When expanding into foreign markets, companies may need to form an equity joint venture, whether due to legal requirements on local ownership or for strategic reasons such as market access, cost efficiency, or operational synergies.
However, partnering with a foreign entity introduces additional challenges, including regulatory complexity, cultural differences, and divergent management styles. Misaligned expectations and communication issues are common pitfalls.
To mitigate these risks, it is essential to conduct thorough due diligence on the prospective partner and to enter into a comprehensive joint venture agreement. This agreement should define the venture’s objectives, governance, capital contributions, and exit mechanisms.
This guide outlines the key legal and strategic considerations of international joint ventures to help businesses structure successful cross-border partnerships.
Joint ventures are not expressly regulated in Slovenia. Nevertheless, under the current legal framework, two types of joint ventures may be formed:
• Contractual joint ventures: contractual joint ventures are regulated by the Slovenian Obligation code, which regulates partnership agreements. Under a partnership agreement, two or more persons agree to use their contributions to work towards any permissible objective. It is important to note, however, that such partnership agreements do not establish a separate legal entity.
• Corporate joint ventures: relationships between parties, similar to joint ventures, may be created by establishing a corporate legal entity. Any permissible form of a corporation may be used. Obligations and responsibilities of partners in the joint venture are established with articles of association and can be supplemented by shareholder agreements.
Yes. Partners from countries outside the EU may be subject to foreign direct investment screening. This screening applies only to foreign direct investments, where the foreign investor receives a minimum of 10% share of voting rights or equity in a business entity that performs business activities in certain sectors (i.e. media, critical infrastructure, critical technologies…).
Instead of being dictated primarily by jurisdiction-specific factors—many of which are already harmonized with EU legislation—the selection of the appropriate form of joint venture is largely determined by commercial considerations, in particular: the intended duration of the cooperation (short-term versus long-term projects), (limited) liability, tax implications, etc.
A jurisdiction-specific consideration in Slovenia is that persons (domestic or foreign) who breach certain laws are not permitted to register as shareholders. In particular, this applies to individuals with unpaid taxes or associated tax debts, those convicted of certain criminal offences, those linked to labour law violations, or in cases of other breaches of the law as stated in the Companies Act.
The formation of a joint venture may be subject to prior notification to competition authorities in Slovenia, as it may be interpreted as a concentration under EU and national law. Under the Competition Act, a situation where two or more independent undertakings create a joint venture that performs all the functions of an autonomous undertaking on a lasting basis shall be interpreted as a concentration. Under national law, concentrations must be notified to the relevant authorities if the combined annual turnover of all undertakings involved in the concentration exceeds 35 million euros or the annual turnover of the joint venture, together with all undertakings in the group, exceeds 1 million euros in the Republic of Slovenia. This applies to both contractual and corporate joint ventures, as long as the joint venture performs all functions of an autonomous undertaking. If joint ventures are merely auxiliary to the parent companies’ activities, notification might not be required. If the joint venture meets the size requirements under the Regulation (EU) no. 139/2004, the formation of a joint venture may be subject to notification to relevant EU authorities instead.
Under Slovenian law, there are no specific restrictions or requirements concerning the contribution of assets to a joint venture entity, other than those that generally apply to in kind contributions to corporations. In-kind contributions can only be made using assets or rights whose economic value can be determined. An obligation to perform a service cannot be considered as an in-kind contribution.
For limited liability companies, if the total value of contributions in kind exceeds EUR 100,000.00 shareholders must ensure that these contributions are assessed by an auditor. The assets must be transferred to the joint venture in such a way that the company can freely use them. Additional statutory limitations apply in the case of joint-stock companies.
As for commercial issues, depending on the type of corporation chosen, corporate joint ventures may provide for limited liability for their founders and are therefore preferred for asset-heavy or longer-term ventures. Contractual joint ventures offer more flexibility but expose partners to unlimited liability as they do not have a separate legal identity.
Legal issues to consider when structuring a joint venture in Slovenia include:
• Foreign direct investment screening (see Section 2 above).
• Merger control notification requirements (see Section 4 above).
• Compliance with applicable laws, including tax obligations, labour law legislation, and other potential legal breaches.
• Sector-specific approvals, where relevant.
There are no requirements regarding the appointment of officers that are specific to joint ventures.
For corporate joint ventures, however, the applicable provisions of corporate law must be observed.
Under national law, only natural persons with legal capacity may be appointed as directors or as members of a management or supervisory body. In addition, the following persons are disqualified from serving as members of management or a supervisory body:
• individuals who already serve on another management or supervisory body of the same company;
• individuals convicted of certain criminal offences;
• individuals subject to a security measure prohibiting the exercise of a profession;
• individuals ordered to pay compensation to creditors as former members of a management or supervisory body of a company against which bankruptcy proceedings were initiated within the past two years.
Additional requirements apply to joint-stock companies, including gender representation obligations for large joint-stock companies.
For contractual joint ventures, the parties are free to choose the governing law for their agreement.
For corporate joint ventures, foreign law cannot be used for questions regarding the establishment, dissolution and status changes of the corporation, as well as disputes concerning the validity of decisions made by their bodies, if the corporation is registered in Slovenia. Parties are free to choose foreign law for any other matters (i.e. shareholder agreements).
Check out Suzana Bončina Jamšek LL.M.(LSE)‘s report on Slovenian law by following this link: https://lnkd.in/dfNsV_nH