The government has approved a bill on cooperatives of workers-owners of small and medium-sized enterprises

The government has adopted a bill on worker ownership cooperatives in a bid to create a systemic framework to involve employees in company ownership, chiefly to address the pressing issue of succession of small and medium-sized enterprises (SMEs).

The bill, which is expected to become law in the autumn, introduces the worker ownership cooperative as a new legal entity, inspired by similar models in the UK, US, and Canada.

This structure will be backed by administrative support, advisory services, and significant tax incentives to encourage business owners to sell their companies to their employees.

Ownership tied to employment

Labour Minister Luka Mesec says the bill brings a world-class system of best practices to Slovenia.

The nation is on the cusp of the second-largest transfer of ownership in 30 years, second only to the transition from socialism to capitalism, he argued after the government adopted the bill on 23 July.

“More than half of owners of SMEs are now over 55, meaning they will gradually retire,” Mesec said. “Our analysis shows a significant number of them have not resolved the issue of succession, and 34% of these owners have expressed interest in selling their company to their employees.”

Under the proposed model, an owner can voluntarily sell their shares to a cooperative established by the employees. To ensure broad participation, the cooperative must include at least 75% of all employees who have been with the company for at least one year, with an entry threshold of just €300.

The ownership stake is directly tied to employment; when an employee leaves the company or retires, the cooperative pays out the value of their shares, which then remain within the cooperative to be allocated to new and existing members.

To incentivise uptake, the bill includes a key tax benefit: an owner who sells to the employees’ cooperative will receive a 20% more favourable tax treatment on the sale. The framework also incorporates safeguards to prevent asset stripping or unfair treatment of the owner or the employees.

Domel and Dewesoft two successful examples

The government pointed to existing employee-owned companies in Slovenia as evidence of the model’s success. Mesec cited the case of Domel, an industrial company in Železniki, which was bought out by its employees in the mid-90s to prevent a hostile takeover by a US multinational.

“This company has an extremely positive effect on the local area,” Mesec remarked, noting that because the owners live and work in the same community, there is a greater degree of social responsibility, including investment in local sports clubs and community activities.

Another example is Dewesoft, a tech company in Trbovlje that has operated under an employee ownership model for a decade. In their model, the founder remains the majority shareholder, with about half the employees holding the remaining 20% of the company.

Mesec noted that until now, these models lacked a proper legal foundation and the necessary incentives, a problem the new bill is designed to solve.

According to the minister, international evidence suggests that employee-owned businesses are more productive, demonstrate faster growth (between 4% and 11%), and have a 76% higher survival rate during economic crises. They also tend to invest over 50% more in research and development due to their long-term focus.

The bill, which has received positive feedback from social partners, including trade unions and employer organisations, is scheduled to hit parliamentary benches after summer recess. In the interim, the government will begin coordinating with companies that have expressed interest in the model.

Source: https://sloveniatimes.com/44248/bill-aims-to-foster-employee-ownership