Non-financial reporting in Slovenia

Background and overview
In 2017, the National Assembly of the Republic of Slovenia adopted another amendment to the Slovenian Commercial Companies Act (Zakon o gospodarskih družbah, ZGD1J), which harmonises certain aspects of Slovenian corporate law with Directives 2014/95/EU and 2005/56/EC of the European Parliament and of the Council, and introduces some other changes in the national legislation. 

The biggest change to the Slovenian corporate law landscape will be brought about by the mandatory inclusion of certain non-financial (corporate governance and other) statements in the annual reports of public-interest companies.

Non-financial reporting
Based on this latest amendment of the Commercial Companies Act, large Slovenian public-interest companies (ie listed companies, insurance companies and credit institutions) with more than 500 employees will be obliged to include detailed statements on environmental, social and employee-related matters affecting the company, respect for human rights, and handling of anti-corruption and bribery risks in their annual reports. These statements must include, among other things:

• a brief description of the company's business model;
• a detailed description of the internal policies on the above mentioned matters, including information on (due diligence  and other) checks and processes implemented, and the  results of these checks and processes;
• the main legal risks of the company in these areas, including a description of implemented or planned measures to  mitigate such risks; and
• an outline of the key (non-financial) performance indicators  for measuring the effectiveness of the implemented or  planned measures. 

In addition, Slovenian commercial companies (save for small and medium-sized companies) must in future include a corporate governance statement in their annual reports, inter alia containing a description of the company's diversity policy applied in relation to administrative, management and supervisory bodies – with regard to aspects such as age, gender and educational / professional background – and the objectives of the diversity policy, planned implementation measures and results in the relevant reporting period.

Compliance with these new requirements and the completeness of the relevant statements shall be checked by auditors, who shall comment on those aspects in their audit opinions.

Implications
Although some Slovenian commercial companies already include non-financial (corporate governance and other) statements in their annual reports, the newly adopted additional reporting requirements will likely lead to changes in the mindset of entrepreneurs in relation to certain aspects that are still partially underdeveloped in some companies and business sectors in Slovenia, such as sustainability of business operations, compliance and diversity / HR.

Other than that – and besides the expected increased level of awareness, transparency, responsibility and prosperity in relation to the above-mentioned "soft" areas of commercial companies' business operations – such changes should also foster the comparability of competing companies across the EU, enabling potential investors to make educated investment decisions based on reliable and comparable information in publicly available records.

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This article was written by Marko Prusnik and Matej Vosner

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