New investment opportunities brought about by Amendments to the Company Law

On the 23rd December, the National Assembly of the Republic of Serbia adopted the Amendments to the Company Law ( “Amendments”), which introduced significant innovations in the regulation of limited liability companies, which give new investment opportunities to members of existing limited liability companies.

The Amendments introduce a new institute, previously unknown in Serbian legislation in relation to this legal form, which is a “reserved own share”.

The institute of reserved own share is defined as the share that the company acquires from the members of the company free of charge.

he company acquires the reserved own share for the purpose of issuing a financial instrument that entitles the holder of that instrument to acquire a share in the company
Regarding the introduction of the reserved own share, the Amendments give an opportunity that did not exist previously with respect to limited liability companies, which is the issuance of a financial instrument that entitles its holder to acquire shares in a limited liability company. In this respect, a person who is the holder of this instrument, at the maturity of the instrument, has the right to acquire, at a predetermined price, a share in the company that issued the instrument. In order for a limited liability company to be able to issue these financial instruments, it is necessary for members of the company to transfer free of charge their shares to the limited liability company. Based on these shares, the limited liability company without contribution forms a reserved own share.

The whole procedure involves the registration of a financial instrument – the right to acquire a share in the Central Registry of Securities, where the Central Registry will provide the limited liability with direct access to the Central Registry, without intermediaries, which eliminates the broker’s payment costs.
According to the Amendments, limited liability companies are brought closer to joint stock companies. However, with respect to limited liability companies, there are significant limitations that are not foreseen for joint stock companies. Namely, a financial instrument – the right to acquire a share cannot be pledged or inherited.

Most of the adopted Amendments will enter into force on 1st April 2020.