A loan agreement is a legal transaction in which one party, either an individual or a legal entity (the lender), commits to lending a certain amount of money or other interchangeable goods to another party. In turn, the other party (the borrower) undertakes to return the same quantity, quality, and type of goods after the agreed period.
Until now, there was no mandatory form for loan agreements between individuals in the Republic of Serbia, which meant such transactions were invisible to the regulatory authorities overseeing financial flows. This amendment aims to create legal certainty and reduce the risk of misunderstandings, fraud, and manipulation when entering into loans between individuals.
The amendment to the Law on Public Notaries (hereinafter “the Law“) introduces a new item in Article 93, paragraph 2, which mandates the solemnization of loan agreements between individuals involving sums of 10,000 euros or more. The threshold is set at this amount because 10,000 euros is the limit for cash transactions according to the Law on the Prevention of Money Laundering and Terrorism Financing. This amendment advocates a mandatory form for loan agreements in order to ensure legal certainty for the contracting parties.
To clarify, the solemnization procedure is a legal process in which a public notary provides additional verification and legal force to the agreement. Mandatory solemnization by a public notary guarantees that all parties are aware of their obligations and have voluntarily agreed to all the terms of the contract. This change gives solemnized loan agreements the evidentiary power of a public document and establishes a register of such agreements for real-time monitoring and oversight by the Administration for the Prevention of Money Laundering.
The amendment also requires public notaries to promptly deliver the solemnized agreements to the Administration for the Prevention of Money Laundering via the register maintained by the Ministry of Justice.
It is important to note that the amendments only apply to contractual obligations between individuals. The banking sector and loans fall under a different form of verification depending on the type of claim or loan.
These changes represent a significant step toward greater legal security in private financial transactions. The solemnization of loan agreements by a public notary will significantly enhance trust in private loans, reduce the potential for fraud and misunderstandings, and simultaneously protect the interests of both parties involved in the agreement.
The Law on Amendments to the Law on Public Notaries was published in the Official Gazette on 28th November, 2024, and will come into force on 5th December, 2024, at which point the aforementioned amendment will be applied.
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