The Financial Operations, Insolvency Proceedings, and Compulsory Dissolution Act (hereinafter referred to as the “ZFPPIPP”) stipulates that insolvency proceedings are: compulsory settlement proceedings, simplified compulsory settlement proceedings and insolvency proceedings.

A company that is unable to fulfil its obligations in accordance with the agreed operating conditions is facing liquidity issues and is therefore also faced with insolvency proceedings.

The purpose of the insolvency proceedings is the sale of the debtor’s assets or the realisation of the assets of the insolvency debtor, as well as the repayment of creditors. During insolvency proceedings, the principle of equal treatment of creditors, the principle of ensuring the best conditions for the repayment of creditors and the principle of speed of proceedings are taken into account.

In order to initiate insolvency proceedings, it is necessary to file a proposal, whereby Article 231 of the ZFPPIPP provides an exhaustive list of the eligible applicants. Creditors acquire procedural legitimacy by filing a claim. Creditors must file their claims within three months after the announcement of the declaration of the opening of insolvency proceedings on the website of AJPES[1].

The Public Guarantee and Maintenance Fund of the Republic of Slovenia also plays an important role in relation to the registration of employees’ claims; the Fund is also entitled to file a proposal if it is likely to prove the employees’ claims against the debtor against whom proceedings are proposed to be initiated, as well as the circumstance that the debtor is late with the payment of these claims for more than two months.

The employees of the employer are often creditors in insolvency proceedings, especially when they have claims against the employer due to unpaid salaries, severance pay, unpaid taxes and contributions, etc. The latter are regulated by the ZFPPIPP and the Public Guarantee and Maintenance Fund of the Republic of Slovenia Act (hereinafter referred to as the “ZJSRS”).

Employees’ claims arising before the opening of insolvency proceedings are usually treated as preferential claims, while claims arising after the opening of insolvency proceedings are treated as a cost of proceedings. The essence of the preferential claims listed in Article 21 of the ZFPPIPP is that they are paid before ordinary and subordinated receivables, immediately after the payment of the costs of the procedure.

Termination of the employment contract in insolvency proceedings

Termination of the employment contract for employees is determined by the Employment Relationships Act (hereinafter referred to as the “ZDR-1”). In accordance with the ZDR-1, the employer may regularly terminate the employment contract for business reasons, namely due to the termination of the need to perform certain work under the terms of the employment contract, or for economic, organizational, technological, structural or similar reasons on the part of the employer.

Employees whose employment contract is terminated for business reasons are equal to employees whose employment contract is regularly terminated in insolvency proceedings. The difference is only in the person who terminates the employment contract of the employee: in insolvency proceedings, the employment contract is terminated by the liquidator and not by the employer. There is also a significant difference in the length of the notice period: the liquidator may terminate the employment contract with a 15-day notice period, which only applies to employees whose work has become unnecessary due to the initiation of insolvency proceedings.

In the event of termination of the employment contract during insolvency proceedings, employees are entitled to: severance pay, unemployment benefit and priority employment rights, if the liquidator collectively dismisses employees and then re-employs employees within one year.

As mentioned above, the Public Guarantee and Maintenance Fund of the Republic of Slovenia also plays an important role in relation to employees’ claims against their employers, in the case of unpaid salaries, severance pay, unpaid taxes and contributions, etc. The essence of the Public Guarantee and Maintenance Fund of the Republic of Slovenia is to provide employees with protection of claims in the event of bankruptcy of the employer. In principle, the Public Guarantee and Maintenance Fund of the Republic of Slovenia settles a certain part of the employee’s claim against the employer from the distribution of the estate, and then acts with the effect of subrogation in relation to the employer or to the bankruptcy estate.

In accordance with Article 24 of the ZJSRS, the procedure for exercising rights is initiated at the request of the beneficiary. The request to exercise the rights of employees in the event of insolvency of the employer must be filed no later than 90 days from the date of termination of the employment relationship. The request shall be submitted to the unit of the Employment Service of the Republic of Slovenia by the employer’s registered office or the competent office for the employee in accordance with the regulations on employment and unemployment insurance, if the employer is established in one of the other Member States of the European Union or the European Economic Area.

[1]AJPES – Agency of the Republic of Slovenia for Public Legal Records and Services