We use cookies on our website.
Some of them are necessary for the functioning of the site, but you can decide about others. View more
On 24 October 2025, the Slovene National Assembly enacted the Workers’ Ownership Cooperative Act (orig. Zakon o lastniški zadrugi delavcev) (the ESOP Act), introducing an ESOP-style ownership framework into Slovenian law. The ESOP Act – which shall enter into force on 1 January 2026 – enables founders / shareholders to gradually transfer their business share to employees through a special intermediary legal entity: the workers’ ownership cooperative (orig. lastniška zadruga delavcev) (functionally comparable to the globally recognised employee ownership trust). The purpose of the ESOP Act – as described by its drafter, the Ministry of Solidarity-Based Future – is to promote long-term, stable worker participation in the ownership structure of their employing company and to support sustainable, locally anchored corporate governance, particularly in cases of ownership succession when current owners retire.
The proposed Slovenian model draws inspiration from established international practices, most notably the U.S. Employee Stock Ownership Plan (ESOP), which has operated successfully since 1974 and today covers over 7,000 companies and more than 14 million workers. The U.S. ESOP mechanism enables shareholders to transfer business shares in the company to employees through a special-purpose vehicle financed from company earnings, without the need for personal savings. It is widely regarded as one of the most effective succession tools for small and medium-sized enterprises and is supported with extensive tax incentives.
In Europe, several jurisdictions have adopted comparable models of employee ownership, namely EOT – Employee Ownership Trust in the UK, FCPE and RES en SCOP model in France, the Legge Marcora in Italy and Sociedad Laboral in Spain. One of the most developed ESOP models in Europe evolved in Hungary – the MRP Munkavállalói Résztulajdonosi Program – in which business shares, or equity instruments are transferred to an ESOP entity on behalf of employees, who benefit from preferential taxation. However, workers typically do not hold governance rights, making it primarily a financial participation tool rather than a true co-ownership model. While these models show a growing trend of employee ownership across European jurisdictions, the U.S.-style ESOP remains the model that most systematically addresses both ownership succession and long-term sustainability and thus serves as the primary reference point for the Slovene ESOP Act.
So, how exactly is the ESOP model structured to operate in Slovenia? The present article highlights five key implications of the novel ESOP Act:
The ESOP Act establishes a new legal form – the workers’ ownership cooperative (orig. lastniška zadruga delavcev) – whose exclusive purpose is to acquire, manage and hold a business share in the employer on behalf of its employee-members. The cooperative may hold a participation only in a single company, and only one cooperative may be formed per employer for this purpose.
To obtain legal status as a workers’ ownership cooperative, the cooperative must file an application with the competent ministry (i.e. the Ministry of Solidarity-Based Future), which verifies compliance with statutory conditions. A central eligibility requirement is that at least 75% of all workers who qualify for membership are included and that the cooperative has at least five members. The cooperative must maintain these conditions on a continuous basis. If the conditions are met, the ministry issues a formal decision and registers the entity as a workers’ ownership cooperative (lastniška zadruga delavcev / l.z.d.).
Membership in the workers’ ownership cooperative is restricted to natural persons who are employees of the respective employer and who have paid the mandatory contribution, which may not exceed EUR 300. Membership is non-transferable and cannot be inherited. It terminates by law in cases of death, termination of employment with the employing company, expulsion, the dissolution of the cooperative or voluntary withdrawal.
The internal governance of the workers’ ownership cooperative is structured around three mandatory governing bodies: the general assembly (orig. občni zbor), a supervisory body (orig. nadzorni odbor or preglednik), and a management body (orig. predsednik or upravni odbor). To safeguard the independence of the cooperative vis-à-vis the employer, management and supervisory functions are subject to statutory incompatibilities:
In this way, the cooperative serves as the institutional vehicle through which employees collectively hold and exercise participation rights in the employer.
The cooperative is financed for the sole purpose of acquiring and gradually increasing its business share in the employing company. As with any other acquisition of a business share, the cooperative must first acquire the share against consideration. However, the initial acquisition consideration is not required to be paid up-front: the buyout can be structured as a gradual payout over time. The acquisition is therefore not free of charge, but the ESOP Act allows the business share to transfer before the full consideration is paid, with the unpaid portion recorded internally and amortised over time through the cooperative’s financing mechanisms.
Unlike traditional shareholder models, the financing does not originate from employee capital but is built around a leveraged succession structure. The mandatory employee contribution (which may not exceed EUR 300 and may be paid only once) is symbolic and serves only as the condition for membership, not as a source of ownership financing.
The primary source of financing of the cooperative (and thus the acquisition as well) is the contribution agreement between the employer and the cooperative. Through this mechanism, the employer allocates part of its distributable profit to the cooperative on a periodic basis (monthly, quarterly or annually), which is treated as a tax-deductible expense for the company up to the statutory limit. These funds are then used to gradually provide payment to the shareholder for the transferred share, and eventually for the employees to acquire a larger business share in the employing company.
In addition to the contribution agreement, the cooperative may also use debt financing, including loans taken specifically to finance the acquisition or to service capitalised exit payouts to departing members. State aid and economic policy incentives are also available under the same conditions as other cooperatives.
Internally, the unpaid portion of the acquisition consideration is recorded on an internal transitional account (orig. prehodni račun), which represents the cooperative’s outstanding obligation arising from the acquisition. As repayments are made through the contribution agreement or other permitted sources, the transitional account decreases, and the corresponding value becomes available for allocation to members.
Through this financing structure, the cooperative does not acquire the business share with employee funds; rather, the employing company gradually provides the finances used to pay out the selling shareholder, while the cooperative functions as the legal holding vehicle that receives and allocates the corresponding value. The financing structure therefore enables the transfer of economic participation to employees without requiring personal capital, while ensuring that the cooperative remains the legal holder of the business share. On the other hand, this makes the ESOP model attractive for founders who prefer internal succession rather than an external sale, and wish to secure continuity of ownership within the company.
Once the cooperative becomes a shareholder, it receives corporate profit flows – either (i) through the contribution agreement between the cooperative and the employer during the financial year or (ii) through the distribution of profit resolved by the general meeting of the employing company. In line with the ESOP structure, these inflows are initially used to repay the outstanding acquisition consideration, which is recorded on the transitional account (orig. prehodni račun). As the debt is gradually repaid, the corresponding value is transferred from the transitional account onto members’ personal capital accounts (orig. osebni kapitalski račun) and the collective capital account (orig. kolektivni kapitalni račun).
Only after the acquisition price is substantially or fully repaid, and the statutory reserve requirement is satisfied, do inflows become available as a true distributable surplus – this protects liquidity and ensures the selling shareholder is prioritised. At that stage, the cooperative may decide either to distribute the surplus to members or to retain it for further equity increases or liquidity protection. In both cases, the surplus is first credited to the personal and collective capital accounts; if it is later distributed in cash, the personal capital accounts decrease accordingly, whereas reinvestment does not reduce them.
Each member’s personal capital account therefore grows over two distinct phases:
The value credited to personal capital accounts varies with the cooperative’s annual inflows: higher inflows produce larger credits, while lower inflows result in smaller ones. Since allocations accumulate over multiple years, long-standing members build up higher balances simply by being included in more allocation cycles.
Differentiation in allocation is permitted yet bounded: the difference between the lowest and highest allocation in any given year may not exceed a 1:8 ratio. The ratio is determined in internal rules of the workers’ cooperative. This ensures that economic participation remains broad-based and consistent with the cooperative structure.
When a member’s participation ends (e.g. termination of employment), the balance on their personal capital account determines the amount to which they are entitled. The value of the personal capital account at exit reflects the current book value of the cooperative’s business share, as the ESOP Act requires annual revaluation of the personal capital account balances in line with changes in the employer’s book value.
The redistribution mechanism thus gradually translates the cooperative’s growing equity position into individual economic entitlements, which are monetised only upon distribution or exit.
From a corporate governance perspective, the cooperative exercises the shareholder rights associated with the acquired business share in the same manner as any other shareholder. The difference lies in how these rights are exercised internally: unlike ordinary shareholders, where voting power corresponds to capital investment, the ESOP cooperative applies the cooperative principle of “one member – one vote.” This means that governance participation within the cooperative is democratic and not proportional to economic entitlement.
Through this structure, employees collectively determine how the cooperative shall exercise its shareholder rights in the employing company – including voting at general meetings – and thereby participate in corporate governance as a unified shareholder. This is crucial for the existing shareholders, as the employing company’s governance structure remains unified and is not fragmented among individual employees. The cooperative is formally represented at the general meeting by its president or management board, but the voting mandate is determined in advance by the cooperative members’ general assembly.
As a result, governance participation is exercised collectively and democratically, with the cooperative acting as a unified shareholder on behalf of all members.
The ESOP Act introduces a dedicated tax framework designed to facilitate the transfer of the business share and to ensure that the financing of the cooperative and redistribution of profit between employees is tax-efficient at all stages of the transaction. For the employer, payments made under the contribution agreement are treated as a tax-deductible expense up to the statutory ceiling laid down in Article 27(4) of the ESOP Act, enabling the company to finance the acquisition indirectly from pre-tax profit.
The cooperative itself benefits from a full exemption on financing inflows, as it may reduce its corporate tax base by up to 100% of the funds received from the employer, provided they are used for ESOP purposes. However, to prevent abusive short-term transfers, a clawback mechanism applies: if the cooperative disposes of the share or loses its status, previously claimed exemptions must be added back to the tax base.
For employees, the tax framework creates a strong incentive for long-term participation. Allocations to personal economic balances are not treated as income and are therefore not taxed at the time of accrual. Only when value is actually distributed to the member does taxation arise, and such distributions – whether during employment or upon exit – are treated as dividends. The applicable personal income tax rate is reduced progressively based on the duration of membership: 20% after 5 years, 15% after 10 years and 0% after 15 years. In effect, the longer the employee remains a member, the lower the tax burden on realisation of their accrued entitlement.
The tax incentives attempt to ensure that the mechanism is not only legally viable but also financially sustainable for both employers and employees.
The ESOP Act introduces a new ownership model that enables founders / shareholders to gradually transfer their business share to the employees. The cooperative holds the legal title to the business share, while employees accrue economic value over time through profit allocations, creating a structured form of deferred ownership rather than direct individual shareholding.
The model is supported by a dedicated tax framework that makes the transfer of a business share in the employing company onto the cooperative financially viable for companies and incentivises long-term participation by employees. At the same time, democratic governance inside the cooperative ensures that the shareholder mandate is formed collectively, rather than being concentrated in management.
The establishment and ongoing operation of the workers’ ownership cooperative will require coordination across several fields: legal, accounting, tax and corporate governance amongst others. Whether this mechanism becomes widely adopted will ultimately depend on its practical implementation by employers. What is clear, however, is that the legal framework now positions Slovenia among the few EU jurisdictions with a comprehensive ESOP-style solution that addresses both how the transfer is financed and how employee participation and internal ownership continuity are realised in practice.