New Company Act Adopted in Serbia

THE NATIONAL ASSEMBLY ADOPTED THE LAW ON AMENDMENTS TO THE COMPANIES ACT

The National Assembly of the Republic of Serbia, at the session held on 17 November 2021, adopted the Law on Amendments to the Law on Companies (“Law”).

The Law introduces important innovations in the field of company law.

Namely, one of the novelties is the introduction of the obligation for companies and entrepreneurs to register as users of e-government services in accordance with the law governing e-government, i.e. the use of electronic documents of state administration bodies and organizations entrusted with exercising public authority. This is in line with the concept of e-government, except in the case when a special law prescribes a different way of submitting electronic documents, as in the case of courts or the Tax Administration.

Also, the adopted law harmonizes the provisions of the Companies Act with the provisions of the Bankruptcy Law and prescribes that, after the sale of the bankruptcy debtor, as a legal entity in bankruptcy proceedings, the value of the share capital of that company is registered in the amount of the purchase price paid. Also, the intention of the legislator is directed towards preserving the legally prescribed minimum share capital, depending on the legal form of the acquired company. Namely, the amendments introduced the obligation that the company, in case the value of the purchase price would be less than the minimum share capital, registers the value of the share capital at the value of the minimum share capital prescribed for that legal form. In that case, the buyer is obliged to pay the missing amount up to the amount of the minimum share capital within six months from the day of the suspension of the bankruptcy procedure. Otherwise, a compulsory liquidation procedure is initiated against the company.

The novelty also refers to the part that regulates the compulsory liquidation, specifically of the entrepreneur, where the cases in which the entrepreneur ceases to perform activities by force of law are specified, and that is the case of revocation, i.e. termination of permit, license, approval, consent, etc. prescribed as a condition for registration or a case when the final court decision determines that the entrepreneur is not at the registered address, and the entrepreneur does not register a new address within 30 days from the final court decision.

Also, when it comes to compulsory liquidation, the entrepreneur is given the opportunity to avoid deletion from the register if he registers the termination of the registered activity within the prescribed period during which the measure was imposed, or registers a change of registered activity or deregisters the activity in case pronounced measure of prohibition to perform registered activity. The entrepreneur may then register the change of registered activity or deregister the activity in case of revocation of permit, license, approval, consent, which are prescribed by a special law as a condition for registration of his activity or register the change of registered activity, deregister the activity or submit proof of extension of the permit, license, approvals, consent, etc., and in case of termination of both permit and license and approval and consent, etc., which are prescribed by a special law.

The most important change concerns the protection of minority members.

In that sense, the content of the notification that a person who has special duties towards the company submits to the competent body of the company for the purpose of reporting jobs and activities in which there is a personal interest is prescribed.

A limited liability company as well as a joint stock company are obliged to publicly announce on their website, or on the website of the registers agency, the intention to conclude a legal transaction, for which approval is required, immediately after making a decision approving the legal transaction or legal action which has a personal interest, and no later than on the day of concluding that legal transaction, i.e. undertaking that legal action.

The stated approval contains: a detailed description of the business or action, the personal business name of the related party, information on the nature of the relationship with the related party, the date and value of the transaction.

Protection of the rights of minority members also includes a claim for annulment of a legal transaction or legal action and compensation for damages against a person who has a personal interest in that business, and may be filed when approval is obtained and the legal transaction is not concluded or the legal action is not taken at fair value.

It is additionally specified that in the situation when the competent court in the lawsuit procedure makes a decision imposing a measure of temporary restriction of the right to perform the function of director, member of the Supervisory Board, representative or procurator, the registers agency deletes that person from the competent register.

Furthermore, the amendments to the Companies Act introduce the obligation for a joint stock company that is not public, as well as for a limited liability company, to, at the request of a shareholder, i.e. a member who owns shares or stakes representing at least five percent of the company’s share capital, no later than three days from the day of receipt of the request, provide the same insight into the data on the amount and structure of the total remuneration for each director, i.e. executive director and member of the supervisory board, if the management of the company has a two-tier management system.

The Law on Amendments to the Companies Act also harmonizes with EU regulations.

Namely, a public joint stock company is obliged to have a remuneration policy for directors and members of the supervisory board, if the company has a two-tier management system. This is the part that refers to the publicity of the work you have as a director and executive director, and the company’s assembly is the body that decides on the proposed remuneration policy.

The competent body of the company must at least once a year make a clear, comprehensive and understandable report on all fees that the assembly has allocated to supervisory boards and executive bodies.

The report on fees must be published on the company’s website. It must not contain special types of personal data and economic offenses for breach of the company’s obligations prescribed in relation to the obligations to publish a report on remuneration policy.

Among other novelties, the Law specifies what the address of the company’s seat and entrepreneurs includes, as well as preventing entrepreneurs from using the word “Serbia” in their business name including any word associated with the word “Serbia”, including the international three-letter designation “SRB”.