Photo: Helmut Spudich / Flickr

On October 23, 2025, the Slovenian National Assembly adopted the proposal for the Employee Ownership Cooperative Act (EOCA), which will enter into force on January 1, 2026. The EOCA establishes the legal basis for employees to buy shares or equity stakes in their company and introduces tax incentives for owners, companies, and employees.

The Act introduces into Slovenian law the ESOP (Employee Stock Ownership Plan) model of employee co-ownership, which is well-developed in the United States, the United Kingdom, and Canada. The ESOP model is used both for business succession (when an entrepreneur wishes to retire or exit ownership) and as a tool for building employee motivation and retention.

EOCA gives a special tax and regulatory status to an Employee Ownership Cooperative (EOC), which serves as a special purpose vehicle for a leveraged buyout, which is the main element of the ESOP model. Legislation allows business owners to voluntarily sell a stock of their business to the EOC using a loan, which can be provided by the seller (if agreed to receive payment over time), a bank, or another lender.

How does EOCA work?

The EOCA ensures a 20% reduction in the capital gains tax rate for those owners who decide to sell their shares or equity to an ESOP fund.

All employees of the parent company who have been employed for at least one year may join the ESOP fund with a small contribution - the maximum mandatory employee contribution is €300, which is also the only financial liability for employees. Membership is only open to active employees – when employment terminated, the membership too is automatically terminated.

The loan obtained by the EOC to acquire ownership is repaid by the company from its free cash flow. The Act stipulates that the company may each year allocate part of its available cash to the EOC as an ESOP contribution, which is recognized as a tax-deductible expense for the company and non-taxable income for the ESOP fund – this contribution is used to pay off the acquisition debt in the first phase and to pay the employee-owners in the second phase.

As the ESOP fund repays its debt to the seller or another lender and when the value of the stock held by EOC grows, employee owners receive capital value growth as if they would own shares directly; each member has a personal capital account in EOC measuring the value of their capital claim. The total value of personal capital accounts is equal to the current value of the stock held by the EOC that has been repaid.

When an EOC generates a surplus (for example, when the loan is fully repaid or when the fund receives more cash than required for annual loan payments), employee owners participated in dividends but in such a way that the free cash flow repays their capital claims (oldest claims always paid out first). In tax terms, the EOCA treats payments to active members in EOC as dividends while non-active members (where employment and membership are terminated) are taxed with capital gains rate (in Slovenia after 15 years, the tax rate is 0%).

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