Slovenian Parliament Passes Coop/ESOP Law

On October 23, 2025, the Slovenian Parliament passed the Employee Ownership Cooperative Act (in Slovenian; see this English-language explanation from the Institute for Economic Democracy in Slovenia), Europe's first law of its kind. The law combines elements of the US leveraged ESOP model with elements of European worker cooperatives, providing tax incentives for business owners to sell to a Coop/ESOP. In a Coop/ESOP, employees have capital accounts in the plan, as with a US ESOP. Unlike a US ESOP, employees must buy a membership in the cooperative to be covered by the plan, although the maximum amount that can be charged is €300.

Under the law, sellers can deduct the costs of paying back a loan to purchase the shares. The size of the deduction is linked to how much of the company the plan acquires. If it acquires 30%, for instance, the company can take a deduction equal to 30% of earnings before interest, taxes, depreciation, and amortization (EBITDA). If the plan buys 100%, all EBITDA is deductible. Owners who sell to the plan can exclude 20% of the gain from taxation.

Employees accumulate shares in their accounts as the acquisition loan is paid off. Once the loan is paid off, companies can contribute cash to the plan, which is used to buy out shares from those who have been in the plan the longest to recycle to other employees. Unlike a US ESOP, therefore, employees can get paid out while still working for the firm. Allocations in the plan can be based on relative pay, tenure, or some other non-discriminatory formula.

There is no trustee for the plan. Instead, employees elect a worker council to oversee the plan. Shares are valued on an asset basis, not a willing buyer/willing seller basis. The willing buyer/willing seller model is based largely on expectations about future profits. The authors of the legislation argue that this makes it more likely for a company to sell and more expensive to repurchase shares. This means that employees in the Slovenian model will likely see less appreciation in their share price, but companies would have more cash available to distribute current earnings to employees if they choose to do so.

To help prevent companies from being sold to capture the premium over asset valuation many will have, the law provides that the trust (not the company) must pay income tax on the contributions it has received over the last 10 years.

The Institute for International Development, based in Slovenia, will work to introduce the model in other European countries. Slovenia now joins the UK, Canada, and the US as the only countries to have passed trust-based employee ownership laws. You can see more about these four models, as well as a related model in France, in the NCEO’s issue paper Expanding Employee Ownership Models in the US, UK, Canada, France, and Slovenia.