and subordinated debt and (ii) increase of the share capital of banks with the state’s own financial resources (the total amount of bailout in three largest banks amounted to 3 billion EUR).

These measures resulted in several proceedings before Slovenian courts and Slovenian Constitutional Court, where aggrieved domestic and foreign creditors and shareholders allege violations of their constitutional rights to fair trial and property, on the basis that they could not participate in the proceedings before the Bank of Slovenia, have no right of appeal against its decisions and were not granted any compensation for the taking of their property.

The legal basis for disputed decisions were, inter alia, the Slovenian Banking Act, Communication from the EU Commission on the application, from 1 August 2013, of State aid rules to support measures in favour of banks in the context of the financial crisis (the “Banking Communication”) and Directive 2001/24/EC on the reorganization and winding up of credit institutions.

The Banking Communication in paragraph 44 provides that in cases where the bank no longer meets the minimum regulatory capital requirements (as was – according to the Bank of Slovenia – the case with relevant Slovenian banks), subordinated debt must be converted or written down, before State aid is granted. Pursuant to the same paragraph the State aid must not be granted before equity, hybrid capital and subordinated debt have fully contributed to offset any losses. However, the Banking Communication in paragraph 19 further stipulates that before granting any kind of restructuring aid to a bank all capital generating measures including the conversion of junior debt should be exhausted, provided that fundamental rights are respected and financial stability is not put at risk.

Expropriated shareholders and debt holders claim that emergency measures of the Bank of Slovenia interfered with their property rights with retroactive effect, since at the time they entered into legal relationship with the bank, the applicable legal regime (i.e. before the Banking Communication) did not condition state aid with prior cancelation of shares and write-off of debt instruments. Hence, disputed decisions violate the principle of legitimate expectations, as developed in the jurisprudence of the Court of Justice of the European Union (the “CJEU”). They further refer to Directive 2001/24/EC on the reorganisation and winding up of credit institutions, which in Article 2 defines reorganisation measures as measures “intended to preserve or restore the financial situation of a credit institution and which could affect third parties’ preexisting rights«, however, without expressly mentioning expropriation of shareholders or debt write off (as administered in case of Slovenian banks).

Only in May 2014, i.e. few months after the Bank of Slovenia adopted disputed measures, the European Parliament and the Council adopted Bank Recovery and Resolution Directive 2014/59/EU, which now provides in Articles 43 to 62 for possibility to cancel existing shares and recapitalize the bank or to convert or write-off debt instruments. Directive came into force on 1 January 2015. With respect to temporal application, Article 55 provides for burden sharing of creditors only with respect to liabilities, which are entered into after the date of transposition of directive into national legal systems. In the words of the EU Commissioner for Financial Stability, Financial Services and Capital Markets Union: »From now on, it will be the bank’s shareholders and their creditors who will bear the related costs and losses of a failure rather than the taxpayer. « (Press release of the EU Commission, published on 31 December 2014: A single rulebook for the resolution of failing banks will apply in the EU as of 1 January 2015).

Another issue is the compatibility of the Banking Communication with the Second Company Law Directive 2012/30/EU. According to this directive any increase or decrease of the share capital must be decided by the general meeting of the company (and not by an administrative measure of the state organ). Interestingly, although the wording of the Banking Communication is very scarce when it comes to issue of fundamental rights of shareholders, which are to contribute to losses of the bank, the EU Commission appears to have foreseen this problem in the past and has recognized that the mandatory nature of the rights accorded under the Second Company Law Directive 2012/30/EU may undermine attempts by authorities to quickly handle a bank crisis (see Communication from the EU Commission, COM(2009) 561/4, An EU Framework for Cross-Border Crisis Management in the Banking Sector, p.12). The CJEU already held in Panagis Pafitis and others v Trapeza Kentrikis Ellados A.E. and others (C-441/93 of 12 March 1996) that the provisions of the directive preclude national rules under which the capital of a bank, which is in distress due to its debt burden, may be increased by an administrative measure, without a resolution of the general meeting.

Faced with all these interesting questions, the Slovenian Constitutional Court in November 2014 decided to submit to the CJEU request for preliminary ruling asking whether, inter alia, the Banking Communication is legally binding for EU Member States, whether it is in accordance with the EU Charter of fundamental rights, the principle of legitimate expectations, Second Company Law Directive 2012/30/EU and Directive 2001/24/EC on the reorganisation and winding up of credit institutions. To date, parties have provided their written observations, and the CJEU has not yet scheduled the hearing. Whatever the decision of the CJEU will be, it will certainly provide some reflection on the current response to the financial crisis and to what extent the burden sharing of shareholders and creditors in the financial crisis is required in order to safeguard the financial stability.


April 24, 2015


The legal framework for functioning of the banking sector in the Republic of Serbia has recently gone through a change by the adoption of the Law on Amendments and Supplements to the Law on Banks (Official Gazette of RS, no. 14/2015) which entered into the force on 12 February 2015 and is applicable as of 1 April 2015 (hereinafter referred to as: the Law).

The main reason for the adoption of the Law lies in the need for improving the mechanism of resolving the problem of insolvent banks to which problem the previous legal framework and in particular the Law on the Assumption of Assets and Liabilities of Banks for the Purposes of Safeguarding Stability of the Financial System of the Republic of Serbia(‘’Official Gazette of RS’’, No 102/2012) only partially gave a positive response.

We would to use this opportunity to highlight the fact that the Law specifically regulates the question of bank restructuring (new Chapter of the Law, No 5, or Articles from 128a to 128h). Also, this extensive legislative text implements EU directives in the legal system of Republic of Serbia, particularly Directive 2014/59/EC (Directive 2014/59/EU on establishing a framework for the recovery and resolution of credit institutions and investment firms).

Together with the adoption of the amendments and supplements to the Law on Banks, amendments and supplements to the Law on the National Bank of Serbia, Law on Deposit Insurance, Law on Bankruptcy and Liquidation of Banks and Insurance Companies, Law on Deposit Insurance Agency as well as to the Law on Ministries were also adopted all with the same goal to implement new institutes introduced by the Law.

Significant novelities 

From significant novelties introduces by the Law, for this occasion we highlight only few as follows:

  1. New institutes introduced by the Law

The Law introduces following institutes to the legal framework of banking sector in Serbia:

  1. Undercapitalized bank

Instead of previous institutes of significantly and critically undercapitalized banks, the Law redefines undercapitalized bank as the bank whose capital adequacy ratio is lower than prescribed, or whose capital is lower than required, as well as the bank whose capital adequacy ratio is lower than the one prescribed by the National Bank of Serbia (hereinafter referred to as: NBS).

  1. Bank important for the system

The Law introduces institute of the Bank important for the system to the banking sector and defines it as the bank whose deterioration in the financial condition or termination of operation would have serious negative consequences on the stability of the financial system. Banks that are important for the system shall be designated by NBS on the basis of the criteria and methodology it prescribes which shall especially take into account the size of the bank, its links with other participants in the financial system and its substitutability in this system, as well as the complexity of its operations.

  1. Critical functions and Key business activities

The Law defines critical functions as activities, services or operations whose interruption would probably lead to endangering of the stability of the financial system or to disturbances in the provision of essential services to the real economy due to the size, market share and the relationship between the entity that performs them with the other participants in the financial system, especially taking into account the possibility of someone else taking over the performance of these activities, services or operations. Key business activities are commercial activities and services associated with these activities whereby substantial portion of revenue of the bank or banking group to which the bank belongs is achieved.

  1. Restructuring of the Bank

The Law introduces additional authorizations as well as additional measures and instruments to NBS as the body responsible for restructuring, as a special kind of administrative procedure in which will be possible intervention of NBS by measures prescribed by the Law over a bank that meets the legally prescribed conditions for restructuring, all in order to keep the critical functions and the key business activities of the bank, at the same time with limitation of the restructuring costs and negative impacts on economic and financial system.

Instead of revocation of bank’s operation license in the case of business difficulties, the Law predicts that in the case of restructuring of the bank with business difficulties, that otherwise would be reasons for revocation of bank’s operation license, bank’s operation license will not be revoked by force of the Law, if there is public interest to implement restructuring.

The Law predicts following restructuring instruments:

  1. Sale of shares and/or part or whole assets and liabilities of the bank;

NBS may sell the shares of the bank in restructuring or all assets or liabilities of that bank, or part thereof, to the acquirer who is not a bank for a specific purpose.

  1. Transfer of shares of one or more banks in the restructuring process or transfer of part or whole, assets or/and liabilities of one or more banks in restructuring process to the bank for specific purposes;
  2. Separation of property or transfer of the assets and liabilities of the bank in restructuring or the bank for specific purposes to the Deposit Insurance Agency or other legal entity (so called: asset management company).

NBS may transfer the assets and liabilities of the bank in restructuring or the bank for specific purposes to the Agency or other legal person that is not a bank for specific purpose, if conditions predicted by the Law are fulfilled. Aim of this instrument is to allow transfer of so called ‘’bad assets’’ of the bank in restructuring or the bank for the specific purpose.

  1. Distribution of losses to shareholders and creditors

We highlight the obligation of NBS to prepare a plan of restructuring for each of the banks active on the territory of the Republic of Serbia. In the opinion of the nominator of the Law, planning the process of bank restructuring is crucial for successful and efficiently bank restructuring because it is a condition which allows individual approach to the bank restructuring, which is way is necessary to consider systematic importance of the bank when drafting plan of bank restructuring as well as plan of bank recovery, to identify critic functions of the bank and ensure their continuity. That is way plans of restructuring have to consider precise information about bank, including dates about organization structure, business lines, financing source, planed instruments and measures of restructuring which shall be applied on the bank, about critical functions of the bank and ways of providing continuity of its performing, and have to consist analysis about critical interdependence and influences of appliance of restructuring instruments on the other financial institutions and financial market, as well as dates about way of communication and exchange of information between NBS and the bank.

Additionally, we highlight that the Law introduces that in the case of administrative dispute regarding procedure of restructuring, the Administrative Court cannot resolve in the proceedings of full jurisdiction. The Law predicts that the Court cannot resolve the administrative issue for which the present Law stipulates competence of NBS.

Also, by lawsuit against the decision to revoke the bank’s operation license, the decision whereby write-off and conversion of capital is implemented, and the decision adopted by NBS in the procedure of restructuring, the banks may only seek the determination of illegality and the annulment of that decision, as well as compensation for damages if that was not claimed in a separate proceedings. Third parties shall retain the rights and obligations acquired on the basis of the annulled decision, while the plaintiff’s rights shall be limited to the compensation of damages he suffered by the execution of that decision.

  1. Recovery plan as the instrument of preventive activities

The Law introduces the obligation for the Bank to prepare recovery plan which envisages measures that the bank shall apply in the case of a significant deterioration in its financial condition, to re-establish its sustainable business and the corresponding financial position.

Within the recovery plan, the bank shall determine different possibilities for recovery and measures that would be implemented within each of these options. The recovery plan shall be evaluated by NBS. The Bank shall update the recovery plan at least once a year, and at the request of NBS more often. NBS shall, within six months from the date of delivery of the recovery plan, evaluate whether the plan meets the requirements predicted by the Law.

  1. New control measures of NBS – Measures of Early Intervention

The Law introduces extended and control functions of NBS over banks and prescribes new corrective and coercive measures in the bank control process (Section 3, Chapter 5 of the Law).

Beside corrective and coercive measures (sending a written warning, imposing orders and measures to eliminate the determined irregularities, revoke of bank operating license), predicts, among other, new measures of early intervention.

The measures of early intervention may be taken by NBS, independently of prescribed corrective measures, over the bank that acted in contravention of regulations, or it is likely that, among other things (due to the fact that its financial situation is rapidly worsening, including the deterioration in liquidity, increase of the level of indebtedness, non-performing loans or concentration of exposure), the bank shall soon to act contrary to the relevant regulations. The measures of early intervention, among other, include carry out one or more measures of the recovery plan, measures of status corporative nature as to convene an assembly of the shareholders, as well as other measures that NBS find adequate.

Additionally, beside the measures of early intervention, NBS may issue a decision to order the dismissal of members of the management body of the bank, or the dismissal of other persons in management position in the bank, or issue a decision on the appointment of temporary administration of the bank.

  1. Change of competences of corporative bodies of the bank

The Law introduces the change of competences of corporative bodies of the bank including the General Meeting of Shareholders, the Board of Directors and the Executive Board as well as the change of conditions for the appointment and dismissal of the members of these boards.

Additionally, the Law now introduces possibility for representative of NBS to attend the meetings of the Board of Directors, the Executive Board of the bank, as well as meeting of the Audit Board, Credit Board and Board for managing assets and liabilities.

  1. Special obligations of banks introduced by the Law

Banks are obligated to harmonize their internal acts with the provisions of the Law, by no later than 01 July 2015.

Recovery plans as closely defined and described in the text above, banks are obliged to submit to NBS by no later than 30 September 2015.

The deadline for NBS to draft plans of restructuring as closely defined and described in the text above, is one year after the Law entered into force, for the banks holding operation license or two years after the Law entered into force for the banking group.

Contact: Miloš Čurović, and Aleksa Anđelković

April 23, 2015

As is the trend in former Yugoslavia countries in the past years, Croatia is embarking on a path where privatisation of state companies is imperative for further development of state economy and infrastructure. Even though each country in the region has pursued a different path toward democracy and a free market economy, all relevant countries have a similar blueprint when it comes to the process of privatisation.

Recently, Croatia ensued a new phase of privatisation on a rather large scale. Although it is not proceeding as planned and the Croatian government is no doubt ruing its own particular lack of fortune after the country’s latest failed privatisation sales, the commitment to restructuring and privatisation is still there. Stable economy, EU membership, strategic location, infrastructure and human capital represent some of the major advantages which Croatia offers to an investor. Key sectors, as defined by the Agency for Investments and Competitiveness (Agencija za investicije i konkurentnost) are: tourism, information computer technology, automotive, food, pharmaceutical, logistics, metal and textile. Also, due to Croatia’s EU Accession which took place on July 1st 2013, there is no need for product double testing or custom clearances between EU countries and Croatia.

Legal basis for privatisation of companies in Croatia is provided by National Property Management Act (Zakon o upravljanju i raspolaganju imovinom u vlasništvu Republike Hrvatske; NN št. 94/2013), which is relatively young, as it was adopted and entered into force in 2013. It predicts the following methods of privatization:

  • Public offer of shares,
  • Public auction of shares,
  • Public call for offers,
  • Public offer of shares on organized markets
  • Acceptance of the offer in the process of takeover,
  • Minority shareholders squeeze-out,
  • Public call for capital increase,
  • Direct sale.


The above mentioned methods may be combined with the procedures of restructuring and capital increase of the companies.

Two additional legal acts are also imperative in the privatisation of companies: Strategy on property management for 2013- 2017 (Strategija upravljanja i raspolaganja imovinom u vlasništvu Republike Hrvatske za razdoblje od 2013. do 2017. godine), adopted by the Croatian Parliament, and Plan on property management 2015 (Plan upravljanja imovinom u vlasništvu RH za 2015. godinu), adopted individually for each specific year. The above mentioned documents are very important as they divide companies into groups based on categories, which are designed to show and predict the possibility of commencing the process of privatisation. That being said, Strategy on property management determines guidelines for the process of selling companies and Plan on property management further analyses and breaks down the possibility of selling companies, where the decision to privatize a specific company shall be adopted by a specific decision of the Government.

So far, a synonym for Croatia’s privatisation story has been Croatian fertilizer firm Petrokemija. The sale of Petrokemija was supposed to show that Croatia was fully committed to restructuring and privatisation. On March 12th 2014 the deadline for binding offers to buy a controlling stake has passed without any concrete bids from the trinity of preferred bidders – Borealis from Austria, Nitrogenmuvek from Hungary and Agrofert from the Czech Republic, while other attempts at full-scale privatisation date back all the way to 1998. As a result, Croatia is stuck with a firm whose Yugoslav-era industrial facilities are in desperate need of investment to be competitive and meet the exacting environmental standards laid down by the EU. As privatisation of Petrokemija has not moved along as predicted, the Croatian government is now saddled with a company that for much of the recent past has been a drain on the state’s finances.

National office for managing state property (Državni ured za upravljanje državnom imovinom) was concentrating most of its attention towards the monetization of highways. A concession model of monetization was expected, meaning that the state was planning to delegate highways to a concessionaire which will in return for a payment of lump sum estimated at € 2.4 to € 3.2 billion to the government manage and maintain them for a span of 30-50 years. The procedure was lately stopped by the Government, in part due to a huge opposition of the public opinion. At the moment, the Government, although the sources are still unofficial, is planning a completely different approach, with an IPO where the 51% of the company would be offered to the Croatian pension funds, the employees and the Croatian citizens.

Airports of Split, Dubrovnik, Zagreb, Osijek, Pula, Rijeka and Zadar are not predicted for any financial restructuring, privatisation or sale. However, on October 9th 2014 the government adopted a decision to re-launch the privatisation of Croatia Airlines. The state currently holds 90 % of the national carrier, valued at € 50 million. After securing approval from the Croatian Competition Agency (Agencija za zaštitu tržišnog natjecanja) in June 2013, the company began implementing the € 259 million restructuring plan, scheduled to last until the end of 2015. The plan includes further redundancy measures and the closure of retail units abroad in 2015. In 2015 it is not realistic to expect any interest or even offers from European airlines but certain interest is shown by the Asian airlines, namely Hainan Group and All Nippon Airways. The Croatian government has declared that Croatian Airlines can be owned by a majority only by a legal or natural person based in EU, other co-owners located outside the EU cannot own more than 49 % of equity share.

Also, in December 2013 the sale of government’s 99.13% stake in Croatian Postal Bank (Hrvatska Poštanska Banka) failed after the only binding bid filed by Erste Bank was rejected due to the low offering price. However, the bank is imperatively inserted in the Plan on property management 2015 in which it is predicted, firstly, its restructuring and the sale of the shares by public tender afterwards.

Even though experts predict no major completions of privatisation in 2015 due to parliamentary and presidential elections, here are some numbers, which could prove otherwise. More than 90 companies are expected to be privatised in 2015 and 16 companies where state owns more than 50 % of shares are ready to be sold.

There are 27 companies of strategic importance for the state, namely HEP Group (Hrvatska Elektroprivreda d.d.), JANAF (Jadranski naftovod d.d.), Plinacro d.o.o., Hrvatske Šume d.o.o., Croatian Lottery (Hrvatska Lutrija d.o.o.), Croatian Railways (HŽ Infrastruktura d.o.o.), Hrvatske Vode, etc., where no privatisation is expected. There are 26 companies of special strategic importance, namely ACI d.d., Croatia Airlines d.d., Jadrolinija, Zagreb Airport (Zračna luka Zagreb), Croatia banka d.d., Croatian Postal Bank (Hrvatska Poštanska banka d.d.), The People’s Newspaper (Narodne novine d.d.), Croatian Railways (HŽ Cargo d.o.o.), Brijuni Rivijera d.o.o., Zadar Airport (Zračna luka Zadar), Split Airport (Zračna luka Split), etc., in which the state owns more than 55 % of all shares, where the government will decide whether privatisation will start or not and another 6 companies with special importance where the state owns less than 50 % of shares.

There are 558 companies with no strategic importance where the restructuring agency is making all the decisions regarding privatisation. Of those, 507 companies are owned by the state with more than 50 % of all shares.

To conclude, no major breakthroughs are expected in 2015 but still, fortune could smile on Croatia and its privatisation plan.

Contact: Branko Ilić,

April 22, 2015


Legal framework for functioning of the payment system in Republic of Serbia has recently gone through a change by adopting Law on Payment Services (’’Official Gazette of RS’’, no.139/2014) which entered into force on 26 December 2014 and is due to become applicable on 1 October 2015 (hereinafter referred to as: the Law).

This extensive legislative text with 232 articles, implemented EU acquis in the legal system of Republic of Serbia i.e. several directives regarding to payment services.

The main reason for adoption of the Law is reflected in the fact that legal framework for providing payment services established by the Law on Payment Transactions presented no more an adequate basis for development of the payment services market. We especially refer that previous legal framework, among other things, put several limitations and prohibitions regarding institutions which could provide payment services and that payment services such as issuing, acquiring and paying by payment cards, payments made through telecommunication, IT and other similar operators, were not regulated by previous law in particular.

To all those who have followed developments on the commencement of PayPal services in Republic of Serbia, as well as confusing legal situation in which activity of the PayPal was performed, please note that along with adoption of the Law, the Law on Amendments and Supplements to the Law on Foreign Exchange Operations (’’Official Gazette of RS’’, no. 62/2006, 31/2011, 119/2012, 139/2014) regarding foreign institutions of e-money and payment institutions was also adopted.

Significant novelties

From major novelties provided by the Law for this occasion we highlight only few, as follows:

  1. New providers of payment services

Besides entities from the banking sector and public authorities (commercial banks, the National Bank of Serbia (hereinafter referred to as: NBS), the Treasury and other public authorities in Republic of Serbia, a public postal operator) payment services may be provided by entities from the so-called non-traditional banking sector such as:

  • Payment institutions

The Law predicts performance of certain payment services by payment institutions as new institutes in the system of payment transactions in Republic of Serbia.

Payment institutions, among other things, may execute money remittance services (Article 4, paragraph 1, item 6 of the Law), execute a payment transactions where the consent of the payer to execute a payment transaction is given by means of any telecommunication, digital or IT device and the payment is made to the telecommunication, digital or IT network operator (Article 4, paragraph 1, item 7 of the Law), execution of other payment services including services enabling cash to be placed on a payment account, services enabling cash withdrawals from a payment account, maintaining the account, fund transfer, transfer where funds are covered by a credit, issuing and acquiring of payment cards (Article 4, paragraph 1, items 1-5 of the Law).

Although a payment institution shall not perform deposit-taking activities or issue electronic money, it may grant a loan to the payment service user in connection with the provision of payment services, in accordance with the Article 95 of the Law.

Performance of payment services by payment institutions is conditioned by license issued by NBS as well as the fulfillment of personal-technical-technological conditions predicted by the Law and condition regarding minimum share capital, which amounts from EUR 20.000,00 to EUR 125.000,00 depending on the type of payment services that payment institution engages in.

  • Electronic money institution

Electronic money can be defined as digital equivalent to the cash, or electronically stored monetary value which is issued on receipt of funds (pre paid), and which is accepted as means of payment by third parties without necessary use of the bank account.

Electronic money can be issued by the banks, a public postal operator, the NBS, the Treasury or other public authorities in Republic of Serbia as well as an electronic money institution.

The Law allows the establishment of domestic electronic money institutions and making payments by electronic money through these institutions, what was not previously regulated by the relevant law nor were there other preconditions for their business.

Issuance of electronic money by electronic money institutions as well as providing of all payment services determined by the Law, is conditioned by license issued by NBS as well as the fulfillment of personal-technical-technological conditions predicted by the Law and condition regarding minimum share capital, which amounts EUR 350.000,00.

Besides service of providing electronic money, electronic money institution provides payment services under Article 4 of the Law, granting credit relating to payment services, other operational and ancillary activities directly related to the issuance of electronic money or to the providing of payment services.

Please note that for foreign electronic money institution, the Law on Foreign Exchange Operations is also applicable.

  1. Modernization and development of payment transaction system by implementation of new payment services

Of new institutes within the payment services, for this occasion we highlight possibility of opening a joint payment account, which means payment account held by the payment service provider in the name of two or more payment service users, in accordance with the framework contract on opening, maintaining and closing the joint account.

Additionally, a direct debit that so far represented security instrument for future outstanding due amounts, now, in accordance with the Law means a payment service where a payee, based on the payer’s consent, initiates a payment transaction to debit the payer’s payment account. The payer may give such consent to the payee, its payment service provider or payee’s payment service provider. It leaves open the question of compliance with the provisions of the Law on Contracts and Torts.

Instead of conclusion – great responsibilities lie ahead

As already said in the introduction to this line, the Law is due to become applicable on 1 October 2015.

In front of the banks providing payment transactions in Republic of Serbia the Law sets ambitious deadlines. Specifically, the Article 221 of the Law predicts an obligation for the banks to harmonize their operations and internal regulations with provisions of the Law by its application date. Also, the banks shall, by no later than one month before the application date of the Law, that means on 1 October 2015, submit the proposal of the framework contract to be applied from the application date of this Law – to payment service users with which they concluded a contract on account opening and maintenance, contract on the issue and use of the payment card or other contract on payment services with permanent execution. Alternatively, what we assume that the majority of banks which provide payment transactions will do, banks may harmonize the contracts with provisions of the Law also by harmonizing general terms of business applied to these contracts. As in the case of the proposal of the framework contract, banks shall, by no later than a month before the application date of this Law, that means on 1 October 2015, inform all payment service users with which they have concluded the contracts that they harmonized general terms of business with provisions of the Law and shall make these terms available to such users.

Contact: Miloš Čurović, and Aleksa Anđelković

April 20, 2015

On 16 April 2015, ODI Serbia’s associate Iva Miščević presented the new Serbian Law on Employment of Foreigners and the new procedure for obtaining work permits in Serbia to the members of the Slovenian Business Club (SBC). ODI Serbia’s presentation was held at SBC’s regular ’’business breakfast” event that became one of the focal points for meetings between Slovenian business people working in Serbia. This ’’business breakfast” gathered more than 20 directors and representatives of the Slovenian companies that are present in Serbia, as well as representatives of some Serbian companies and local municipalities.

The new Serbian Law on Employment of Foreigners (”Official Gazette of Republic of Serbia”, no. 128/14) (hereinafter referred to as: the Law) came into the force on 4 December 2014 and replaced the previous Law on Conditions for Concluding Employment with Foreign Citizens from 1978.

The Law created better business ambient for foreign investments, introduced a more clear process of obtaining approvals for work and harmonizated the national law with European Union law.

The most important novelty introduced by the Law is that the labour permit is now required not only for the conclusion of an employment contract in Serbia, but also for the conclusion of any other agreement based on which the foreigners acquire rights stemming from employment.

Now all foreigners working in Serbia must apply for work permits unless legally exempt. Exemptions include, among other cases, foreigners: (i) who live in Serbia for less than 90 days within a period of six months as of the day of their first entry into the country and if, inter alia, such person is the owner, board member or legal representative of a business registered in Serbia; (ii) who are in Serbia to attend business meetings, make business contacts or establish a branch or subsidiary office; (iii) who are in Serbia for the purposes of procuring goods or to assemble or repair equipment; or (iv) who are in Serbia for a trade fair or similar exhibition.


April 17, 2015

Getting the Deal Through works with many of the best lawyers and law firms in the world to bring together a unique legal information resource, written by experts on each subject area, in every significant jurisdiction. Their online research platform is used by thousands of law firms, universities, regulators, and corporate counsel at leading multinational organisations as a reliable, first port of call for any legal query worldwide.

The original Q&A comparative series, GTDT now covers over 68 practice areas spanning competition&regulatory, dispute resolution&litigation, tax, white collar crime, IP, corporate, commercial, banking&finance, infrastructure&transport, energy&natural resources, insurance and compliance. Across the entire series, GTDT publishes analysis on more than 150 jurisdictions.

Our Partner Gjorgji Georgievski and Junior Associate Simona Kostovska, both ODI Macedonia, participated in the TMT section and represented ODI Law Firm and prepared answers to the questions regarding Macedonia. Find their contribution on the link below:

 Getting the deal through – Media and Telecoms

Reproduced with permission from Law Business Research Ltd. This article was first published in Getting the Deal Through: Telecoms & Media 2015, (published in March 2015; contributing editors: Laurent Garzaniti and Natasha Good, Freshfields Bruckhaus Deringer LLP). For further information please visit”


April 17, 2015

When contemplating any M&A in Slovenia, tax considerations are an important factor to assess. Neglecting tax implications may, at minimum, lead to “unpleasant” surprises in the course of the transaction. In the worst case, however, it may lead to turning what seemed to be a profitable opportunity at first into a costly mistake.[1] The aim of this short analysis is to present some guidance on which are the most important income tax considerations of M&A in Slovenia and how they should be addressed.

Slovenian Companies Act[2] distinguishes among different types of M&A transactions: merger by absorption or by formation of a new company, and various types of divisions (spin-offs, split-ups and split-offs; either by absorption or by formation of a new company). In the following, tax considerations of merger by absorption as one of the most basic types of M&A in Slovenia will be analysed. Such considerations will be presented separately from the point of view of each of the participating subjects: (1) the transferring company, (2) the receiving company, and shareholders of (3) the transferring and of (4) the receiving company. It should be noted, however, that analogical (mutatis mutandis) conclusions apply also to other types of M&A in Slovenia.

First, let’s have a look at the structure of the analysed transaction:

MA Tax Considerations case study

Merger by absorption is a type of M&A in Slovenia, whereas a limited company (transferring company – company A) transfers all of its assets and liabilities to another public limited company (receiving company – company B) by means of universal succession. The transferring company is dissolved without going into liquidation, while its shareholders (shareholders A) are attributed shares of the receiving company. Consequently, the percentage share of the existing shareholders of the receiving company (shareholders B) in the capital of that company is reduced accordingly.

1. Tax considerations of the transferring company (“Company A”):

Pursuant to the provisions of Slovenian Corporate Income Tax Act (CITA)[3] the transferring company is exempt from the tax relating to hidden reserves and/or profits. Additionally, losses that can be attributed to the transferred assets and liabilities are also exempt from taxation. Such exemption, however, is recognized only on the basis of notification of the transaction to the Tax Administration, subject to the requirements of the Tax Procedure Act (TPA).[4] Notification needs to be submitted by the transferring or the receiving company which is the resident of the Republic of Slovenia. If both companies are Slovenian residents, transferring company needs to submit the notification; while in case none of the companies is Slovenian resident, receiving company needs to submit it.[5] The notification is to be submitted before the intended date of the transaction.[6]

As provided by Article 49 of the CITA, the transferring company is required to calculate its profit or loss as the difference between the fair value and the tax value of the assets and liabilities as at the cut-off date of the merger (as if the assets and liabilities were disposed to non-associated enterprises against payment). Consequently, the profit is calculated, but not taxed (provided that the tax benefits under Article 49 of the CITA have been granted by the Tax Administration upon notification).

It should also be noted that neutrality entitlements provided by Article 49 of the CITA are only the possibility the transferring company may opt to pursue by submitting notification to the Tax Administration; while it may as well choose not to exercise these rights.

2. Tax considerations of the receiving company (“Company B”):

As a general rule, the receiving company assumes liability for the entire tax history of the transferring company. Thus, it could end up having to pay back taxes for the acquired entity, the amount of which could in practice be very significant. Consequently, tax due diligence needs to be carried out and should include not only the company’s entire tax history but also inquiries about matters such as open audits and notices of audits.

Pursuant to the provisions of Article 49 of the CITA, the receiving company (company B) is entitled to the following tax benefits:

  • the right to carry over provisions created by the transferring company and assume its rights and obligations related to these provisions;
  • the right to take over tax losses of the transferring company;
  • it is not liable to taxation relating to any gains accruing on the cancellation of its holding in the capital of the transferring company (company A).

Again, entitlement to these benefits is not an automatic consequence of the transaction. Rather, tax benefits may only be granted by Tax Administration upon submission of a relevant notification (pursuant to the provisions of Article 381 of the TPA).

In addition, the receiving company as a universal successor may in practice also benefit from the use of tax incentives or tax reliefs of the transferred company.[7]

The receiving company is required, however, to value the acquired assets and liabilities, to depreciate the acquired assets and calculate the profits and losses related to the transferred assets and liabilities by taking into account their tax values at the transferring company as at the cut off date of the merger as if the operation had not taken place. Thus, for the tax purposes, individual assets retain their character, bases and holding periods; there is no »step-up« in basis. Thus, in case the transferring company has a substantial amount of depreciable assets that have been fully depreciated that may be a negative factor in assessing the transaction.[8]

3. Tax considerations of the shareholders of the transferring company (“Shareholders A”):

Pursuant to the provision of Article 49 of the CITA, the allotment of securities representing the capital of the receiving company (company B) in exchange for securities representing the capital of the transferring company (company A) in itself does not give rise to any taxation of the profits or losses of the shareholder. This benefit, however, may only be granted, if the shareholder is a resident of Slovenia or if he holds securities of the transferring company and of the receiving company through a business unit located in Slovenia. In addition to this, this benefit applies only in case no additional cash-payments have been made. In case of additional cash payments the shareholder is subject to tax in proportion to such payments; while the pro rata profit or loss is added to the cash payment and the fair value of the securities of the receiving company.

As further specified by Article 94 of the Personal Income Tax Act (PITA)[9] in case of mergers the taxation of capital gains of the individuals may also be deferred. In such case, the date of acquisition of exchanged shares of the transferring company (company A) is considered to be the time of acquisition of the newly acquired capital (for the tax purposes).  Practical importance of such legal presumption may be substantial, since it may amount to longer holding period and subsequently to lower taxation of capital gains of individuals.[10] Deferral may be granted on the basis of the notification of the Tax Administration. The notification needs to be submitted for the shareholder (individuals) by the transferring or receiving company.[11]

It may also be noted, that due to the exchange rate, the overall percentage share of individual shareholder in the capital of the receiving company may be reduced as a consequence of the merger. While this fact in itself does not have any direct tax consequences, it may in some particular cases result in important tax considerations in the sphere of application of the provisions of national taxation legislation or Double Taxation Treaties that require ownership of the qualified share in the capital as a pre-condition to granting certain benefits under such provisions (e.g. rules on hidden profits distribution, international aspects of taxation of dividends etc.).

4. Tax considerations of the shareholders of the receiving company (“Shareholders B”):

As a consequence of the transaction, the overall percentage share of existing shareholders in the capital of the receiving company will be reduced. As is the case with the shareholders of the transferring company, this in itself does not have any direct tax consequences. However, the reduced share in the capital of the company may lead to not satisfying the required thresholds under the relevant provisions of national legislation or particular Double Taxation Agreements (in order to be eligible for certain benefits, e.g. reduced tax rate).


As it has been shown, M&A in Slovenia have important tax implications. Relevant tax considerations may also differ, depending the perspective of each of the participants of the transaction (each of the companies, or their shareholders). In order to avoid any subsequent “unpleasant surprises” or unnecessary additional costs, it is recommended that such tax considerations are taken into account and thoroughly analysed when deciding on whether to proceed with any proposed corporate transaction, in particular M&A.



[1] See also David Burton, Anne Levin-Nussbaum, Tax Considerations in M&A Transactions, p. 3, available on    (9.4.2015).

[2] Companies Act, “Zakon o gospodarskih družbah” (ZGD-1), Official Gazette of the Republic of Slovenia No. 42/2006 with subsequent changes. Available at: (9.4.2015).

[3] Corporate Income Tax Act, “Zakon o davku od dohodkov pravnih oseb” (ZDDPO-2), Official Gazette of the Republic of Slovenia No. 117/06 with subsequent changes. Available at: (9.4.2015).

[4] Tax Procedure Act, “Zakon o davčnem postopku” (ZDavP-2), Official gazette of the Republic of Slovenia No. 117/06 with subsequent changes. Available at: (9.4.2015).

[5] Under the provision of Article 381 of the TPA, the submitting company should also enclose written consent of the other engaged company to the submitted notification.

[6] For the scope of information and documentation that needs to be submitted to the Tax Administration, see Article 381 of the TPA.

[7] For additional tax considerations of M&A in Slovenia, see also Marijan Kocbek, Nekateri davčni vidiki pri združitvah gospodarskih družb, Podjetje in Delo 1/2001/XXVII, str. 53-60.

[8] See David Burton, Anne Levin-Nussbaum, see above.

[9] Personal Income Tax Act, “Zakon o dohodnini” (ZDoh-2), Official Gazette of the Republic of Slovenia, no. 117/06 with subsequent changes. Available at: (9.4.2015).

[10] Under the provisions of PITA, capital gains of individuals are subject to a tax rate of 25%. This rate is reduced by 10 percentage points after first five years and then by five percentage points for each subsequent five years the asset is held. Thus, capital gain is exempt in total once the asset is held for more than 20 years.

[11] To further explore these tax considerations, see also Explanation of Slovenian Tax Administration No. 4210-432/2008 of 30.11.2007.

Photo credit:  photosteve101 / Foter / CC BY

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