Proposal for Amendments to the Companies Law – What Will be Different?

Proposal for Amendments to the Companies Law – What Will be Different?

November 17, 2021

The Government of Serbia has recently adopted the Proposal for Amendments to the Companies Law (the “Proposal”), which official text states that its primary goal is to promote the protection of minority shareholders, in accordance with measures provided by the Action Plan of the Program for Improvement of Position of the Republic of Serbia on the World Bank’s Business List – Doing Business for the period 2020-2023. In addition, the respective novelties imply other changes as well, the most significant being those referring to the position of entrepreneurs, and court protection in case of business address abuse.

Improvement of the Status of Minority Shareholders, i.e. Stockholders

For the purpose of improving the status of minority shareholders and stockholders, the Proposal specifies legal provisions referring to the conclusion of legal transactions and undertaking of legal actions which imply personal interest, i.e.:

  • content of the notice on existence of personal interest in a legal transaction concluded by a company, and/or legal action undertaken by a company;
  • data that a company is obliged to publish, and/or documentation that it is obliged to keep in relation thereto;
  • data that a company is obliged to indicate in its annual financial statements with regards to concluded legal transactions, and/or undertaken legal actions that included personal interest; and
  • right to file a complaint for cancellation of such legal transaction, i.e. legal action (and damage compensation) if the transaction was not concluded, i.e. the action was not undertaken in accordance with the law.

Additionally, the Proposal provides the obligation for a limited liability company, and a non-public joint-stock company, upon request of a shareholder or stockholder that holds shares, i.e. stocks representing minimum 5% of the company’s share capital, to provide such shareholder/stockholder with data on the amount and structure of total compensation for each director (or executive director and supervisory board member, in case of two-tier corporate governance system), no later than three days upon receipt of the request.

On the other hand, a public joint-stock company is obliged to have a compensation policy for directors (and supervisory board members, in case of two-tier corporate governance), while the board of directors (or supervisory board, in case of two-tier management, or compensation commission, provided that it has been established) shall prepare annual, clear, comprehensive and eligible report on all compensations paid, or to be paid by the company, or its affiliated companies operating within the same group to each current and former member of the board of directors (or supervisory board) in the last year preceding the year of the subject report. The compensation policy and report shall be subject to voting in the company’s general meeting.

Furthermore, the Proposal includes Chapter IVa, the provisions whereof stipulate special rules as regards the encouragement of long-term shareholder engagement in public joint-stock companies, in accordance with EU Directive 828/2017, notably regarding the identification of shareholders and their notifying, as well as role and status of mediators.

Status of Entrepreneurs

According to the Proposal, a business name of an entrepreneur may not contain word “Serbia”, its derivatives or any forms associating to this word, or internationally recognised three-letter designation of the Republic of Serbia “SRB”.

In addition, if an entrepreneur is prohibited to perform a registered business activity pursuant to a final decision of a competent authority, such entrepreneur shall be entitled, within 30 days upon the day of entry into effect of such act, to register the suspension of performing registered business activity for the period of validity of the imposed measure, whereby upon that, if intending to maintain the status of entrepreneur, it shall be entitled to register the change of business activity, in order to perform another activity and continue collecting profit by such performance.

Court Protection in Case of Business Address Abuse

Considering the increased number of citizens notifying the issues relating to public enforcement officers and public utility companies, because their home addresses were registered in the Companies Register as seats of companies and entrepreneurs, without their knowledge and consent thereof, court protection will be ensured in this regard.

In relation thereto, the Proposal defines company seat as a place and address in the territory of the Republic of Serbia, which is used for managing a company’s business, and which is specified as such by the memorandum/articles of association, statute or decision of the general meeting, partners or complements, while the company seat address implies city, municipality, settlement, street or square, house number, floor and apartment number, in accordance with regulations on territorial organisation.

An interested party may file a complaint to the competent court, requesting the deletion of the registered address of company seat, provided that the owner did not allow the use of the premises where the company seat is located for company management activities. Upon the request of the person who filed a complaint for deletion of the registered address of the seat, a dispute annotation will be made in accordance with the law on registration, while the procedure upon the complaint is urgent. Upon its entry into force, the court shall deliver the judgment imposing deletion of the company seat address to the companies register for registration. If the company fails to register a new company address within 30 days after the entry into force of the aforesaid judgment, the companies register shall ex officio institute the procedure for forced liquidation of such company.

Other amendments

In addition to the above, the Proposal, in accordance with provisions of the Law on Electronic Administration, stipulates that a company is obliged to register as a user of electronic administration services, and that the electronic document is submitted to the company or entrepreneur in accordance with the law governing electronic documents, electronic identification and services of trust in electronic business, i.e. the law governing electronic administration when delivery is made to the Individual Electronic Mailbox on “eUprava” portal, unless otherwise provided by a special law.

Finally, the Proposal stipulates certain changes with regards to data on persons which shall be registered under the law concerned, and which are therefore registered in accordance with the law on registration.

Namely, according to the Proposal, both for domestic and foreign natural persons, in addition to their personal name and personal ID number and/or personal name, passport number and country of issuance, i.e. registration number for foreign citizens, foreign citizen’s ID card number and country of issuance, data on the person’s gender shall also be registered.

According to the reasoning of the Proposal, this amendment was proposed in accordance with the gender equality policy, while it is not quite clear how it contributes to the achievement of goals of this policy, particularly considering that the gender information about domestic citizens is already included in the personal ID number, which is subject to registration.

This article is to be considered as exclusively informative, with no intention to provide legal advice. If you should need additional information, please contact us directly.