Amendments to the Companies Act

On 8th June 2018, the National Assembly of the Republic of Serbia adopted amendments to the Companies Act, which were published in the Official Gazette No. 44/2018 of 9th June, 2018. While some provisions came into force on 10th June, 2018, those more important ones came into force on 1st October, 2018, whereas provisions concerning special types of European companies in accordance with EU regulations will come into force on 1st January 2022.

The changes are numerous and made in order to relief and speed up the business operations in Serbia. In the following lines we highlight only some of the most important changes, as follows:

Abolition of use of the seal: From 1 October  2018 obligation of legal entities and entrepreneurs to use the seal in business transactions was abolished. Therefore, if an authority or a legal entity (e.g. a bank) requests the use of seals, against the law, such request may be reported via email address opened by the Government of the Republic of Serbia: ukidanje.pecata@gov.rs.

Required e-mail address: Every legal entity is obliged to have and register the email address.

Qualified electronic signature: In accordance with the concept of e-government in the Serbian law, there is a possibility of authentication of an electronic document, and signatures on the founding act can be replaced by the qualified electronic signature. In such context, the Law on Certification of Signatures, Manuscripts and Transcripts (“Official Gazette of the Republic of Serbia”, No. 93/2014 and 22/2015) regulates in Article 27 only the authentication of the printed copy of the electronic document, and it is very likely that this regulation will change, in order to comply with the amendments to the Law on Business Companies.

Business name: As a novelty, it is possible to abbreviate a business name to the acronyms of words from its title and subject of business.

For example: Perspektiva društvo za konstalting doo Beograd may well after abbreviation be:  PDZK doo Beograd

Determination of Market Value of Shares: The method for determining the market value of shares has been changed, so the market value of shares is now defined as a weighted average price achieved on a regulated market, i.e. a multilateral trading platform in the sense of the law governing the capital market, for a period of six months which precedes the day of issuing a decision establishing the market the value of the shares, under condition that in that period the volume of turnover of shares of that class on the capital market represented at least 0.5% of the total number of issued shares of that class and that in the same period more than 1/3 of trading days were traded on a monthly basis.

Approval of a legal transaction in case of personal interest: A novelty was introduced regarding the approval of a transaction whose value exceeds 10% of the book value of total assets of the company in case of existence of personal interest. In this regard, it is necessary that body of the Company that gives approval of such transaction, before giving approval, engages an expert who will assess the market value of the objects or rights that are subject of this transaction and make report about it.  It is also prescribed the obligation of the company to publish, within 15 days from the day after this approval, on its website or on the website of the Business Registers Agency a detailed description of that transaction and all relevant facts about the nature and extent of personal interest.

Branch of a company: It is stipulated that every branch, ether domestic or foreign company, is registered before the Business Registers Agency, contrary to previous obligation to register only branches of foreign companies.  An interesting novelty is that in the event of a status change of the founder of the branch, there is a possibility that the legal successor of the founder of the branch will decide on the continuation of the work of the branch, but on that occasion the branch will have to change the business name. If in such case the aforementioned decision is not made, the branch ceases to exist, since the founder ceases to exist due to such status change.

Deadline for dividend payment: The deadline for dividend payment, according to the amendments, cannot be longer than 6 months from the date of the decision on dividend payment.

There are more novelties regarding the reduction of share capital, the acquisition of own shares, the return of additional payments, and the rules governing cross-border merger issues and the specific form of European companies.