Serbian Business Registers Agency started a large number of compulsory liquidations

Serbian Business Registers Agency („Agency “) initiated the procedure of compulsory liquidations for 7.500 companies, that did not comply with the provisions of the Companies Act. The compulsory liquidation procedure was initiated for companies that by the end of 2017 did not submit to the Agency the annual financial report for the previous two years. The reason for this number of compulsory liquidations is just one of the reasons prescribed by law for launching the compulsory liquidation.

Pursuant to the Companies Act („the Law “), one of the grounds for the cessation of a company is compulsory liquidation. The Law stipulates that the compulsory liquidation of a company shall be carried out in cases where the company does not start liquidation within 30 days from the date of occurrence of certain reason. Some of the reasons prescribed by Law would be the expiration of the company’s term stated in the Article of Association, prohibition of performing a business activity, revoked license or authorization to perform a business activity, when the company’s capital is reduced below the statutory minimum, if the company fails to submit the financial report for the previous year until the end of the year, and if the company does not have a statutory representative , and does not register a new statutory representative in time prescribed by the Law. As the Law further prescribes that for the implementation of the procedure of compulsory liquidation the Agency is in charge. The Agency is obliged to publish on its website a notice about the company for which the reasons for compulsory liquidation have been met. The notice provides company with the opportunity to eliminate the reasons for compulsory liquidation within the prescribed time limit, thereby avoid compulsory liquidation. In case the reasons for compulsory liquidation are not cured within ninety days, the Agency ex officio initiates the procedure of compulsory liquidation which converts the company into the status of compulsory liquidation. At the same time the Agency publishes on its website an announcement on compulsory liquidation. The duration of the announcement is sixty days. The company in the status of forced liquidation continues with its business activity, but new business opportunities cannot be taken, only already started projects can be finished. In a state of compulsory liquidation, the company can only pay its due obligations, current obligations and obligations toward its employees. From the date of entering into the status of compulsory liquidation all judicial and administrative proceedings against the company are discontinued. Upon the expiration of the duration of the announcement the Agency shall ex officio delete the company from the Register, within thirty days.

The provisions of the Law regarding the compulsory liquidation were not enforced until the end of 2017, as the Ministry of Economy and Regional Development in its opinion of June 08, 2012, stated that the provisions of compulsory liquidation cannot be enforced due to their insufficient precision. Five years later on the October 20, 2017 with the opinion of the Ministry of Economy, the previous opinion was revoked and the Agency started implementing the provisions regarding compulsory liquidation. The compulsory liquidation is thus enforced in practice, even though the provisions of the Law have not been formulated more clearly.