4 Important Things to Consider Before Working with Serbian Companies
As you already know, business and economic activity around the world are more linked than ever before.
The idea of a “global economy” is now the way things are done.
Businesses are now looking for customers outside of their own country.
You might be an owner or representative of this business, and you might have already found some good options in Serbia.
So you wish to consider partnerships or joint ventures to make use of the overseas businesses’ customer base and reputation.
In order to do this, you don’t know if you should ask Serbian businesses to partner with them and bring new products or services to Serbia.
In the same way, Serbian businesses often try to find a target market overseas.
This article will talk about important things to think about when working with a Serbian or foreign businesses.
It’s important that you:
- know the main points of the partnership or joint venture agreement;
- know the current status of a partner company in Serbia;
- do your research on the possible business partner;
- and know the law in the foreign country.
How the partnership works
Businesses can work together on a one-time project that has an end date.
On the other hand, businesses can make a deal to work together on an ongoing basis.
Businesses can also work together through an investment deal in which one party invests money and the other acts as a consultant.
You need to be clear about the terms of engagement you’re proposing, since this will usually determine what each party has to do.
You also need to know how each person will share responsibility, profits, and losses.
At the end of the day, you want to avoid misunderstandings and problems with business relationships as much as possible.
For example, let’s say that a business from outside of Serbia asks a business from Serbia, called Belgrade Company, to sell goods or services related to the UEFA Euro 2024 in Germany.
If that’s the case, this job is likely to be short-term and only last until the football tournament.
So, the legal paperwork that the parties sign should reflect the fact that their business relationship is only temporary.
A Certificate of Good Standing of a Serbian Company
Most of the time, overseas companies asked us to verify the legitimacy of a company they wanted to do business with or procure for them a certificate of good standing.
Before explaining how to do this check or verification, it’s important to point out that a Certificate of Good Standing is different from an Excerpt from the Serbian Business Registers Agency about a specific company registered in Serbia.
A certificate of good standing is a document that is common in Western economies (USA, UK, etc.). It proves that a company is still in business, hasn’t been dissolved or merged, and, most importantly, that all business filings and/or taxes that the state requires have been made or paid.
So, the Serbian Official Excerpt from the Business Registers is only partly the same as the certificate of good standing.
Namely, it confirms that the observed company exists and hasn’t been dissolved, but it doesn’t say anything about whether or not the forms were filled out or taxes were paid.
So, a closer look is needed to figure out how to fix these problems.
You may also be worried about many other things about your future partner in Serbia.
As an example, we usually check, write up, and give our clients a written report with the following information about a Serbian company under scrutiny: (i) Addresses and contact information, (ii) Accounts and Blockages, (iii) Management and employees, (iv) Ownership structure, (v) Summary financial data, (vi) Liens, Pledges, or Mortgages, (vii) Credit score, (viii) People with ties to the company, (ix) Finance and Financial Comparisons, (x) Trends, (xi) Enforcements as a debtor, (xii) Enforcements as (xv) Financial leasing, (xvi) Real estate, (xvii) Data on foreign trade activities and transactions, and (xviii) Changes over time.
If you want to find out more about your potential partner, click here and leave the required information, as well as information about the company you want to check (preferably its official business name, tax id number or corporate number).
The above report should help you reduce or get rid of risks and make a well-informed decision about your business in Serbia.
But if this level of information doesn’t meet your needs, we move on to due diligence, the next level of checking out the target company.
There have been more than a few cases of businesses committing fraud against foreign companies while saying they are fully operational.
Because of this, it is especially important that you do the necessary research on the entity you want to work with.
This way, you can be sure that the business is real.
In short, some of our clients asked us to do a thorough legal, financial, and business due diligence.
As part of legal due diligence, you need to find out about the company’s structure and board of directors, as well as its current and past transactions and risks.
As part of financial due diligence, you can look at documents about sales records and profit and loss to see if the target entity is doing as well as they say they are.
Commercial due diligence would also be helpful to find out how the subject entity plans to grow and how many experts they have in the field they work in.
In any case, having local professionals help with due diligence may help put the results of the process into context.
Which law applies
Businesses in different countries have to follow different laws. These differences are important to keep in mind.
For example, let’s say that the foreign company that contacts A Belgrade Company will make UEFA Euro Cup 2024 merchandise in their own country.
If that’s the case, the laws about the quality and safety of these goods may be different from those in Serbia.
Also, the origins of goods, which are important for applying the free trade agreements that Serbia made with third countries and supranational unities and organizations, may come into question when it comes to exporting goods to the host country.
So, you will need to talk to a lawyer here in Serbia about how to judge the origin of goods, their packaging, and any safety or care instructions to make sure you follow all local laws.
It will also be important to make sure that the governing law is clear in the contract so that the foreign entity knows what Serbian law requires for this kind of engagement.
When a business from another country asks if you want to work together, it can be exciting. But it is important to talk to a lawyer before signing any legal paperwork. It’s important to make sure you fully understand any risks and major responsibilities that come with the proposed relationship.
If you need help forming a partnership with a foreign business and understanding the key terms of the partnership or joint venture, one of our experienced business lawyers may be willing to look at your situation and let you know if we can help.
PS. What exactly is due diligence?
Due diligence means looking at all of the important factors that affect a business and its future success, as well as all of the risks that come with the proposed deal. If a Serbian business approaches you about a possible partnership, you must do the research you need to do on the Serbian entity.
You should check to make sure it is a legit business.
For more information on this or any other legal, tax, or business topic, feel free to write to us at [email protected] at any time or call us at phone number +381113281914 every working day from 08:30 to 16:30.
Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your AK STATT representative, or other competent legal counsel.