European Company in Serbia – Utopia or Reality

According to provisions of the current Serbian Companies Act (“Official Gazette of RS”, no. 36/2011, 99/2011, 83/2014 – other law, 5/2015, 44/2018, 95/2018 and 91/2019 – the “Law”), as of the beginning of 2022, registration of the European Company as a legal entity in the Republic of Serbia will be allowed.

This is due to the ongoing EU integration process and harmonization of the legal system of the Republic of Serbia with the legal system of the European Union during the accession negotiations.

However, the application of these regulations can take real effect only with the full membership of the Republic of Serbia in the European Union.

For that reason, it is expected that the Law will be amended once again in this regards so that the date for application of the previously mentioned provisions is postponed accordingly.

Nevertheless, it is always a good opportunity to stop and take a look at current aspects and future opportunities and benefits that the application of these regulations may bring.

So, with the full membership of Serbia in the European Union, it will be possible to register the European company as a legal entity in Serbia.

European Company (Societas Europea)

A European company or a European joint stock company may be established as a company which capital is divided into shares held by one or more shareholders who are not liable for the company’s obligations, except in situations of abuse of limited liability of the company already prescribed by the Law.

The European Company will acquire the status of a legal entity on the day of registration in the Serbian Business Registers Agency, and the legal form in the business name will be marked with the Latin abbreviation “SE“.

Ways of establishment

1. By merging of joint stock companies, of which at least one is registered on the territory of the

• Republic of Serbia, and the other on the territory of another EU member, whereby one or more joint stock companies are merged with a joint stock company registered in the territory of the Republic of Serbia, by transferring to that company all assets and liabilities, whereby the merging companies cease to exist without termination, and the acquiring company changes its legal form to a European company;

• two or more companies merge with the establishment of a European company by transferring to that company the entire assets and liabilities, whereby the merging companies cease to exist without the termination procedure;

2. As a holding company founded by

• at least two companies, of which at least one limited liability company or joint stock company is registered in the territory of the Republic of Serbia and at least one company registered in the territory of another EU member, or

• at least two limited liability companies or joint stock companies registered in the territory of the Republic of Serbia, each of which, for a period of at least two years, has a registered branch or controlled company in the territory of another EU member of which it is the sole owner;

• an important note is that the companies that founded the European company as a holding company continue to exist.

3. By establishing a controlled company in the form of a European company, which is establish by:

• at least two companies, of which at least one limited liability company or joint stock company is registered on the territory of the Republic of Serbia and at least one company registered in the territory of another EU member, or

• at least two limited liability companies or joint stock companies registered in the territory of the Republic of Serbia, each of which, for a period of at least two years, has a registered branch or controlled company in the territory of another EU member of which it is the sole owner;

4. By changing the legal form of a joint stock company which, for a period of at least two years, has a registered controlled company in the territory of another EU member of which it is the sole owner;

• the change of legal form in this case does not affect the legal subjectivity of the joint stock company and does not result in the establishment of a new legal entity.

The minimum share capital of the company is prescribed in the amount of EUR 120,000, expressed in Serbian currency dinars (RSD) at the middle exchange rate of the National Bank of Serbia on the day of payment.

On the other hand, it will be possible to establish a European company in Serbia with both one-and two-tier board.

• Objectives of European company

The main goal of the European company is the possibility of a more efficient and simpler organization and functioning on the EU common market.

One of the basic and essential business rights of the European Union, namely, freedom of establishment and the free movement of services, has been taken into account by and transposed through the Serbian Company Law provisions, to recognize the importance of giving space and freedom to companies to move freely throughout the European Union, including a change of headquarters and cross-border mergers and movement of capital.

However, it is not necessary to be an expert in economical sciences to realize that the real goal of the incorporation of European companies is, among other things, joint response of the EU member states to the growing presence, even pressure, of American companies, and recently, to companies from the Middle and Far East.

While it is debatable whether this move came in on time or it was kinda late, it seems that sole opportunity for establishment of European companies created potential benefits to the businesses and companies of the member states.

• Advantages

1. Unhindered flow of capital, without complicated procedures for fulfilling the requirements of national legislation and without the need to terminate a company in one state in order for it to be moved to another state. In this way, the high costs of such transactions should be reduced;

2. Flexibility that is the result of avoiding the network of branches of foreign companies in other countries and their adaptation to each specific national legislation;

3. By reducing the costs of cross-border capital flow, the incorporation of the European Company has opened a special door for the growth and development of small and medium enterprises.

At this point, however, it should be noted that the regulation of certain categories of companies (such as banks, insurance companies and other financial institutions) or segments of their business has remained within the realm of the national legislation.

• Specificity

One of the most discussed topics related to European companies is the participation of workers in management.

This specificity has taken shape in the right of employees to information and consultation in the establishment of the European Company, by adopting a series of rules regarding the formation of the relevant body of employees for conducting negotiations, as well as rules regarding the negotiation process.

The aim of the negotiations is to find an appropriate modality of employee participation in the management of the future European company, which should be regulated by the Company’s Statute.

Some of the ways could be the participation of employee representatives in the management or supervisory board or the creation of a special body that represents employees.

• Perspective in Serbia

As mentioned, the application of the regulations introduced in the Companies Act related to the establishment and registration of European companies in Serbia will begin with the full membership of Serbia in the European Union.

Until then, in the accession negotiations process as well as in the accession process itself, it will be necessary to make additional compliance of domestic legislation with the legislation of the European Union, especially with regard to labour and employment, foreign exchange, customs and tax regulations as well as trade regulations in general, in order to establish a proper framework for achieving the full capacity and effects of European companies in Serbia.