Jankovic Popovic Mitic has advised BG Urban Lux on its EUR 1.3 million acquisition of the Ima Dana restaurant in Belgrade from the bankruptcy estate of BIP – the Belgrade Beer Industry.
Ima Dana, located in Skadarlija, Belgrade’s bohemian quarter, is one of the oldest restaurants in the city.
BG Urban Lux operates primarily in residential and commercial real estate construction.
JPM’s team was led by Partner Ivan Petrovic.
Serbia is showing green across the board, with healthcare, IT, and real estate driving the economy, according to NKO Partners Partner Djordje Nikolic.
“Even with the upcoming elections in April, not much is expected to change politically,” Nikolic begins. “The level of investor happiness seems to be quite high – 2021 saw the highest total FDI come into the country since 2000, with the total number at EUR 3.9 billion.” And the investors are quite diversified, according to him, coming from the EU, Russia, United States, Middle East, China, and many more.
The reasons Nikolic cites for Serbia being a fruitful investor target are varied. “We have a highly qualified labor force that speaks English, while market-based salaries are still lower than in the rest of Europe,” he says. Additionally, Nikolic points to the fact that the state subsidizes a number of sectors and that, overall, the administrative bureaucratic system is generally efficient, although there are still some bottlenecks that need to be dealt with. “One of the upsides of having one major party control most of the state’s faucets is a highly efficient administration at the local level, due to a single center running the show. For this reason, there are many successful investments in various industries realized in different cities and municipalities, throughout Serbia.”
Still, even with these positives, Nikolic is skeptical when it comes to the EU accession process. “I just don’t believe that there is enough of a democratic capacity in the country to reflect all EU values, not the least of which due to an inefficient and slow judicial system and the insufficient independence of the court system and prosecutor’s office,” he says.
Weighing in on a successful 2021 transaction-wise, Nikolic outlines the business sectors working the hardest. “Firstly, which comes as no surprise given the pandemic, there is the healthcare sector. Both wholesale and retail are active, with retail being particularly aggressive,” he says. Nikolic points to Dr. Max which has been “acquiring a lot of targets in Serbia” as an example.
Next, the real estate sector has been performing very well. “All real estate aspects have been roaring – industrial, office, residential – you name it,” Nikolic says. “CTP has been particularly active here, with some 15 transactions or so in the past few years, not to mention the ever-developing Belgrade Waterfront project.”
Much like in other Balkan countries recently, the IT sector is a driver for economic betterment in Serbia as well, Nikolic says. “Many companies are coming over, setting up shop, and hiring people – but there are M&A transactions as well.” He reports that the local change in the wider legislative framework that allowed for LLCs to facilitate employee stock ownership plans was a key innovation leading to investor attention: “employees can now, more easily than before, access stock options at a group level.”
Finally, Nikolic reports on the mining and ecology sectors. “The mining sector had a particularly active first half of 2021, but most activities stopped following the anti-Rio Tinto protests that took place later in the year. Everybody is waiting for this situation to get resolved before resuming their activities in this sector,” he says. “Also, the ecology sector is packed with energy-efficient projects funded by various international organizations, including USAID and the UNDP.” Nikolic concludes by saying: “this is a very promising trend for the future, the development of green agenda projects.”
Recently, the Serbian Government (“Government“) adopted a Regulation on the Quota in the Market Premium System (“Quota Regulation“), and soon after, the Regulation on Market Premium and Fid-In Tarif (“Tarif Regulation“) and the Regulation on the Model Agreement for the Market Premium for Renewable Energy Sources (“Model Agreement Regulation“). This package of by-laws has been adopted to create conditions for the organization of the first market premium auction in accordance with the Law on the Use of Renewable Energy Sources (“Law“).
The market premium system represents a new type of state aid for energy producers, i.e., a monetary supplement paid to the energy producers when selling electricity. The amount of incentives (maximum market premium), as well as the max market purchase price for electricity, are determined by the Energy Agency (the “Agency“). For now, the Agency has only adopted the Quota Regulation by which a quota of 400MW has been determined for wind farms with a capacity of at least 3 MW, and has determined the maximum repurchase price of electricity of 5.57 Eurocent / kWh.
Considering that the market premium is defined as a two-way floating premium, the Government (Elektrodistribucija Srbije) will pay the premium to the investors when the electricity price in the market is lower than the one realized at an auction. On the other hand, if the market price is higher than the one achieved at an auction, the electricity producer will be obliged to pay premiums. However, having in mind the low repurchase price defined by the Agency, the effectiveness of the system has been called into question.
Not long after the Quota Regulation, the Government reached the Tarif Regulation and the Model Agreement Regulation, which delve into more detail about conditions, procedures and more, regarding obtaining the status of a “temporary privileged producer”.
According to the Law and the mentioned regulations, the entire procedure for exercising the right to market premium involves an auction in which interested producers compete and consists of several stages:
Initiation of proceedings
The procedure begins when the Ministry of Mining and Energy (“Ministry“) announces the start of the planned auction on its website. The Ministry is obliged to publish the auction plan at least 45 days in advance, after which a public invitation is sent. This invitation contains more detailed information about the auction. In addition, the Ministry publishes all other necessary information and forms that the participants in the auction fill in and submit in order to participate in the auction, and the auction procedure itself is conducted by a commission appointed by the competent minister.
Qualifications
Qualifications are the elimination phase in the auction procedure, which confirm whether the participants meet the conditions prescribed by the Law and the public invitation. One of the conditions is a financial security instrument for the seriousness of the offer, i.e. a cash deposit or a bank guarantee, which is paid to a special account of the Ministry. The amount of this security is rather high, at EUR 30 per Kw of the capacity.
Bidding
This phase consists of participants exhibiting offers and the subsequent competition between said offers. Criteria for a successful bid is the offered price, i.e. premium, meaning a lower market premium / a lower purchase price in relation to the maximum market premium / maximum anticipated purchase price.
Rank list and quota filling
After the bidding, depending on the offer they came up with, the Participants are ranked from the lowest to the highest amount of the market premium, i.e. the purchase price. Filling the quota is done in the same way, and the quota is deemed filled when the sum of capacities of producers from the ranking list reaches the level of the prescribed quota.
The procedure ends with the adoption of a decision on granting the right to the market premium (“Decision“), which is issued by the Ministry after the commission compiles a ranking list and a report on the conducted procedure after which the Agreement is signed.
Privileged Producer Status
The Participants who successfully finished the auction procedure will obtain the status of a temporary privileged producer on the date of the Decision, conditioned that they provide to Ministry a financial security instrument in the form of a bank guarantee of 60 EUR per kW market premium incentives.
Conclusion
The adoption of this by-law package is indeed encouraging news and signals that Serbia really wants to switch to greener energy by stimulating renewable energy production. However, having in mind the maximum determined repurchase price, and the amount of securities necessary for participation in the incentive program, the question is whether the whole market premium system makes sense and will there be any participants willing to participate in the auctions..
This text is for informational purposes only and should not be considered legal advice. Should you require any additional information, feel free to contact us.
By Milan Samardzic, Partner, and Vuk Knezevic, Associate, Samardzic, Oreski & Grbovic
NSTLAW has advised the Rustler Group and its Serbian affiliate Hauzmajstor d.o.o. and its local management on its corporate restructuring as a result of which management entered the ownership structure of Hauzmajstor d.o.o.
According to NSTLAW, “the deal comprised of an existing Executive Director purchasing an equity interest in the company from its Austrian investors, new corporate governance and shareholders agreement.”
Hauzmajstor is a real estate company managing assets of EUR 2.5 billion. The company is a member of the Austrian Rustler group – a European real estate service provider with a turnover of over EUR 50 million, an estimated EUR 10 billion of assets under management, and more than 500 employees.
NSTLAW’s team was led by Associate Luka Marosiuk.
Harrisons has advised the EBRD on a EUR 10 million loan to OTP Leasing Serbia.
According to the firm, the loan is “fully guaranteed by OTP Serbia to support the competitiveness of small and medium-sized enterprises” in the country.
“The proceeds of the loan will help SMEs improve production capacities and make their processes compatible with the European Union’s directives on environmental protection, worker protections, and product safety and quality,” Harrisons informed.
The Harrisons team was led by Principal Mark Harrison and Consultant Ines Matijevic-Papulin and included Associate Mina Markovic.
On January 1, 2022, certain provisions of Articles of the Rulebook on Electromagnetic Compatibility (Official Gazette of RS no. 25/2016 and 21/2020) ceased to apply, as well as of the Rulebook on Electrical Equipment Intended for Use within Certain Voltage Limits (Official Gazette of RS no. 25/2016 and 21/2020), which refer to the conformity certificate, i.e., its mandatory provision.
As a reminder, the abovesaid rulebooks refer to the equipment that may cause electromagnetic defects and/or whose operating features may be affected by such defects, and the electric equipment intended for use in the range from 50 V to 1000 V for alternating current and 75 V to 1500 V for direct current, with certain exceptions.
In addition, conformity certificate represents a document that proves that a product (device, i.e., electrical equipment) meets the prescribed requirements (i.e., significant requirements regarding the product safety).
The aforesaid rises several issues:
1. Does the abolishment of this obligation refer to the products placed in the market prior to January 1, 2022, or only to those placed after the said date?
Considering that, under the stated rulebooks, the obligation to provide conformity certificate refers to the moment prior to the placement of product in the market of the Republic of Serbia, conformity certificate will not be mandatory for products placed in the market starting from January 1, 2022.
Pursuant to the Rulebook on Electromagnetic Compatibility, placement in the market implies first supply to the Serbian market, i.e., any making of devices available in the market of the Republic of Serbia for the purpose of distribution, consumption, or use, within the trade activity, both with or without compensation.
2. Will it be necessary to provide another document instead of the conformity certificate?
In accordance with provisions of the respective rulebooks, in order to place a product in the market of the Republic of Serbia, one needs to possess and to enclose a declaration of conformity, and this obligation shall remain in force after January 1, 2022.
Declaration of conformity is a document made by the manufacturer (of device, i.e., electrical equipment), which certifies that the product meets all relevant safety requirements and has all necessary documentation in relation thereto.
3. Does the abolishment of conformity certificate also imply the abolishment of the Serbian conformity mark?
Under the Law on Technical Requirements for Products and Conformity Assessment (Official Gazette of RS no. 49/2021), the Serbian conformity mark is a mark proving that a product placed in the market or use in the Republic of Serbia conforms to the requirements of Serbian technical regulations, given that such regulation envisages its placement.
Accordingly, the regulation concerned stipulates an obligation for manufacturer, its representative or importer, to ensure the labelling of products with appropriate conformity mark prior to its placement in the market.
Therefore, if the requirements have been met, i.e., provided that the product placed in the market or for use in Serbia meets the requirements of the Serbian technical regulation, and if such regulation stipulates the placement of Serbian conformity mark, there is an obligation to use this mark, i.e., to place it on the product, regardless of the fact that no conformity certificate as to such product was issued by the appointed body.
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.
By Lara Maksimovic, Senior Associate, PR Legal
Harrisons has advised the EBRD on a EUR 5 million loan to the city of Belgrade for the implementation of energy efficiency measures in four public buildings.
The project includes the Emergency Medical Institute, the City Library, the Student Healthcare Centre, and the Student Hospital. According to Harrisons, “most of the buildings were constructed in the 1920s and have not undergone any major refurbishment since then. This project will be co-financed by investment and technical assistance grants of up to EUR 11 million provided by the European Union from the Instrument for Pre-Accession Assistance with the Republic of Serbia.”
Harrisons’ team included Lawyers Mark Harrison and Ines Matijevic Papulin and Associate Mina Markovic.
Karanovic & Partners, working with Freshfields Bruckhaus Deringer in Brussels, has advised the Ardent Group on the Serbian aspects of its sale of Gaming1 to CVC Capital Partners Fund VIII. Allen & Overy advised CVC on its investment and related financing.
Local advisers to the Ardent Group reportedly included Levine Keszler in France, Brigard Urrutia in Colombia, Lenz & Staehelin in Switzerland, Mamo TCV in Malta, and Morais Leitao in Portugal.
According to Karanovic & Partners, “CVC will bring its expertise to support the group’s growth in becoming a global reference in the regulated online gaming markets thanks to the continued development of their technology and through their unique omnichannel approach.”
Part of Ardent Group, Belgium’s Gaming1 operates land-based and online games including casino games, sports betting services, and poker. The Ardent Group is a Belgian company developing projects in entertainment, communication, and commercial property.
Established in 1981, CVC is a private equity company with a global network of 24 local offices in Europe, the Americas, and the Asia-Pacific region.
“In a rapidly changing world, the key to success is adapting,” Ardent Group CEO Emmanuel Mewissen commented. “By partnering with CVC, we will benefit from their global, sector, and technology expertise, which will support our company to continue on our successful growth path and further build our digital capabilities. We will stay loyal to our values and Belgian roots, as shown by our recent move to our digital hub in the heart of Liege. This desire to anchor ourselves in and to contribute to our country’s growth is an integral part of our identity and will continue to guide us daily.”
The Karanovic & Partners team was led by Partner Ivan Nonkovic and Senior Associate Sava Draca.
Allen & Overy fielded teams in Belgium and the UK.
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:
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
Karanovic & Partners has advised the Green for Growth Fund on extending its RSD 1.7 billion loan facility with UniCredit Bank Serbia.
According to the firm, the transaction is a part of GGF’s efforts “to provide finance for energy efficiency and renewable energy investments in the Southeast Europe region.”
“We are pleased to strengthen our strategic partnership with UniCredit Bank Serbia, a well-established market leader,” GGF Board Member Christopher Knowles commented. “Local currency lending is a key component of responsible finance, as it protects unhedged borrowers from exchange rate risk. As an impact investment fund focused on mitigating climate change and promoting sustainable economic growth, the GGF is keen to advance the practice of local currency financing in Serbia and the region overall. That is why we are pleased to be furthering our relationship with UniCredit Bank, especially during the ongoing pandemic.”
“We are proud that UniCredit Bank Serbia is a partner of the first Green for Growth Fund transaction in local currency on the Serbian market,” UniCredit Bank Serbia CEO Nikola Vuletic added. “This transaction is a great indicator that some of the most important and innovative financial institutions like the GGF rely on our expertise. Besides that, this partnership proves that UniCredit Bank Serbia is a reliable partner and one of the local leaders in financing renewable energy projects.”
The Karanovic & Partners team was led by Partner Katarina Guduric and Associate Dimitrije Ilic.