Amendments and supplements to the Law on Companies

Amendments and supplements to the Law on Companies were published on 19 November 2021, and certain new institutes and changes have been introduced.

Amendments and supplements entered into force on 27 November 2021, except for certain provisions which entry into force have been delayed either due to the need to be harmonized with the e-Governance or until the moment of the accession of the Republic of Serbia in the EU.

In accordance with these changes, it was necessary to amend the Law on Registration Procedure in the Business Registers Agency, as well as the Law on Central Records of Beneficial Owners.

JPM Associates Živko Simijonovic and Luka Hajduković provided detailed insight of the adopted changes.

Amended Law on Companies

The amended Law on Companies introduced new legal institutes (such as institutional investors, property managers, and voting advisers), in accordance with EU corporate law, but also corrected certain ambiguities that in practice had provoked different interpretations of the provisions.

Provisions concerning the transactions with the personal interest are specified in more detail. In this regard, data required to be included in the content of the notice were specified as well as a concept of fair value was defined in accordance with internationally accepted standards.

The company’s obligation to disclose data regarding compensation of directors, executive directors, and supervisory board members to shareholders has been introduced.  In addition, the company is obliged to compile a “Compensation Policy” and to compile a “Compensation Report” once a year.

Provisions on the legal entity appointed as the legal representative of another legal entity have been amended, thus having the previous ambiguous provision on the necessity to have at least one natural person appointed as a director, in this case, was deleted.

Due to the increased number of citizen’s objections to problems with public executors and public utility companies, because their addresses, without their consent, had been used for registration of seat of entities, it is now possible for an interested person to submit the lawsuit requesting deletion of the residence address. This was also a reason to stipulate a new reason for forced liquidation.

The restrictions on the use of the word “Serbia” in the business name for companies is now expanded to include and apply also to entrepreneurs.

The new provision regarding the prohibition to establish pledges over the treasury shares had been introduced. Also, the competence of the shareholders’ assembly to transfer authority to the board of directors regarding the issuance of the approved shares had been abolished.

Amended Law on Registration Procedure in the Business Registers Agency

This application of amended Law on Registration Procedure in the Business Registers Agency will commence by the expiry of 12 to 18 months respectively, due to the introduction of electronic business. The registration application for the establishment of the legal entity shall be submitted only by electronic means. Minor changes have been made concerning the authorized person for the submission of the registration application, as well as regarding obtaining of data and documents of the competent authority ex officio.

In practice, there has often been a situation where the company dismisses the legal representative and does not appoint a new one, and that creates legal uncertainty towards third parties. Now it was introduced for the shareholder to be an authorized person to sign and submit the registration application for dismissal of the legal representative.

In accordance with the tendency to exchange data between state authorities, the amended Law has confirmed what already existed in practice, that the registry can obtain data from other state authorities as official records.

The major change, in accordance with the amended Law on Companies, is that after the expiry of the next 18 months, applications for the incorporation of a company will be submitted in electronic form. Also, after the expiry of 12 months, conditions will be created for the application of provisions under which lawyers can certify digitalized documents for the purpose of submitting electronic applications.

Amended Law on central records of beneficial owners

Since the founder, in the process of electronic incorporation, will have the obligation to simultaneously report and register the beneficial owner of the company, this Law has been amended as well specifying that the authorized person in the process of registration of the beneficial owners is also the founder.  The amended law shall be applied after the expiry of 18 months as of entering into force.

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