New amendments to the Companies Act of the Republic of Serbia (“Act“) entered into force on 27 November 2021. In the following text, we highlight the most important ones.
When it comes to the company’s headquarters, the previous version of the Act stipulated that the jurisdiction of the court may be established outside the company’s headquarters in the event that the company permanently performs its activities in a place other than the company’s headquarters. The current version of the Act does not contain this provision. Also, due to the existence of a large number of fictitious headquarters addresses, the new Act stipulates that an interested person may file a lawsuit with the competent court in case the person who has the right of ownership did not allow the use of the premises at the address of the headquarters for managing the company’s operations. At the request of the person who filed the lawsuit, a record of the dispute is registered and the proceedings for the lawsuit are urgent. In the event that the company does not change the address of its registered headquarters after receiving the final judgment, a compulsory liquidation procedure is initiated.
The address of the company’s headquarters includes the city, municipality, street or square, house number, floor and apartment number, in accordance with the regulations governing the territorial organization. Companies, entrepreneurs, branches, and representative offices of foreign companies that do not have a registered office address in accordance with the above provisions, are obliged to harmonize the registered office address and to register the harmonized registered office address within one year from the entry into force of the Act.
Registration on the e-Government portal
Furthermore, the Act introduces the obligation to register companies on the e-government portal, in line with the development of business digitalization. So, in addition to the mandatory e-mail address, companies are now required to be registered on the e-Government portal, through which they will receive e-documents, in accordance with the Law on Electronic Government.
Sale of a bankruptcy debtor
The new Act eliminates the dilemmas regarding the amount of the company’s equity capital after the sale of the bankruptcy debtor as a legal entity. Namely, a company, acquired as a legal entity in bankruptcy, although previously established, actually has a similar status as a newly established company. Therefore, it was not clear which value of capital should be registered, bearing in mind that the value of the company’s former equity capital no longer exists. Amendments to the Act now precisely regulate that the equity capital is registered in the amount of the paid purchase price from the contract of sale of the bankruptcy debtor, and the buyer’s contribution as a non-monetary contribution to the equity capital, in the amount of the paid purchase price.
If the value of equity capital is less than the value of the minimum equity capital, the value of the equity capital is registered as the value of the minimum equity capital prescribed for that company, and the buyer is obliged to pay the missing amount up to the minimum equity capital within six months from the date of suspension of the bankruptcy proceedings. Otherwise, a compulsory liquidation procedure is initiated.
Undertaking legal actions and activities in which there is a personal interest
A new Article 66a has also been added to the Act, which refers to reporting on legal affairs and activities in which there is a personal interest. Namely, the new Act prescribes that the Company that concluded legal transactions during the business year, i.e. undertook legal actions in which there was a personal interest of a person who has special duties towards the company, and for which approval is required, is obliged to provide the following data in the annual financial statements for that business year:
1) type of legal business or action;
2) subject of the legal transaction or action;
3) value, i.e. price of the subject of legal transaction or action;
4) percentage of the share, i.e. shares that a person who has special duties holds in the company, as well as a legal entity, i.e. another person with whom a legal transaction is concluded, i.e. a legal action is undertaken;
5) a property, status, i.e. function that a person who has special duties performs in the company, as well as a legal entity, i.e. another entity with which a legal transaction is concluded, i.e. a legal action is undertaken.
Furthermore, Article 67 of the Act, relating to the approval of a business in which there is a personal interest, has been amended so that even if approval for a particular legal transaction is obtained and the legal transaction is not concluded, i.e. the legal action is not taken at fair value, the company may file a lawsuit for annulment of that legal business, i.e. action and compensation of damage from a person who has special duties towards the company, and who had a personal interest in that business, i.e. legal action.
The new Act now prescribes the obligation of the company to publish on its website or the website of the Business Registers Agency the intention to conclude a deal in which there is a personal interest, i.e. to take legal action that requires approval. This includes a detailed description of the business or activity, personal or business name of the related party, information on the nature of the relationship with the related party, date and value of the transaction, as well as information from the notice of personal interest, immediately after the decision approving the legal transaction, that is, a legal action in which there is a personal interest, and no later than the day of concluding that legal transaction, i.e. undertaking that legal action. Previously, the company was obliged to publish a notice on the concluded legal transaction or undertaken legal action within 3 days from the day of concluding the legal transaction or undertaking the legal action.
Also, the new Act stipulates that if a lawsuit is filed against a director, member of the supervisory board, procurator, or liquidation manager due to the existence of a job or action in which there is a personal interest, without it being approved, now, in addition to entering restrictions on the rights of that person into the Central Records of Temporary Restrictions to the Rights of Persons, this person is deleted from the register as a representative.
Accession to the company and nullity of the share transfer agreement
The new Act contains a provision prescribing that, in the case of a new member joining the company, a contract must be concluded with certified signatures of the member joining and the person authorized by the decision of the company’s board, which (decision) allows joining the company.
As opposed to the previous legal gap, the Act now explicitly states that a judgment establishing the nullity of a share transfer agreement has effect on the company and its members. Furthermore, the Act stipulates that in the event that a change of the company members was registered in accordance with the Law on the Procedure of Registration with the Business Registers Agency, on the basis of a contract on transfer of shares whose nullity was determined by a court decision, the competent court shall submit the judgment to the register of business entities for the purpose of registration, and litigants, i.e. their legal successors, have the right to submit an application for registration of changes in the data on the company’s members who were registered on the basis of a void share transfer agreement.
Availability of information on the amount and structure of the total remuneration of the director or supervisory board member
Furthermore, the amendments to the Act introduce the obligation for a joint stock company that is not public, as well as for a limited liability company, at the request of a shareholder, i.e. a member who owns shares or stakes of at least five percent of the company’s equity capital, within three days from the day of receiving the request, to provide insight into the data on the amount and structure of the total remuneration for each director, i.e. executive director and member of the supervisory board, if the management of the company is bicameral. It will be considered that the company has fulfilled the obligation even if it enables the shareholder to download this data from the company’s website, free of charge. Also, if this information is considered a trade secret in terms of the law governing trade secrets, the shareholder may gain insight only if he/she signs a statement of confidentiality.
Public joint stock company
With regards to public joint stock companies, the Act introduces rules regarding the encouragement of long-term engagement of shareholders in public joint stock companies. For the first time, the Act lists the terms such as institutional investor, asset manager and voting advisor. The Act regulates their obligations, engagement policy, the obligation to publish the investment strategy of institutional investors and asset managers, as well as the publication of special information for voting advisors. Also, the procedure of informing shareholders in a public joint stock company has been regulated, which certainly leads to the better realization of shareholders’ rights.
In addition to two new reasons for initiating liquidation proceedings (as stated above: if the company does not register a new registered office address after the judgment on the lawsuit of the interested party becomes final, and if the buyer of the bankrupt legal entity does not pay the minimum capital within 6 months from the bankruptcy procedure termination), the new Act now addresses the issue of the course of the compulsory liquidation procedure in the event of the initiation of bankruptcy procedure as follows:
1) If a previous bankruptcy procedure is opened during compulsory liquidation – the compulsory liquidation procedure is terminated, and if, after that, the proposal for initiating the bankruptcy procedure is rejected, i.e. the procedure is suspended due to the withdrawal of the proposal for initiating the bankruptcy procedure, the compulsory liquidation procedure continues;
2) If a bankruptcy procedure is opened during compulsory liquidation – the compulsory liquidation proceedings shall be suspended.
Minor changes were made regarding the terminology of the remaining assets after the deletion of the company following the compulsory liquidation. Namely, the new Act prescribes that the members of the company are liable up to the amount of the received property after the deletion of the company (previously, a similar application of the provisions on voluntary liquidation, i.e. up to the amount of the liquidation balance). Also, the provision of the previous Act that the members of the company regulate their relations regarding property after liquidation with a contract, and that they can request the court to divide the property in an out-of-court settlement – has been deleted.
It should be noted that the forced liquidation proceedings launched by 1 June 2022 will be conducted according to the old Act.