Useful to know when starting a business in Serbia

Four legal aspects of protection and compliance of start-ups in Serbia

With adoption of amendments to the Law on Innovation Technologies (hereinafter: the “Law“) in the Republic of Serbia for the first time is created a legal framework that recognizes, categorizes and encourages innovation activities carried out with developing, implementation and application of innovative technical-technological methods, research methods and solutions, which together result in a product or a service at a inventive level, which the Law collectively recognizes as a innovation. This way, the Law distinguishes innovation activity from other types of activity and recognizes its peculiarities in order to encourage the development of innovation activity. In the lines below, you can find what the Law in Serbia has recognized as a novelty and what are the key legal aspects of protection and compliance of start-ups in Serbia.

Recognition of specific properties – activation phase

Recognizing the characteristic categories in the field of innovations such as start-ups, spin-offs and start-up angels, with the possibility of their registration in the register of innovation activities kept by the ministry responsible for innovation and scientific research, the Law begins to create a framework for easier access to state aid in the form of incentive funds through the Innovation Fund. The idea of the legislator is that start-ups have a simplified access to incentives, so that once a registered start-up will not have to prove its specific status over and over again, in a slow, bureaucratic procedure. This is especially important because the legislator had sense to recognize speed as an essential character of development ideas of start-ups, which aims to move to higher stages of development of start-up ecosystems in Serbia.

According to the strategic document [1]of the Government of the Republic of Serbia, the Law represents the initial development framework for the development of the national innovation system and start-up eco-system in Serbia, and it is completely justified to expect that it will change according to the needs and directions of development of the start-up ecosystem, and later adapt to higher stages of development. In addition to incentive funds, tokens and financing through start-up angels (which are expected to be fully developed trough bylaws), it will be necessary to create incentive legal frameworks to accelerate the development of additional (and innovative) financing mechanisms.

Legal aspects of protection of innovations and legal business of start-ups

Every economic activity, and especially dealing with innovative technologies, requires a high degree of care for the invested funds, and more importantly, for the invested time. Although the field of innovation can be extremely wide and thus applicable legal areas, we have singled out four legal aspects that are common to all types of innovation activities.

  • Intellectual property rights, ie the protection of primarily property rights acquired on the basis of innovation, are at the core of the idea of commercial exploitation of innovation. Whether the innovation is in the development phase or already represents a functional solution, it requires at all times adequate legal protection and careful attitude of innovators towards their own investment (tangible and intangible assets), with equal awareness of risks and potentials. Given the above assumptions, the process of contracting an appropriate and comprehensive legal framework (contract) for the commercial exploitation of innovation will inevitably be simpler and more elegant. On the other hand, the protection of intellectual property rights, especially if an infringement has already occurred, is an essential right of the innovator, but also a duty towards one’s own work and the whole endeavor.

 

  • The status aspect is important, starting with the adequate choice of the legal status form and the regulation of mutual property and non-property relations when there are several persons in question, all the way to the so-called ” Exit-a”, the sale of start-ups, and which procedure is in itself legally and tax-challenging, especially when the business entity is the subject of innovation activity.

 

  • Having in mind the nature of innovation technologies that themselves break the boundaries of the standard, common and predictable, it is necessary to perform a detailed analysis of the legal and tax implications of the future commercial exploitation of the innovation. From the side of applicable rules, which are static in they nature, a lack of predictability increases risks. From the mentioned analysis, among other things, the legal framework will depend, which is also taking innovative forms in the world. On the other hand, legal analysis in accordance with local regulations is a beneficial solution to minimize risk. The tax aspect is especially important given the growing number of transactions in cryptocurrencies, where despite the relevant regulations (such as the Law on Digital Property [2]), the nature of innovative technologies creates practices much broader and faster than the field of legal regulation. Failure to comply with tax regulations in this regard can lead to unpleasant consequences and unnecessary losses.

 

  • Particularly sensitive segment are the situations when processing takes place, and thus the need to protect personal data, especially in the case of cross-border flow of such data. In an era where owning information or data is a key development direction, in which such processing is increasingly performed by artificial intelligence, compliance with legal obligations regarding the protection of personal data is an imperative in order to reduce legal risks of all kinds of negative consequences of non-compliance with regulations.

 

Development perspective

It is expected that the adoption of bylaws will concretize the existing legal framework to the necessary extent, which will enable its functionality and full scope of application, as well as the use of the full potential of the incentive measures provided by the Law.

Regulations in this area of economic activity will certainly change faster and more often than in other, more traditional, activities.

In general, it is necessary to create an innovation system

  • that will not further contribute to the “brain drain”,
  • that will be competitive with other start-up eco-systems in the same phase of development,
  • development of alternative financing instruments,
  • creating a favorable climate for special investment entities.

Which will develop Serbian start-up ecosystem in a higher phase of development and which will make the legal aspects of protection and business of start-ups in Serbia expand and become more sophisticated, but certainly simpler for the business itself.

In individual terms, it is necessary to develop and comply start-ups to existing regulations in order for the business to run without unpredictable impacts that change development plans fundamentally, and increase the degree of risk beyond acceptable limits .

 

 

[1]Strategy development startup ecosystem Republic Of Serbia for the period from 2021 to 2025 , adopted by Government Republic Srbije , 05 Number : 023-11452 / 2021-1 dated 09.12.2021. years ;

[2]Law on Digital Property (“Official Gazette of RS”, No. 153/2020)