The Parliament of the Republic of Serbia enacted the Applicable Companies Act (Official Gazette of the Republic of Serbia, Nos. 36/2011, 99/2011, 83/2014 – Other Law, 5/2015, 44/2018, 95/2018, 91/2019, and 109/2021, hereinafter: „the Law“) in 2011. Since the entry into force of the Law, the Parliament has repeatedly adopted amendments to the Law, including the most recent ones on November 17, 2021. This paper seeks to highlight some of the key modifications that may prove important in practice.
Registered seat
The latest amendments define a company’s seat as the place and address in Serbia from which the operations of the company are directed and which is designated as such in the articles of incorporation, articles of association, or decision of the members’ meeting. The notion of the company’s seat has not been changed, but it has been specified that the address of the company’s seat includes: city, municipality, settlement, street or square, house number, floor and apartment number. In addition, given the large number of fictitious registered seats, the the Law allows any interested party to file a complaint (lawsuit) with the competent court seeking the registered address of the corporate seat to be struck from the register if the owner of the premises in question has not allowed them to be used as a company headquarters. Additionally, compulsory liquidation can now be ordered if a business does not register a new corporate seat address within 30 days of a court ruling ordering it to delete its current one becoming enforceable, which allows these companies to be removed from the market.
eUprava – Registration on the e-government website
Amendments to the Law amended Article 21 of the Law, which mandates that companies register on the e-government website, in addition to the previous requirement for registering the firm’s e-mail. This change brings the the Law into line with the Electronic Government Law, whose Article 40 requires public authorities to deliver official documents to clients electronically, including into the Single Electronic Inbox for users of e-government services, except were otherwise provided for by other regulations. In addition, Article 15 of the Electronic Government Law permits private individuals and businesses to use e-government services once registered, which allows them to access their Single Electronic Inbox.
Registration of equity following sale of bankrupt debtor
Article 45 of the Law is supplemented with two more paragraphs, so that the Law now stipulates that after a bankrupt debtor is sold in bankruptcy as a going concern, the value of its equity is registered as being equal to the purchase price indicated in the sale agreement, and the buyer’s equity contribution is registered as a non-cash contribution to equity equal to the purchase price. If the purchase price paid by the new member is lower than the minimum equity requirement, the equity is registered in the minimum amount prescribed for the company, and the buyer is required to contribute the difference to the equity within six months of the end of the bankruptcy proceeding.
Operations and transactions involving self-interest
Amendments were also made to the the Law provisions regulating mandatory reporting of operations and transactions involving self-interest. Specifically, these changes regulate the content of the notice that must be made by persons with special duties towards the company, from Article 61 of the Law, to the competent authorities when declaring operations and transactions which involve self-interest. In addition, limited liability companies and joint-stock companies are required to publicly disclose, on their website or the website of the Business Register, their intent to undertake an operation or into a transaction that requires approval. Such disclosure must include a detailed description of the operation or transaction, the personal or trading name of the connected person, the date and value of the transaction, and information that must be contained in the notice referred to in Article 65(2) of the the Law immediately after the formal decision is adopted approving the operation or transaction involving self-interest, or at the latest on the date on which the operation is executed or transaction entered into.
Compulsory liquidation of sole traders
Compulsory liquidation of sole traders is another innovation envisaged by the latest amendments to the the Law. The Law now provides an exhaustive list of situations (if the sole trader is barred from engaging in its registered activity by a final decision of an appropriate authority; if the sole trader’s bank account has been frozen for more than two years without interruption; and the like) in which the Business Registrar will publish a notice on the website of the Business Register declaring that conditions were met for the sole trader to be deleted from the Register and invite the sole trader to unfreeze its bank account or address other reasons requiring its deletion from the Register within 90 days. If the sole trader does not do so, the Registrar will sua sponte issue a decision to delete the sole trader from the Register within an additional period of 30 days.
Entry of a new member to the company
Article 175 of the the Law has been amended to stipulate that, where a new member enters the company, a contract must be entered into with that member in writing that is furnished with notarised signatures of the entering member and the person duly authorised in the members’ meeting decision approving the entry of the new member. This defines the written format of the contract on the transfer of shares in equity entered into after the members’ meeting has, pursuant to Article 200(1)(21) of the the Law decided to approve the entry of a new member.
Nullity of contracts on the transfer of shares in equity
Amendments to the Law added a new Article 175a, which stipulates that rullings annulling contracts on the transfer of shares in equity affect both the company and its members. In addition to the above, paragraph 2 of Article 175a, stipulates that if a contract on the transfer of shares in equity that has been annulled by the court was used to substantiate registration of changes to the company’s membership, pursuant to rules governing registration, the competent court will deliver its ruling to the Business Register, which will insert a note into the Register pursuant to rules governing registration, and the litigants or their legal successors are entitled to apply for a change to information about members of the company registered pursuant to an annulled contract on the transfer of shares in equity.
Remuneration of directors and members of supervisory boards of listed companies
The amendments include new provisions governing remuneration in listed companies that are aligned with Directive 828/2017/EU. Here, the Law stipulates that the listed company is required to have a remuneration policy for directors and members of supervisory boards, in a two-tier governance structure, which must be clear and understandable. In addition, the board of directors, or supervisory board, in a two-tier governance structure, are required to prepare, once every year, a clear, comprehensive, and understandable report on all remuneration paid or undertaken to be paid by the company or an affiliated undertaking operating as part of the same group to each individual director or member of supervisory board in the year preceding the year to which the report pertains. Moreover, the company is required to publish this remuneration report on its web site following the meeting of its members that reviewed the report, and the report must remain accessible free of charge for at least ten years after being published on the web site of the company.
Compulsory liquidation
The section of the the Law that regulates compulsory liquidation has seen some changes. Firstly, two new reasons for initiating compulsory liquidation have been introduced. The first reason is related to the registration of equity of a company purchased in bankruptcy as a going concern, and envisages that the firm is to be liquidated if its buyer does not pay in the difference up to the minimum required equity within 6 months of the end of bankruptcy proceedings, as mandated by Article 45(5) of the the Law. The second reason for compulsory liquidation is where a company does not register a new company’s seat within 30 days of the court ruling ordering the deletion of a registered corporate seat becomes final.
Belgrade,
January 12, 2022