The Legal 500

Twitter Logo Youtube Circle Icon LinkedIn Icon
RESAVSKA 23, 11000 BELGRADE, SERBIA
Tel:
Work +381 11 30 94 200
Fax:
Fax +381 11 30 94 223
Email:
Web:
https://www.karanovic-nikolic.com

Show all Press releases

Serbia Amends Company Law

June 2018

The Serbian Parliament adopted amendments to the Serbian Company Law (Law) on 8 June 2018, and they were published in the official journal on the same date.  

This is the first overhaul of the Serbian Company Law since it was enacted back in 2011. Most of the amendments relate to the introduction of the concepts required for Serbia's accession to the EU (such as cross-border merger and European company forms). However, a lot of the changes have been made in an attempt to resolve the issues which occurred in the practical implementation of the previous Law.

The Law's entry into force is planned in three phases, and is somewhat complicated:

  • immediate application, as of 9 June 2018, is envisaged for provisions relating to the buy-out of shares and determining the market value of the shares (see section "Valuation of shares in joint stock companies" below);
  • amendments relating to the harmonisation with EU legislation will apply from 1 January 2022; and,
  • all other provisions will apply as of 1 October 2018.

Below is an overview of the most important changes.

Business names

Under the amendments to the Law:

  1. an abbreviated business name of a company can now contain an acronym; and,
  2. a business name cannot contain the designation "SRB" without the approval of the Ministry of Economy. The approval of the said Ministry was, until now, required for designations with the full name of "Serbia". However, this approval requirement has now been extended to the abbreviation "SRB" as well, since it was broadly used in business practice as a means of circumventing the approval requirement. As for companies containing the designation "SRB" in their names, the relevant ministry is authorised to (and it will most likely do so), once this provision takes effect, request that each of these companies delete this designation from their registered name unless they obtain approval in the meantime.

E-address

Until 20 October 2019, all companies will have to register their e-mail addresses with the companies register.

Distribution of dividends

The amended Law introduces a deadline for the payment of dividends after being declared. The deadline is 6 months following the decision on declaring dividends.

Assets of significant value

The amendments to the Law attempt to introduce some clarifications to the provisions concerning the disposal of assets of significant value i.e. assets exceeding 30% of the company's asset value (which require shareholders' meeting approval and in turn trigger the rights of dissenting minority shareholders to sell their shares to the company). This concept has been the source of tensions between the management and the minority shareholders ever since it was introduced into the Serbian legal system back in 2004. The interest of the management and the majority shareholders has been to limit the application of this provision (in turn, limiting the right of minority shareholders to force a sale of their shares), while the minority shareholders' interests have been the opposite.

The amendments relate to situations which are most frequent in practice – taking out a loan and granting securities for such a loan. Now, for the purposes of calculating the 30% threshold, the higher amount between (i) the loan value and (ii) the value of each of the securities given for such a loan is to be taken into consideration, and not the sum of each of these individual values.

While the attempt to bring clarification to this complicated and burdensome concept is certainly welcome, it still remains to be seen whether this will bring any significant benefit in practice.

Transactions involving personal interest

The amendments introduce changes to the internal approval procedure for transactions involving the personal interest of the shareholders or directors:

  • If the value of the transaction is less than 10% of the company's book asset value, no approval by the disinterested shareholders or directors is needed.
  • If the value of the transaction involving personal interest is greater than 10% of the company's book assets value, the approval procedure is made more stringent: 
  1.  
    1. as part of the approval procedure, a company must obtain an assessment by an authorised court expert, auditor etc. of the market value of the assets subject to the transaction; and,
    2. once the approval has been obtained, the company must publish on its website, or on the website of the Business Registers Agency, detailed information on the transaction and the personal interest involved.

Branches of Serbian Companies

The amendments introduce the requirement (so far, it was an option) for Serbian companies to register all their branch offices in Serbia with the companies' register. Serbian companies that have non-registered branches in Serbia will have a one-year period to register them.

Minority shareholders in limited liability companies

  • The shareholding interest threshold authorising a shareholder to request a convening of the shareholders' meeting has been decreased from 20% to 10%. The company's bylaws can set a lower, but not a higher threshold.
  • The shareholding interest threshold authorising a shareholder to put an item on the agenda of the shareholders' meeting has been decreased from 10% to 5%. The company's bylaws can set a lower, but not a higher threshold.
  •  The amendments clarify the existing provision enabling voting rights not to be pro-rata to the respective shareholding interests – the amendments confirm that voting rights do not have to be pro-rata to the shareholding interest, but no share can have zero voting rights.

Decrease of share capital in limited liability companies

According to the amendments, a "regular" version of share capital decrease, which involves payments to shareholders (such as in the case of overcapitalisation) is not possible. Now, share capital decrease is possible only as a matter of, more or less, "accounting" changes – the covering of losses, the creation of reserves etc.

The amendments to the Law have only formalised the existing practice of the authorities, which prohibited this type of share capital decrease even before these amendments. The expectations of the business community, that such an extremely conservative and ungrounded practice will be terminated by these amendments, did not materialise; to the contrary, we now have a strict legal prohibition against the decrease of share capital in the case of the overcapitalisation of a Serbian limited liability company.

Valuation of shares in joint stock companies

The conditions for determining the market value of shares in a joint stock company have been changed. The amended Law now prescribes that the market value of shares is the average weighted price of shares on the regulated market in the period of 6 months prior to the issuance of the decision on determining the market value, provided that:

  • in that period, at least 0,5% of the shares were subject to trading on the regulated market; and,
  • the trading took place on at least 1/3 of the trading days in each month during that period.

If the above conditions are met, when determining the value of the shares for the purposes of a buy-out of shares held by dissenting minority shareholders, only the market value should be taken into consideration, and there is no requirement to determine the book or the evaluated value of the shares.

If there is no market value for the specific shares, the higher amount between the book value and the value evaluated by authorised evaluators is to be paid as the price to the dissenting minority shareholders.

These amendments apply immediately after the publication of the amendments, i.e. as of 9 June 2018.

Harmonisation with EU regulations

There are some amendments, in relation to EU integrations, which will enter into force on 1 January 2022. The amended Law:

  1. introduces new company forms: Societas Europea, the European joint stock company, and the European economic interest grouping; and,
  2. enables cross-border mergers of Serbian and EU companies.

Legal Developments by:
Karanović & Nikolić

  • Interview with Patricia Gannon: The Importance of Female Leadership in Law Today

    Patricia Gannon, founding partner at Karanović & Nikolić, was recently appointed Chair of the European Forum at the International Bar Association . In this interview, she discusses her role at the helm of the largest global gathering of legal professionals and tackles the important topic of diversity in law, as well as female leadership from her unique perspective as female co-founder of a leading law firm from Southeast Europe.
    - Karanovic & Nikolic

Legal Developments in Serbia

Legal Developments and updates from the leading lawyers in each jurisdiction. To contribute, send an email request to
  • Interview with Patricia Gannon: The Importance of Female Leadership in Law Today

    Patricia Gannon, founding partner at Karanović & Nikolić, was recently appointed Chair of the European Forum at the International Bar Association . In this interview, she discusses her role at the helm of the largest global gathering of legal professionals and tackles the important topic of diversity in law, as well as female leadership from her unique perspective as female co-founder of a leading law firm from Southeast Europe.
  • Raspberries and IT: New Sector Inquiries by the Serbian Competition Commission

    The Serbian Competition Commission (the " Commission ") recently finished sector inquiries concerning quite distinct industries – raspberries and the public procurement for software and hardware. The aim behind the inquiries was to perform extensive market research and analysis in order to acquire a clearer picture of the possible antitrust issues and risks in two sectors widely perceived as strategic for the development of the Serbian economy.
  • Even More Sector Inquiries: Sportswear And Oil Retail Under Scrutiny By The Serbian Commission

    The Serbian Competition Commission (the " Commission ") continues its diligent examination of the Serbian competitive landscape in specific industries, this time with inquiries in two more industries – sportswear (including footwear and sporting equipment) and oil (petroleum products). Once again, the aim behind the market test was to identify potential issues on the relevant markets and provide broader insight into the functioning of the relevant markets.
  • New Amendments to Serbian Tax Laws

    At the end of 2017, the Serbian Parliament passed amendments to Serbian tax laws, including the Law on Personal Income Tax (PIT Law), the Law on Contributions on Mandatory Social Insurance (CMSI Law), the Law on Corporate Income Tax (CIT Law), and the Law on Value Added Tax (VAT Law).
  • Permit-free Regime for Construction in Montenegro

    The new Construction Law entered into force in Montenegro and it is meant to unify construction, zoning regulations and deal with illegal objects. However, some provisions of the old Construction Law still remain in force, until the adoption of the General Regulation Plan.
  • Amendments To The Slovenian Construction Law

    With the aim of breathing a bit of fresh air into the construction legislation, three new laws have been adopted recently and will be applied with effect from 1 July 2018. The current Construction Act will be replaced with both the new Building Act and the Architectural and Civil Engineering Activities Act, while the current Spatial Management Act will also be subject to certain amendments.
  • Expedited Procedure Rules part of the new ICC Rules

    On March 1, 2017, the amendments to the ICC Rules entered into force. Among different changes, maybe the most noticeable ones relate to the introduction of the Expedited Procedure Rules (hereinafter: the Rules), now contained in the new Article 30 of the ICC Rules and the new Appendix VI.
  • New tax rulebooks in Serbia - trend of increased taxation of foreign legal entities

    Upon recent amendments of the Law on Value Added Tax in Serbia (the “VAT Law ”), the Ministry of Finance adopted several accompanying secondary pieces of legislation:
  • Serbia: Regulation on the Terms and Conditions for Attracting Direct Investments

    The Regulation on Terms and Conditions for Attracting Direct Investments (“Official Gazette of the Republic of Serbia”, no. 110/2016) has come into force on 1 January 2017. The Regulation introduces certain changes in regards to public invitation, grounds and conditions for the allocation of funds in respect of the investment projects.
  • Changes in tax laws in Serbia - New duties for foreign legal entities

    The Law on Amendments to the Law on Value Added Tax (hereinafter: Law on VAT), the Law on Amendments to the Law on Tax Procedure and Tax Administration (hereinafter: Law on Tax Procedure), and the Law on amendments to the Law on Excise Duties (hereinafter: Law on Excise Duties) were published in the Official Gazette of the Republic of Serbia no. 108/2016 of 29 December 2016. All laws came into force on 1 January 2017, however, certain provisions will begin to apply at a later date, as outlined below, for every law individually.