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Act on emergency measures of payment deferral of the borrowers was adopted (UPDATED 30 MARCH 2020)

The National Assembly of the Republic of Slovenia announced adopted the Intervention Measure Act on Deferred Payments of Borrowers' Obligations (“Act”) so to prevent liquidity crisis of businesses credited by banks. Its main purpose is to sustain financial stability in the Republic of Slovenia as the epidemics of SARS CoV-2 deepens.

(NOTE 1: This is an updated version of the article published on 18 March 2020 and available at: https://www.jadek-pensa.si/en/act-on-emergency-measures-of-payment-deferral-of-the-borrowers-is-in-preparation/.)

(NOTE 2: The Act was amended by the adoption of ZIUZEOP (i.e. Mega corona law) that entered into force on 11 April 2020. We outlined the amendments set forth in the ZIUZEOP in the article available at: https://www.jadek-pensa.si/pregled-pomembnejsih-dolozb-zakona-o-interventnih-ukrepih-za-zajezitev-epidemije-covid-19-in-omilitev-njenih-posledic-za-drzavljane-in-gospodarstvo-mega-korona-zakon/. In summary: by the adoption of ZIUZEOP, the Act now provides that (1) in addition to the extension of the end date of the maturity of the credit agreement for the duration of the deferral, the maturity of the applicable security agreement shall also be extended, and that (2) during the period of deferral, interest shall be accrued on the deferred part of the principal at the regular interest rate agreed upon when the credit agreement was concluded.)

Pursuant to the Act which was published in the Official gazette of the Republic of Slovenia on 28 March 2020, entered into force on 29 March 2020 and will expire 18 months after the end of the reasons fort he adoption of the measure (which will be determined by a decision by the Government of the Republic of Slovenia ), banks shall grant deferral of payment (only) to entities with registered seat or permanent residency in the Republic of Slovenia.

The emergency measures as set forth in the Act entails 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 may also agree on a different, more favorable delay for the borrower.

Payment deferral pursuant to the Act 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 also applies to new loans that will be approved during the period of validity of the Act.

The borrower shallfile 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 primarily 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 companies in accordance with the law governing companies, and a cooperative, society, institute, foundation, natural person who employs workers under the law governing employment relations, holder of the agricultural holding or holder of supplementary activity on the farm in accordance with the law governing agriculture, and also any natural person who is a citizen of the Republic of Slovenia and has a place of permanent residence in the Republic of Slovenia, shall 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. To this end these entities shall therefore provide a description of the business situation and a statement that as at 31 December 2019 they had no outstanding duties arising from compulsory contributions, taxes and other charges, or that, on the day of filing the application to defer payment, they are in a situation where, in accordance with the provisions of the law, their liabilities due from compulsory contributions, taxes and other charges obligation have been deferred or they were allowed to repay them in installments.

The description of business situation shall 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 shall 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) was temporarily prohibited by a government or municipal decree due to the effects of the virus, need not file neither description of the business situation nor the statement.

Borrowers who need prepare a description of his business position shall also report to the bank on a monthly basis on the implementation of the plan for liquidity management measures and other changes in its business situation.

A special (more lenient) regime applies to natural persons who shall only determine and justify in their application to defer payment that due to the circumstances related to the consequences of the virus epidemic, they are temporarily unable to guarantee the repayment of the obligations under the credit agreement with the bank and for that purpose provide a description of the facts and circumstances related to the consequences of the virus epidemic which influenced their financial position

A bank that would unjustifiably reject a payment deferral may be issued a fine of EUR 80,000 and up to EUR 250,000.