Category: Serbia

Amendments to the Tax Procedures and Tax Administration Act (“Act“) were adopted and entered into force on December 20, 2022. The following is a reminder of the most significant changes you should keep an eye on.

(Non)postponement of the enforcement procedure

The legislator removed paragraph 6 from Article 77 of the Act through the amendments. This article stipulated that the Tax Administration would only initiate compulsory enforcement after a decision had been made on a taxpayer’s request to postpone tax payment. This move implies that the Tax Administration may, without restrictions, initiate enforcement proceedings even though a request for tax deferment has been submitted.

In that case, the enforcement procedure will increase the tax debt. The taxpayer will incur the enforcement, collection, and other collateral costs regardless of whether the taxpayer submitted a proper request for postponement of tax payment and the eventual positive outcome thereof.

Ex officio defense attorney

Moreover, the Act in this version introduces an ex officio defense counsel.

In the pre-investigation procedure, the tax police shall appoint ex officio an attorney if the suspect did not provide a defense attorney. This applies when there is reasonable suspicion that the defendant has committed a tax crime under the Serbian Code of Criminal Procedure, which prescribes a sentence of eight years in prison.

Amendments mentioned above harmonize the Act with the Criminal Procedure Code and its provisions on mandatory defense and ex officio defense counsel.

New criminal acts

The amendments to the Act introduced liability for two new criminal offenses: the illegal supply of fiscalization equipment and the illicit supply of accounting and other software. Criminal liability applies to persons who illicitly produce, process, sell and transfer fiscalization equipment, accounting, and other software, which may avoid recording turnover, resulting in tax evasion. For both counts, the amendments prescribe a five-year prison sentence and introduce a ban on the responsible person of the company and the sole trader from performing certain related activities for one to five years by a court order. Electronic devices, equipment, and software, as well as accounting and other software that are the subject of these criminal acts, will be confiscated.

Tax return for the personal income tax

Finally, there is news for individuals who earned more than three average annual salaries in Serbia based on the Serbian Statistical Office data. The taxpayer – a natural person – should submit the yearly personal income tax return exclusively in electronic form through the portal of the Serbian Tax Administration.

By introducing the so-called self-taxation regime, the Tax Administration aims to facilitate and speed up the process by inserting the data in the tax return in advance and uploading it to the portal no later than April 1 of the current year for the previous one for which the annual tax is determined. The above will applies from January 1, 2023, to tax returns for the 2022 annual personal income tax. 

By Danica Misojcic, Senior Associate, Zarko Popovic, Associates, Gecic Law

Zavisin, Semiz & Partneri and Dentons have advised a banking consortium on their EUR 155 million financing for the 103.3-megawatt Krivaca wind farm project co-owned by Serbia’s MK Group and Slovenia’s ALFI Green Energy Fund. Karanovic & Partners advised the Axpo Group on its market-terms long-term PPA with the Krivaca project company.

The lending consortium consisted of Erste Group Bank, Erste Bank Novi Sad, Raiffeisen Bank International, Raiffeisen Banka Beograd, Nova Ljubljanska Banka, NLB Komercijalna Banka Beograd, and Oesterreichische Entwichklungsbank.

The Krivaca wind farm is being developed by IVICOM Energy Zagubica, a renewable energy project co-owned by the MK Group and the ALFI Green Energy Fund. According to Karanovic & Partners, “they will support the ongoing construction of the 105-megawatt wind farm situated 150 kilometers east of Belgrade, in Krivaca. It will feature 22 turbines, each with a capacity of 4.8 megawatts. As of January 2024, the wind farm is supposed to begin producing enough green power for more than 75,000 households, saving 115,000 [tons in carbon dioxide] emissions annually, and becoming a true milestone for the energy transition in Serbia. It is the first wind farm in Serbia and the Balkans to be financed on the basis of a private power purchase agreement.”

According to Dentons, “the first turbines should be delivered in spring 2023, while commissioning is scheduled for the end of 2023.”

“The Axpo Group is Switzerland’s largest producer of renewable energy. The company already has a strong presence in the SEE region, with offices in Albania, Bulgaria, Croatia, Greece, Romania, and Serbia, offering services in power and gas supply, energy trading, and green certificates,” Karanovic & Partners reported.

The Karanovic & Partners team included Partners Maja Jovancevic Setka and Petar Mitrovic, Senior Associate Katarina Tomic, and Associate Dimitrije Ilic.

Zavisin, Semiz & Partneri’s team included Partner Stojan Semiz, Senior Associate Jelisaveta Stanisic, and Associates Tijana Trivunovic and Djordje Ilijasevic.

Dentons’ team included Bucharest-based Partner Simon Dayes, Counsel Maria Tomescu, and Associates Cristina Staicu and Alexandra Sofinet, with further team members in Duesseldorf.

Editor’s Note: After this article was published, CEE Legal Matters learned that Selih & Partnerji advised the agent – Erste Bank – on the deal. The firm’s team included Partners Blaz Ogorevc and Miha Stravs, Senior Associate Lenart Kmetic, and Attorney at Law Lidija Zupancic.

Subsequently, Ulcar & Partnerji confirmed it had advised sponsors MK Group and Alfi Green Energy Fund and borrower Ivicom Energy on the transactions. The firm’s team was led by Managing Partner Matjaz Ulcar.

Doklestic Repic & Gajin reportedly advised turbine supplier and installer Nordex Energy.

The Republic of Serbia continues to encourage creativity in the field of audiovisual production through incentives’ allocation to individuals even so in 2023.

This ever-growing market of creativity backed up with the aim of supporting the respective field, is once again vested with a new Regulation on Incentives for Investors to produce Audiovisual Works (‘Regulation’) adopted in the Republic of Serbia and entered into force as of January 14, 2023.

This regulation is followed with corresponding significant funds dedicated within the state budget for 2023 well-intended for granting incentives to persons/entities on whose behalf and with whose funds the production of audiovisual work in the territory of the Republic of Serbia is financed or co-financed.

The right to grant incentive funds lies with the legal entity and the entrepreneur on whose behalf and funds therewith the production of the audiovisual work in the territory of the Republic of Serbia is financed or co-financed (‘Investor’), and in particular:

• in the amount of 25% of qualified costs, or

• in the amount of 30% of qualified costs, provided it is an audiovisual work for the production of which the funds for the realization of the project allocated in the production budget of the Republic of Serbia amount to more than EUR 5,000,000.

whereby the total amount of the allocated incentive funds cannot be higher than 50% of the total amount of funds intended for the respective production of audiovisual work in the Republic of Serbia.

With respect to the above incentive grant rights and within the very meaning of Regulation, qualified costs are considered the following:

i. costs related to the production of the audiovisual work incurred and paid to legal or natural persons in the territory of the Republic of Serbia, which are related to the purchased goods and services provided, the use of locations, the payment of wages to team members who are citizens of the Republic of Serbia or to foreigners who have a residence of at least one (1) year in the territory of the Republic of Serbia, in accordance with the regulations of the Republic of Serbia; and

ii. costs incurred in connection with the use of goods, i.e. renting of movable and immovable objects can only be recognized if the goods, i.e. movable objects and immovable objects owned by legal or natural persons from the territory of the Republic of Serbia.

The nature of qualified costs is thoroughly regulated under the applicable Rulebook on types and content of the rationale for eligible and non-eligible costs and the form of application for awarding and payment of incentives to the investor who is producing audiovisual work in the Republic of Serbia (‘Rulebook’).

The incentive funds may be granted for audiovisual work which:

i. content is not against moral, public order and the public interest of the Republic of Serbia, does not disturb the image of the Republic of Serbia, doesn’t promote violation of human rights and hate speech thereof;

ii. is in a format of feature-length movie, TV movie, TV shows, animated movie and animated tv show, audio and/or visual postproduction of audiovisual work, dedicated movie, feature-length documentary, and documentary tv program, as follows:

a. feature-length movie, a TV movie, and feature-length documentary whose runtime is at least 70 minutes, and an animated movie produced for public display, which runtime is at least 5 minutes;TV show with at least 3 episodes and runtime of every episode a minimum of 40 minutes;

b. animated show with at least 10 episodes which cumulative runtime is at least 40 minutes;

c. documentary tv program which runtime is at least 40 minutes.

iii. production started or production is continued in the course of a budget year wherein a request for allocation for incentives is submitted;

iv. production is fully or partially carried out in the Republic of Serbia, and whose audiovisual work is of significant artistic and/or cultural value for the art of filmmaking, thus contributes to cultural diversity and pluralism of artistic expression in the field of cinematography.

Other than the above conditions which audiovisual work is required to meet, it is also mandatory to surpass the requirement of minimum funds allocated in the production budget for the realization of the respective project in the Republic of Serbia, and in particular minimum amounts are as follows:

i. movie and TV movie: EUR 300,000.00;

ii. TV show: EUR 150,000.00 per episode;

iii. animated TV show: EUR 150,000.00 per episode;

iv. animated movie, audio and/or visual postproduction of an audiovisual work: EUR 150,000.00;

v. dedicated/particular purpose movie: EUR 150,000.00;

vi. documentary movie and documentary TV program: EUR 50,000.00

Having all requirements met, the incentive funds are allocated based on the request for the allocation of incentive funds, submitted to the Commission for the allocation of incentives (hereinafter: Commission), through the Film Center of Serbia. The request for the allocation of incentive funds before the Commission can be submitted by either the Investor or a domestic legal entity/entrepreneur who produces audiovisual work for and on behalf of the Investor in the Republic of Serbia.

Based on a request submitted for granting the incentives, the Commission renders a decision determining fulfillment of pre-conditions and on grounds therewith, the ministry responsible for cultural affairs proceeds with execution of a respective agreement on granting the incentives with the applicant (i.e. with the Investor or an entity acting on Investor’s behalf).

Thereafter, the request for payment of incentive funds is submitted to the Commission through the Film Center of Serbia, within 45 days after the production of the audiovisual work on the territory of the Republic of Serbia is concluded.

Finally, the granted incentive funds are paid, on grounds of the abovementioned request and within 60 days from the finality of the decision of the ministry responsible for cultural affairs and are transferred to a special purpose account held with the Treasury Department.

The whole system of incentive support which is carried out under Serbian regulation and propelled by the Ministry of Culture and Film Center of Serbia really comes along with the idea of not only attracting foreign investors but also creating a great environment with a secondary financial boost to Serbian residents and others performing business activities within the creative field, stretching from production to multiple original works and engagements such as original screenplay writers, actors, film crew and others representing this very industry.

By Aleksandar Popovic, Partner, and Milos Maksimovic Senior Associate, JPM Jankovic Popovic Mitic

Our current publication is in detail Serbian Legal Framework for alcoholic beverages. It thoroughly analyses governmental approvals required to market alcoholic beverages, advertising restrictions, licensing and distribution requirements and restrictions, permissible product ingredients, and practical compliance issues.

This legal overview covers the following key topics:

1. Specialized Regulations for Beer, Wine and Strong Alcoholic Drinks;
2. General regulations: Law on Excise Duties, Law on Advertising & Law on Protection of Competition

1. Specialized Regulations

The regulatory framework of Serbia in the field of alcoholic beverages consists of several narrowly specialized laws and sub-regulations that govern the production and marketing of alcoholic beverages. Serbian legislation regulates beer, wine, and strong alcoholic drinks individually, and separate law applies to ethanol (ethyl alcohol). In the listings below, key issues addressed by the laws on alcoholic beverages will be pointed out.

a) Beer

✓ The Law on Beer deals with the issues of beer production, service beer bottling, beer quality and raw materials quality control, packaging and labeling, and beer market placement.

✓ Only legal entities registered in the Register of Beer Producers may engage in beer production.

✓ The beer producer should meet the prescribed conditions for facilities, premises, equipment, devices, and professional staff.

✓ A beer producer registered in the Register of Beer Bottling Service Providers can also engage in the beer bottling service.

✓ If imported in bulk, the beer producer and service beer bottler can bottle the beer in original packaging.

✓ Raw materials for beer production are subject to mandatory quality testing in terms of physical, chemical, and microbiological properties and the presence of residues of plant protection agents and other pollutants. The responsibility for the quality of raw materials rests with the beer producer or the importer of raw materials. Bylaws under the jurisdiction of the Ministry of Agriculture define the requirements regarding the quality of hop, barley malt, unmalted raw materials, and water.

✓ In addition to raw materials, beer is also subject to mandatory quality control, including sensory evaluation.

✓ Beer producers or importers are responsible for the packaging and labeling of beer. The label in the Serbian language should be prominent and readable and should not mislead the consumer.

b) Wine

✓ The Law on Wine deals with, among others, wine production and trade.

✓ The wine should possess the prescribed quality in terms of physical, chemical, microbiological, and sensory properties. Wine is subject to mandatory quality testing and sensory evaluation before bottling, labeling, and market placement, by an authorized laboratory.

✓ The wine is packaged and labeled by the producer. Like with beer, the label should be easy to see, clear and legible, with information in the Serbian language.

✓ Wine intended for the final consumer is marketed only in its original packaging.2. General Regulations

✓ Imported wine should meet the conditions regarding quality and labeling that apply to domestic wines. In this sense, imported wine is subject to sampling for quality testing and sensory evaluation.

c) Strong alcoholic drinks

✓ The Law on Strong Alcoholic Drinks deals with the production, quality, labeling, and sale of strong alcoholic drinks, as well as other issues of importance.

✓ Strong alcoholic drinks have specific sensory properties and a minimum alcohol strength of 15% vol. This category of alcoholic beverages also includes egg liqueur with a minimum alcohol strength of 14% vol.

✓ Only a legal entity registered in the Register of Producers of Strong Alcoholic Drinks can produce strong alcoholic drinks.

✓ Strong alcoholic drinks should meet quality and safety conditions, which is the manufacturer’s, i.e., the importer’s responsibility. Authorized laboratories perform safety and quality testing and sensory evaluation of strong alcoholic drinks. Strong alcoholic drinks should be kept and packaged in containers whose lids or foil do not contain lead to preserve their quality.

✓ The producer or importer is responsible for labeling strong alcoholic drinks, and the label should be easily visible, clear, and legible. The data on the label should be in the Serbian language so that the consumer can easily understand every piece of information. Multilingual label corresponding to data written in Serbian is allowed.

✓ Category names Whiskey or Whisky, Brandy or Weinbrand, Raisin brandy, Heferbrand, bierbrand or eau de vie de biere, Topinambur, Geist, Gin, London gin, Aquavit or aquavit, Pastis, Pastis de Marseille, Anis, Bitter, Creme de cassis, Guignolet, Punch au rhum, Sloe gin, Sambuca, Maraschino, Marrasquino or Maraskino, Nocino, Advocaat or avocat or lawyer, Mistra, Väkevä glögi or Spritglögg Berenburg or Beerenburg should not be translated on the label, nor in the description and presentation of strong alcohol drinks.

✓ Strong alcoholic drinks in their original packaging that meet safety and quality requirements can be placed on the market for immediate human consumption.

✓ If imported to Serbia for further production or sale, strong alcoholic drinks should meet domestic safety, quality, and labeling requirements and be accompanied by an appropriate quality document from the exporting country.

2. General Regulations

In addition to the previous laws, companies whose business is in the alcoholic beverage industry also interact with other laws such as, among others, the Law on Excise Duties, the Law on Advertising, and the Law on Protection of Competition.

The list of relevant regulations is not exhaustive, but we will pithily refer here to the most noteworthy aspects of these laws affecting the operations of such companies.

a) Law on Excise Duties

Alcoholic beverages are subject to excise duty. Hence, they classify as excise goods.

For excise taxation purpose, alcoholic beverages are beverages that are, depending on the raw materials from which they are produced and the ethanol content, marketed as such beverages. Alcoholic beverages classifying as excise goods are:

1. strong alcoholic drinks;

2. low-alcohol drinks containing more than 1.2% vol. alcohol but no more than 15% vol. alcohol, produced from fruit juices or refreshing non-alcoholic drinks; and

3. beer (except non-alcoholic beer that contains up to 0.5% alcohol).

The highest excise tax applies to strong alcoholic drinks.

b) Law on Advertising

The advertising of alcoholic beverages is subject to special rules concerning children and minors.

During and at least ten minutes before or after the broadcast of a children’s show, i.e., a show intended for minors, it is forbidden to broadcast advertising messages and TV sales messages recommending alcoholic beverages.

Additional prohibitions and restrictions apply to strong alcoholic drinks. Their advertising is prohibited, including any display of a trademark or other mark used to identify the strong alcoholic drink, unless in printed media, provided that they are not intended for or thematically oriented toward children or minors, and in electronic media from 11 pm until 6 am.

Exceptionally, it is possible to advertise an alcoholic beverage, trademark or another mark of an alcoholic beverage or to publish information about the quality and other properties of the alcoholic beverage at the point of sale, fair stand, in professional books, magazines, and other professional publications intended for producers or sellers of those products, or on means of business communication and business representation of alcoholic beverage producers.

The rules for advertising alcoholic beverages with an alcohol content of less than 20% are more lenient.

It is allowed, for example, to advertise such alcoholic beverages on transport vehicles (except public transport vehicles), in connection with sports events, or via internet advertising. It is expressly forbidden to show the use or imitation of the use of alcoholic beverages in advertising.

An advertising message advertising an alcoholic beverage should contain a warning message referring to the prohibition of the sale and serving of alcoholic beverages to children or minors, as well as a warning on the responsible use of alcoholic beverages.

An advertiser of alcoholic beverages may not sponsor:

1. media, athletes, sports clubs, sports competitions; nor

2. children and minors, their activities, and persons or activities whose audience is predominantly children or minors.

This restriction does not apply to an advertiser of alcoholic beverages with an alcohol content of less than 20%.

c) Law on Protection of Competition

Compliance with competition protection rules is crucial for all market participants, especially regarding exclusive or non-exclusive distribution agreements.

A business model of a market participant that has or can have the goal/consequence of significantly restricting, distorting, or preventing competition violates the competition.

Distribution agreements may have features of a restrictive agreement if they are aimed at or lead to a significant limitation, disruption, or prevention of competition in the territory of Serbia.

Under the Law on Protection of Competition, restrictive agreements shall include contracts, contract provisions, express or tacit agreements, concerted practices, and decisions of market participants’ associations, which determine purchase or sale prices or other terms of trade, or limit and control production, market, technical development, or investments, apply unequal business conditions, or share markets or sources of supply.

It is possible to exempt a restrictive agreement from the prohibition if they contribute to the production and trade or incite technical or economic progress and do not exclude competition in the market.

At the request of the participants in the restrictive agreement, the Commission for the Protection of Competition of Serbia may exempt a particular restrictive agreement from the prohibition. In addition, under the regulations of the Government of Serbia, specific categories of agreements on the sale, purchase, or distribution of goods between market participants operating at different levels of production or distribution (vertical agreements) are exempt from the prohibition.

Therefore, when concluding a distribution/licensing agreement, one should pay attention to the provisions that could act as a restrictive agreement and test the planned business model against the regulation on the exemption of vertical agreements from the prohibition.

By Milan Samardzic, Partner and Tijana Kovacevic, Senior Associate, SOG Law Firm

NKO Partners has advised a group of Saga’s minority shareholders on Noventiq’s buyout of their equity. Jankovic Popovic Mitic advised the buyer.

According to JPM, Noventiq had previously acquired Saga’s major shareholder – New Frontier, in Austria – and is now Saga’s majority shareholder.

Saga is a Belgrade-based information technology company.

Softline Holding, operating as Noventiq, is a London-headquartered digital transformation and cybersecurity services provider focused on emerging markets.

“Saga’s solutions offerings and sophisticated own internet protocol will help Noventiq not only expand its geographical presence but also entrench our portfolio capabilities,” Noventiq President and COO Herve Tessler commented. “Saga’s financial technology solutions are about transforming legacy banks and institutions into digital leaders, and thanks to this transaction, our customers from a wide array of sectors will be able to benefit from Saga’s extraordinary technology.”

The NKO team was led by Partner Djordje Nikolic and included Senior Associate Srna Popovic.

The JPM team included Senior Partner Nenad Popovic, Senior Associates Bojana Javoric and Marko Ilic, and Associate Luka Hajdukovic.

Zivko Mijatovic and Partners has successfully represented the Champagne Wine Interprofessional Committee in its request for general customs supervision based on indications of geographical origin for Champagne wine across Balkan markets.

According to ZMP, “CIVC is the interprofessional body bringing together all the operators involved in Champagne wine: winegrowers, wine merchants, Champagne houses, professional associations, and cooperative cellars. The request was related to the indication of geographical origin Champagne.”

“Customs Offices in all Balkan countries adopted our general request,” the firm announced.

ZMP did not respond to our inquiry on the matter.

The very idea of introducing a new financial instrument issued by a limited liability company (“LLC” or “Company”) is to improve the economic environment as well as financial growth by providing a way for companies to incentivize employees, especially the ones in IT industry, thus enabling companies to operate in accordance with high standards adopted worldwide.

Considering that the companies within the IT industry and start-ups, in general, have the capacity to multiply their own value in the short term (developing a ‘viable product’) such undertakings usually lack the initial funds to pay adequate compensation and salaries so the additional incentives for employees are enabled creating the opportunity for them to become the shareholders of the company, and to participate in dividend distribution or to capitalize by selling the acquired shares with a premium.

Reserved Own Share | Right to Acquire the Share

Law on Companies (‘Law’), as the organic law regulating rights and obligations regarding this matter, defines reserved own share as a share the company acquires from its member without consideration (free of charge), for the very purpose of granting a financial instrument – right to acquire a share (‘financial instrument or ’RaS’).

The Law envisages that a reserved own share is acquired upon General Meeting’s decision unless otherwise provided by the company’s Incorporation Act, whereas the deciding authority can also be transferred to the company’s director or a supervisory board in case of the two-tier management system.

The decision by General Meeting must be adopted with 2/3 majority of the total voting shares of all company members, whereas the company may acquire reserved own share only from the fully paid (or with fully entered non-pecuniary contribution) shares. The reserved own share can only be acquired from the shares of members who have voted in favor of such a decision whilst the share percentage of total reserved own shares cannot exceed the 40% threshold of the company’s total share capital.

Registration of the Reserved Own Share with SBRA

After the above decision has been adopted by the company’s General Meeting (or other deciding authority), the Serbian Business Registers Agency (‘’SBRA’’) conducts the registration of the reserved own share based on the mentioned decision and written consent of members whose shares are proportionally reduced thereof, while the company acquires the reserved own share only after the registration is made with SBRA.

When registration is being finalized, the members who gave their consent (‘agreeable members’) are left with reduced shares and the company’s reserved own shares are formed for the purpose of awarding financial instruments.

Tax Perspective

Albeit this financial instrument is still considered to be a novelty, the Tax Authority already took an official position that, for a single shareholder company, the transfer without compensation for the purpose of forming a reserved own share with the aim to grant a financial instrument – RaS, is not subjected to capital gain tax when a single shareholder is a natural person (Law on Personal Income Tax).

Stretching the same legal logic to the capital gain tax definition under the Law on Corporate Profit Tax (for example, when a company is a shareholder), it follows there is no capital gain tax obligation in either situation, given the Law explicitly prescribes that a reserved own share with aim of issuing financial instrument – RaS can only be acquired ‘free of charge’ whereas both tax laws regulating capital gain taxes prescribes that a transfer eligible for capital gain tax is the one realized by the taxpayer through sale or other transfer for a fee, whereby a ‘capital gain’ represents the difference between the price for which the right/share was acquired and selling price thereof.

As reserved own share is formed ‘free of charge’ by the company’s member(s), it cannot be deemed as transfer eligible to capital gain tax for either a natural person or a legal entity as a member of the respective company.

Limitations on Reserved Own Share and Financial Instrument

Once the reserved own share is registered, the company loses the voting rights thereon, and it cannot be used and counted in the quorum of the company’s General Meeting. A reserved own share represents a non-transferable instrument issued by LLC allowing the agreeable holder (an employee, for example) the right to acquire a share on a particular day and for a pre-agreed price.

Rights arising from the financial instrument – RaS cannot be disposed of nor subjected to any pledge. If the holder passes away before the maturity day, prior to the acquisition of shares, the subject financial instrument cannot be inherited.

Also, pre-emption rights cannot be exercised by other company members for the share which is acquired on the grounds of financial instrument.

Registration of Financial Instruments with CSR

The decision by which financial instrument is adopted by the General Meeting of the company, or other competent body therein, needs to be submitted to Central Securities Registry (‘’CSR’’) within five working days from the day of adoption, for the purpose of registration in favor of the holder of that instrument.

The decision (either when adopted by General Meeting or other corporate body authorized under Incorporation Act) must contain the required elements provided under the Article 159 of the Law such as the number of financial instruments, data on persons acquiring the instrument, percentage of shares to be acquired, price to be paid, maturity day of the instrument and other mandatory elements.

The procedure and documentation required for the registration of RaS with CRS are exercised in accordance with the CRS’ Rules of Operation and the request for registration can be submitted by the issuer itself (authorized person in the company) or a CRS’ member on behalf of the issuer which is an exception to the general rule, given that requests with CRS are usually submitted only through a respective official member therein. Also, issuing financial instruments, is not considered a public offer in terms of the law governing the capital market, and therefore is ‘released’ from the strict rules and control by the Securities Commission of Serbia (‘’SEC’’).

Share Price and Other Conditions

The price is determined by the General Meeting of the company issuing the financial instrument whereby the Law does not prescribe criteria or methodology for price determination as it is expected to be a price lower than the “market price” given the idea of the instrument to enable certain persons (employees) to acquire shares under more favorable conditions.

The determined price can even be lower than the nominal value of the share corresponding to the contribution registered with SBRA. This manner of price determination is not detrimental to the company since it has acquired its own reserved shares without compensation (free of charge) so it can dispose of the shares at a lower price, with a goal of providing incentives for employees.

All financial instruments (RaS) from a single issue shall confer the equal rights provided in the respective decision and all financial instruments arising out of one reserved own share have an equal maturity date and the same deadline for payment of the price. RaS cannot be conditioned with any additional requirements, except for the payment of the agreed price given the other conditions would not be in accordance with the Law nor the very nature of this instrument.

Early Maturity for Financial Instrument

The Law prescribes situations when obligations are due prior to the usual maturity date
in case of:
i. liquidation
ii. status changes, and
iii. change of legal form whereby the deadline for payment of the price by RaS’ holder to the company in such cases is 40 days as of the day when each situation arose.

The company is obliged to send a letter to RaS’ holders in these cases followed by an invitation to pay the price and the company cannot finalize liquidation, status change, or change of legal form until it completes the registration of the holder shares acquired upon financial instrument or reduction of share capital due to cancellation of unused reserved own share.

Share Acquisition | Cancellation | Unused Shares

Each issued financial instrument may be realized by the acquisition of shares by the legitimate holder or canceled either in accordance with the terms of the emission decision or if the holder does not fulfill the obligations above. In both cases, financial instruments shall be cleared from CSR.

Anyhow, if financial Instrument – RaS has been canceled, the General Meeting of the company or other competent body, shall render a decision to cancel that financial instrument. The company must submit an application for the clearing of RaS with CSR no later than 30 days after the expiration of the deadline for payment of the price from the emission decision for all emissions based on the same reserved own share. Thereafter, CSR makes the clearance and issues the company a certificate of clearing of the financial instrument.

After the registration of a share acquired by exercising RaS, the remaining unused portion of the reserved own share may either be canceled or used for new issuance of the financial instrument. If the decision is made to cancel the remaining unused portion of the reserved own share, the company shall reduce its share capital in the corresponding amount or use the remaining reserved own share for new emissions.

Court Protection for RAS’ Holder

If the company does not carry out registration of the holder’s share within 60 days, the holder, if made the payment thereof, may initiate proceedings before a competent court to establish the shareholder’s status and the ownership percentage in share capital or to determine the compensation that the company must pay if fails to comply with the procedure.

In case of cancellation without legal ground prior to the maturity date of RaS, the legal holder shall be entitled to compensation in the amount of the share’s market value on the maturity date of the financial instrument but reduced by the designated price that holder should have paid but did not (since due day did not occur).

In case of the death of the legal holder, the heirs can demand from the company compensation in the amount of the share’s market value on the maturity date and if deletion of the company occurs (liquidation), the holder of the financial instrument shall become a creditor of the company claiming the amount of share’s market value as of the day of the deletion of the company reduced by the price amount, if not paid by the holder.

Conclusions

This relatively new financial instrument, serving as an employee’s incentive mechanism as well as a start-up’s financial stimulator when lacking initial capital, seems like a promising addition to Serbian legislation and potentially a handful instrument of growth acting as a great incentive for employees who can acquire shares in this manner with the possibility to reach high profits either by participating in dividends distribution or by selling their shares for the vastly higher price than the one for which they acquired it.

By Milos Maksimovic , Senior Associate and Luka Hajdukovic, Associate, JPM Jankovic Popovic Mitic

On the 19th of January, there has been yet another competition infringement investigation (ex officio) by the Serbian Commission for the Protection of the Competition, this time against VAILLANT doo Beograd (Vaillant) regarding the market of gas boilers!

The Commission analysed the available data on the prices of gas boilers of the “Vaillant” and “Protherm” brands in Serbia. After conducted analyses and a dawn raid carried out, the Commission discovered that the retail prices on retailers’ websites (authorized distributors) were identical both among all the analysed retailers and against the prices from the price list for January 2023 available on the website of the Vaillant (with the difference of less than RSD 1).

Namely, as Vaillant is a wholesaler, which is not present in a retail market in which the analysed retailers are present and as the retailers of the brand “Vaillant” are also retailers of the brand “Protherm”, the Commission has subsequently concluded that these actions represent restrictive agreements i.e., that the Vaillant imposed resale prices over products of the brands “Vaillant” and “Protherm” to its retailers.

By analysing and collecting publicly available data on retail prices of products and services of market participants, the Commission continues with its Q4 2022 practice in 2023, this time on the gas boilers market. Following up on the proceeding against Apcom CE and APCOM D.O.O. BEOGRAD, which we covered in a recent JPM article the practice shows that the Commission continues to gravely focus on RPM and that the Commission will not be reluctant to pursue more cases.

Ultimately, we can conclude that it is extremely important for businesses to be familiar with the basic competition rules i.e., they should be able to recognize situations that could put them and the company at risk and take all precautionary measures to minimize the possibility of breach of competition regulations. We will continue to monitor the practice of the Commission in the future.

By Nikola Poznanovic, Partner, and Zivko Simijonovic, Senior Associate, JPM Jankovic Popovic Mitic

One of the long-debated domestic themes is non-existence of retail NPL market in Serbia. Following the 2008 World Economic Crisis in Serbia, the country managed to regulate corporate NPL market, and to decrease NPL level from 20% to 3,19 %.

However, retail NPL market remained a taboo. There are several reasons for this and the main one is that the general public fears that regulating retail NPL (“RNPL”) market would legalize debt slavery.

Stil, the true is quite different. Instead of establishing RNPL market, the NPL companies mostly offer side services to the banks on debt collection, whereas the real effects of such services is de facto purchase of RNPL.

Having this in mind, and that Serbian law completely lacks regulation of personal insolvency (as well as entrepreneur’s insolvency), this creates close to a debt slavery situation for many citizens that defaulted, and brings into jeopardy many more. When we take in consideration the current crisis, inflation, which includes sharp increase of interest rates, Serbian society could enter the dark ages.

On the other hand, the necessity to establish RNPL market could be beneficial for all parties: (i) the banks could release large amount of reserves with the National Bank of Serbia (“NBS”) and invest them further, (ii) the state could improve its legislation through introducing a personal insolvency, which could be further used to improve social service offices, and (iii) the citizens in distress could be offered with a fresh start and assistance from the social services to overcome the crisis. Even the NPL companies would benefit, as they would be doing their business in much better environment for investing into RNPLs.

Social service is in its decades long neglection period, and should be re-established as an institution that should also assist debtors to overcome their personal debt crisis via well-educated and skilled insolvency administrators (counsels).

At the end, establishing solid system of personal insolvency on the one side and RNPL market on the other, could boost economic growth.

By Ivan Nikolic, Senior Associate, SOG Law Firm

CEELMDirect Profile Pick: A series of interviews with partners and firms with Premium profiles on the CEELMDirect legal directory. Today’s interview: Vladimir Bojanovic, Managing Partner at Bojanovic & Partners in Belgrade.

CEELMDirect: Hi Vladimir – thanks for joining us. Let’s start at the beginning. What led you into the law in the first place?

Bojanovic: I never doubted for a second that I wanted to be a business lawyer, and I think I had this notion since I was a kid. The most direct trigger event was a cheesy TV show about lawyers on Wall Street – I cannot recall the name. However, the real reason is that, at an early age, I realized I had the ability to understand complex concepts and apply them easily in the real world. This was my opportunity, as the best lawyers see and grab opportunities when they arise. I was lucky to find like-minded partners and team members.

I think this has translated directly into our business. One of the challenges of running a thriving business is that there are many ways to measure success. For many, success means profit. For us – and I think this applies equally to me and our lawyers – it means applying our ability to solve problems for our clients. We simply try to make their businesses better… and so far we have been successful.

CEELMDirect: What was your favorite course and professor in law school?

Bojanovic: Interestingly, it was not at law school but in my MBA program – I would say Corporate Finance, at Cambridge, taught by Professor David Chambers. It helped me understand business so well. 

CEELMDirect: When did BOPA open its doors, and what was its first successful client matter? 

Bojanovic: We opened the firm in 2012, although many of our team members have worked together since the mid-90s. Our first matter was one of the landmark projects in Serbia, which inevitably led to a combination of feelings. I can just say we were so proud at the end, and it opened doors for so many other opportunities.

CEELMDirect: What firm social event or retreat have you enjoyed most over the years?

Bojanovic: Every year we have retreats in one of the 13 countries where our legal practice has offices (we have 350 lawyers in the region). The last one was in magical Zabola, a castle from the 13th century in Transylvania. I loved it so much. 

CEELMDirect: Does the firm have anything special planned for 2023?

Bojanovic: We are just starting. Huge things are coming.

CEELMDirect: Sounds good, Vladimir. We look forward to hearing about them, and seeing them reflected on your firm’s CEELMDirect profile!