The Act on emergency measures on deferral of borrowers’ payment obligations (hereinafter: “the Act”) was adopted on March 20, 2020, within the urgent legislative procedure. Stated Act, under certain conditions, facilitates borrowers’ deferral of payment obligations under credit agreements and thus alleviates consequences of the emerging economic situation due to the COVID-19 epidemic. The Act came into force on 29 March 2020, the day after being published in the Official Gazette of the Republic of Slovenia.
Deferral of payment obligations shall be granted by banks and savings banks established under the laws of Republic of Slovenia and/or branches of banks of European Union Member States with their seats in the Republic of Slovenia, which, in accordance with the law governing banking, are allowed to provide banking services in the territory of the Republic of Slovenia (hereinafter: “the bank”).
Beneficiaries of measures under the Act are (i) companies with their seats in the Republic of Slovenia, (ii) cooperatives, societies, institutions, foundations and natural persons who employ workers according to the Employment Relationships Act and self-employed persons with their seats or habitual residence in the Republic of Slovenia, as well as (iii) holders of agricultural holdings and holders of supplementary agricultural activities according to the Agriculture Act and (iv) natural persons who are nationals of the Republic of Slovenia, with their habitual residence in the Republic of Slovenia (hereinafter: “the borrower”). The deferral of payment shall be granted by the bank based on borrower’s application, which must be filed not later than 6 months following the declaration of outbreak of epidemic. It is intended that the Act also applies to the credit agreements concluded during the period of validity of the Act, i.e. credit agreements concluded between the next day after publication of the Act and expiry of 18 months following the day of declaration of an ending of the epidemic situation.
Characteristics of deferral
The borrower and bank may agree on deferred payments with an annex to the credit agreement under condition that borrower has outstanding payment obligations which did not fall due until the declaration of an outbreak of epidemic. The deferral of payment obligation may last for 12 months, if not agreed otherwise, whereby the amount of outstanding installments remains unchanged. The final maturity date of the credit agreement is, therefore, extended for 12 months.
In order to benefit a deferral of payment obligation, the borrower, who does not qualify as a natural person, has to demonstrate that it generally fulfils all its tax obligations, contributions and any other charges or that he was given a right to installment payment of those obligations, however, he is not able to perform his current payment obligations under the credit agreement due to reasons which are a consequence of the epidemic crisis. Additionally, a borrower classified as a large company must also demonstrate that performance of mentioned payment obligations would cause its liquidity problems which could also lead to potential insolvency. Also the borrower who is a natural person has to demonstrate that he is temporarily not able to perform his payment obligations due to circumstances which are a consequence of the epidemic crisis and are affecting his financial position. Note that borrowers whose business activities were suspended under governmental or municipal decrees shall be subject to less severe terms and conditions.
It should be emphasized that, according to the Act, borrowers who do not qualify as natural persons also have an obligation to regularly notify banks about the implemented measures to establish their liquidity and other relevant changes related to their business situation. If the borrower fails to perform his notification obligations or provides the bank with false application information, the bank shall be entitled to suspend or shorten a deferral. The bank shall be also entitled to suspend or shorten a deferral when, on the basis of the information available, it deems that such measure is justified.
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Law Firm Kavčič, Bračun & Partners, o.p., d.o.o.
Ljubljana, 20 March 2020
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