On 19 November 2021 the Parliament of the Republic of Serbia enacted amendments to the Company Law. The amendments are applicable as of 27 November 2021, except for certain clauses for which a deferred implementation is provided. This is the seventh time the Company Law undergoes changes since it was enacted ten years ago.
In separate news, available here, we have addressed the major changes relating to limited liabilities companies and expressed our concerns with regard to the impact these changes may have to the business environment. Below we present other major changes that relate to limited liability companies (LLC) and joint stock companies (JSC).
Changes that relate to both LLCs and JCSs:
1. Registration of the companies as the user of e-government services
Until 27 May 2023, each company will be obliged to register for use of e-government services, which should enable the electronic administrative procedures and e-communication with governmental bodies.
2. Directors of the company
So far, companies were obliged to have at least one natural person performing the function of director. Now, this requirement is no longer applicable, and the companies may have only legal entities as directors.
3. Transactions involving personal interest
Provisions on approving of transactions involving personal interests of shareholders, directors and officers have undergone certain changes:
- the notification on the legal transaction involving personal interest that needs to be submitted to the company’s body entitled to approve such transaction is much more detailed – type, legal nature of the transaction, detailed description, value, payment terms and all relevant facts on the nature and scope of the personal interest;
- where value of the legal transaction exceeds 10% of the company’s net assets, an external expert should be engaged to determine the fair value of the assets or rights in accordance with the IFRS 13;
- a company is obliged to publicly announce on its website or on the company registry’s website the intention to conclude a transaction, with a detailed description of that transaction (including all details set out in point i. above), immediately after the decision on its approval is rendered or at the latest on the day of undertaking such transaction;
- all transactions with the personal interest carried out through an accounting year should be reflected within financial statements of the companies;
- now, the company and affected shareholders have the right to file a lawsuit for annulment of a transaction involving personal interest and compensation for damages, not only in case when the approval is not obtained or where relevant facts have not been properly disclosed, but also in the case where the approval was obtained, but the transaction has not been undertaken at fair value.
4. Additional details on registered seat
The companies are now obliged to register the following data as part of seat registration: city, municipality, street or square, house number, floor and apartment number. If the current registration of the company’s registered seat does not contain all this information, the company is obliged to register the missing information until 27 November 2022.
Additionally, if the owner of the premises has not consented to the registration of the registered seat of the company at its premises, the owner is entitled to file a lawsuit requesting deletion of the registered seat address of such company. If the company does not register a new proper address within 30 days following the final court ruling accepting the owner’s claim, the companies’ registry shall be entitled to initiate a compulsory liquidation procedure over such company (this provision is applicable from 1 June 2022).
This novelty has obvious aim to address the problems which occurred in practice involving false addresses and addresses at locations without the consent of the owner.
5. Mandatory registration of the gender
For all individuals registered in the companies’ registry in relation to a particular company (director, shareholder, member of the supervisory board, procurist, representative of the branch etc.) gender will be mandatory as registration data. This amendment will be applicable as of 1 June 2022. For the time being, it is not clear now how and when the existing companies will need to apply for registration of these data; we expect this to be clarified by the rules/instructions of the companies’ registry.
Changes that relate to JCSs only:
6. Access to Information by Shareholders in Court Dispute
Each JCS is now obliged to provide to a shareholder who initiated litigation procedure against the company based on legal grounds provided by the Company Law, the information related to the court case (even if in ordinary course of dealings such information would not be available to such shareholder). This includes documents regarding company’s title to assets, reports of governing bodies, minutes of governing bodies and documentation relation to execution of transactions involving personal interest, etc.
7. Directors/members of the supervisory board fees
The total remuneration of the director includes salary or other remuneration provided in employment/management agreement and may include the right to incentives through the allocation of shares, i.e. warrants of the company or another affiliate of the company. The shareholders holding at least 5% of the share capital are now entitled to access the documents and data on the amount and structure of the total remuneration for each director and member of supervisory board.
8. Policy on Compensations to Directors and Supervisory Board Member
The public joint stock companies are now obliged to prepare the policy which will in detail regulate the fixed and variable parts of compensations to directors and supervisory board members (including details on computation of variable parts, compensation in shares, severance payment, model engagement agreement etc). Such policy is to be adopted by the shareholders meeting, and any payments must be made in accordance with that policy. Additionally, the detailed report on the compensations to directors and supervisory board members must be part of the annual financial statements of the company, is subject to audit and must be publicly available for at least 10 years. The existing public joint stock companies must comply with the new provisions until 27 November 2022.
The information in this document does not constitute legal advice on any particular matter and is provided for general informational purposes only.
By Ivan Nonkovic, Partner, and Milos Jakovljevic, Partner, independent Attorneys at Law in cooperation with Karanovic & Partners