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Act on emergency measures of payment deferral of the borrowers is in preparation

The government of the Republic of Slovenia announced on 18th March 2020 that an Act on emergency measures of payment deferral of the borrowers (“Act”) is being prepared so to prevent liquidity crisis of businesses credited by banks. The main purpose is to sustain financial stability in Republic of Slovenia as the epidemics of SARS CoV-2 deepens.

Pursuant to the Act which will enter into force the day after being published in the Official gazette of the Republic of Slovenia (and expire 18 months after the announcement of the end of the epidemic), banks shall grant deferral of payment to companies with seats in the Republic of Slovenia (only), or, in case of employers who are natural persons, self-employed business, holders of agriculture (pursuant to the law regulating agriculture in the Republic of Slovenia), if they have permanent residency in Slovenia.

The emergency measures as set forth in the Act will entail a unilateral payment deferral (unless any such payment was already due prior to the declaration of epidemics) for a period of 12 months after the entry into force of the Act. The bank and the borrower will also be able to agree on a different, more favorable delay for the borrower.

Payment deferral shall mean:
(i) Moratorium on all liabilities under the loan agreement until the end of the deferral period.
(ii) The final maturity date of the loan agreement shall be extended for the duration of the deferral.
(iii) At the end of the deferral period, the next installment will become due in accordance with the terms of the credit agreement.
(iv) The deferral of payment shall not affect the calculation of the amount of each installment under the credit agreement.

The deferral of credit obligations will also apply to new loans that will be approved during the period of validity of this Act.

The borrower will have to file an application to defer payment of the credit agreement obligations with the bank, no later than six months after the virus epidemic is canceled. The content of the application is prescribed taking into account the size of the company and the specific situation of the activity.

The application filed by a company that is classified as micro, small or medium-sized enterprises in accordance with the law governing companies, and a cooperative society, a natural person who employs workers under the law governing employment relations, holder of the agricultural holding, will need to include a declaration and justification that all contributions, tax and other public charges are being paid regularly, however that it cannot guarantee the repayment of its loan agreement with the bank for business reasons related to the virus crisis and will therefore provide a description of the business situation and a statement that, as of December 31, 2019 it has no outstanding duties arising from compulsory contributions, taxes and other charges.

The description of business situation will need to be particularly substantiated by a company which is classified as a large company under the law governing companies. As large companies are expected to have more adequate liquidity buffers in place, they will have to justify in particular that the payment of their liabilities to banks would jeopardize their solvency.

On the other hand, business entities whose activity (sale of goods or services) were, due to the effects of the virus, temporarily prohibited by a government or municipal decree, need not file neither description of the business situation nor the statement.

Borrowers who need prepare a description of his business position must also report to the bank on a monthly basis their business position.

A bank that would unjustifiably reject a payment deferral may be issued a fine of EUR 80,000 and up to EUR 500,000.