Piercing the Corporate Veil in Slowenien

In Slovenia, the concept of piercing the corporate veil is based on the abuse of a company in order to achieve a profit at the expense of creditors. It is an instrument that creditors may use to claim repayment directly from the shareholders of a legal entity. Please note that “lifting the corporate veil” applies only to shareholders, while representatives of a company have their own liability regime. Lifting the corporate veil is regulated by the Slovenian Companies Act, which stipulates that shareholders shall assume liability for the obligations of a company in the following cases:

• If shareholders have abused the company as a legal person in order to attain an objective that is forbidden to them as individuals;
• If shareholders have abused the company as a legal person, thereby causing damage to their creditors or creditors of the company;
• If, in violation of an Act, they have used the assets of the company as a legal person as if they were their own personal assets, or
• If for their own benefit, or for the benefit of some other person, they have reduced the assets of the company, when they knew, or should have known that the company would not be capable of meeting its obligation to third parties.

Abuse of legal personality is expressly governed by the law, which provides an exhaustive list of cases when shareholders assume liability for the obligations of a company. This represents a specific regime in relation to the general regime on abuse of rights and is applicable in the following cases:

• If shareholders have abused the company as a legal person in order to attain an objective that is forbidden to them as individuals;
• If shareholders have abused the company as a legal person, thereby causing damage to their creditors or creditors of the company;
• If, in violation of an Act, they have used the assets of the company as a legal person as if they were their own personal assets, or
• If for their own benefit, or for the benefit of some other person, they have reduced the assets of the company, when they knew, or should have known that the company would not be capable of meeting its obligation to third parties.

Please note that while the list of cases when shareholders assume liability for the obligations of a company is exhaustive, it is broad enough to cover most activities that fall under the notion of “abuse of legal personality”.

Yes, the principle of “corporate veil piercing” exists in the Slovenian legal system specifically as a response to abuses of legal personality by its shareholders. As the Slovenian Supreme Court has stated, the concept of “piercing the corporate veil” was developed as a response to the emergence of undesirable consequences of the principle of separation of the legal entity ad its shareholders, which conflicted with the principle of fairness (judgement of the Slovenian Supreme Court no. II Ips 88/2015, dated 12.01.2017).

The so-called “corporate shield” is recognized as a general rule in the Slovene legal system. Pursuant to Slovenian Companies Act, companies shall assume liability for their obligations with all their assets, while shareholders share liability alongside the company only when such an obligation is laid down in an Act. However, exceptions to this rule do exist. These exceptions enable creditors to hold shareholders personally liable for the company’s obligations.

The most important exception to this general rule is the doctrine of “piercing the corporate veil”, as it has already been discussed in the response to question 3.

It is worth noting that although the list Slovenian Companies Act is exhaustive, it covers most abuses of legal persons that are known in other jurisdictions, for instance:

• The so-called “alter ego” doctrine is governed by Slovenian Companies Act, which states that shareholders are liable for the company’s obligations when they have used the assets of the company as a legal person as if they were their own personal assets.
• The so-called “undercapitalization” doctrine is also governed by Slovenian Companies Act, which states that shareholders are liable for the company’s obligations when they have reduced the assets of the company, when they knew, or should have known that the company would not be capable of meeting its obligation to third parties

Additionally, regarding the “undercapitalization” doctrine, the Supreme Court of the Republic of Slovenia has ruled that undercapitalization in of itself is not sufficient to justify a “piercing of the corporate veil”. The shareholders may only be liable for the company’s obligations when their activities cause a lessening of a company’s assets in conjunction with the undercapitalization of the company (judgement of the Slovenian Supreme court no. II Ips 48/2015, dated 07.05.2015).

Yes, the corporate shield is provided for shareholders who use their limited liability to exempt themselves from their personal debts and obligations. However, as mentioned above, the corporate shield is only provided for shareholders under the condition that such protection does not represent an abuse of legal personality.

It is therefore perfectly legal for a member to establish a limited liability company to avoid personal liability for activities of their limited liability company. However, fraudulently trying to exempt themselves from personal liabilities or debts could be seen as an attempt to attain an objective that is forbidden to them as individual and therefore provide a basis for piercing the corporate veil under Slovenian Companies Act.

The case of controlling shareholders who use their limited liability company to pursue personal interests may be sanctioned under Slovene law.

First, as explained above, such shareholder’s conduct may be used as a basis for lifting the corporate veil, if the shareholder uses their limited liability company to pursue personal interests in order to attain an objective that is forbidden to them as individuals.

Second, such a shareholder’s conduct may give rise to a claim for the shareholder’s exclusion from the company pursuant to Slovenian Companies Act. Any shareholder may file an action against a company pursuing the exclusion of another shareholder if they demonstrate “well-founded reasons” for exclusion. A pursuit of personal interests undoubtedly represents well-founded reasons for exclusion. The Higher Court of Ljubljana has ruled that when a shareholder acting as a director of a company transfers a large part of a company in pursuit of personal interests, without the participation of other shareholders, represents a well-founded reason for the shareholder’s exclusion (judgement of the Higher Court of Ljubljana no. I Cpg 1545/2013, dated 13.05.2014).

Third, when the controlling shareholder appoints themselves to the position of a director of the company in pursuit of their personal interests, they may be personally liable for damage to the company as a whole. Slovenian Companies Act stipulates that a director must, in performing their duties on behalf of the company, act in the best interests of the company. If the shareholder acting as a director disregards the best interests of the company to pursue their personal interests and, in doing so, causes financial loss for the company, they may be personally liable for damages to the company. In this way, the result for the shareholder is the same as in the case of “piercing the corporate veil”.

Fourth, under Slovenian Companies Act, the shareholders of a company are liable for damage caused to the company intentionally or through gross negligence. Further, pursuant to Slovenian Companies Act, a shareholder may file an action in their own name, but on behalf of the company, against another shareholder that failed to meet their obligations in the management of the company (so-called “actio pro socio”). These provisions are mostly useful for minority shareholders who may not be able to achieve the majority needed to force the company to start proceedings against a shareholder for failing to meet their obligations.

First, in such cases, a piercing of the corporate veil may be justified. As already presented in answers to question 3, Slovenian Companies Act enables liability of shareholders for obligations of the company in two cases that also involve creditors:

• If the shareholders have used the company as a legal person, thereby causing damage to their creditors or creditors of the company; and
• If the shareholders have reduced the assets of the company, when they knew, or should have known that the company would not be capable of meeting its obligation to third parties

Second, such conduct may represent a criminal offence under the Slovenian Criminal Code, which stipulates that whoever, with the intention of not paying their obligations, apparently or actually worsens their own or a third person’s financial circumstances, thus causing bankruptcy, they shall be sentenced to imprisonment for no less than six months and no more than five years. Similarly, Slovenian Companies Act stipulates that if a person engaged in economic activities intentionally puts a certain creditor in a preferential position, thereby causing large property loss to other creditors, they shall be sentenced to imprisonment for no more than five years. A shareholder that acts as a director of a company or enables a director to conduct such activities may therefore be liable under Slovenian Criminal Code.

It is worth noting that under the Liability of Legal Persons for Criminal Offences Act, even legal persons are capable of committing both criminal offences listed above.

Yes, Slovenian law does regulate the liability of a de facto administrator. Slovenian Companies Act states that a person who, by his influence over a company, intentionally induces a member of the management or supervisory bodies, a proxy or a business agent, to act to the detriment of the company or its shareholders, shall be liable to compensate the company for any damage caused.

Under the Slovenian Insolvency Act, company administrators are liable for damage caused to creditors for certain breaches of insolvency law, such as the obligation to treat all creditors equally As firmly established in case law of Slovenian courts, de facto administrators are liable for such damages to creditors in conjunction with the de iure administrators of a company.

Additionally, the concept of a “de facto administrator” is commonly used in insolvency proceedings in the criminal law context. In this context, the person who was the de facto administrator of the company may be liable in addition to the de iure administrator of the company.

Yes, the concept of piercing the corporate veil also applies in the context of groups of companies. If the parent company is the shareholder of the dependent company, the same rules on piercing the corporate veil, as already presented in the answer to previous questions, apply.

Additionally, Slovenian Companies Act stipulates special rules for the liability of a parent company. If the parent company induces a dependent company to (a) carry out a legal transaction that is detrimental to it, or to (b) perform or omit an act to its detriment, it must compensate the dependent company for the damage incurred (the rules are different in the case of concerns). Any shareholders of the dependent company may claim compensation in the name of the company (so-called actio pro socio).