Category: Serbia

Even though changes could be in the pipeline for Serbia given the upcoming April 2022 presidential and parliamentary elections, the central Balkan country is in a state of stability and steady advancement, according to Radovanovic Stojanovic & Partners Partner Sasa Stojanovic.

“Looking at the previous election cycle, one could expect that the current political structures will remain in place, after the April 2022 elections end,” Stojanovic says. “Overall, there is a feeling of political stability in Serbia, which reflects on investor trust as well.”

Following the initial pandemic shock of 2020, Serbia has entered a recovery phase. “The market has recovered significantly, and this year has been much better than the last one. Why, some investment assessment experts eyeball the total FDI amount for this year at USD 4 billion!” Even if that number may not be the exact one, Stojanovic feels that it reflects the general sentiment accurately.

“Also, it is quite important to note that Cluster 4 of the EU accession negotiations has opened up – which is a strong indication that this process is advancing adequately,” Stojanovic says. He believes that, should this trend continue, Serbia might know its accession date by 2025. “Reflecting this, there have been some major efforts to harmonize the domestic legislative framework with that of the EU.”

Turning to specific business and market areas that have been overperforming, Stojanovic highlights the banking, IT, and energy sectors first. “A 400-megawatt quota for wind power plants has been set and the path for investors both foreign and domestic is opening up.”

Additionally, the number of M&A transactions is, according to Stojanovic, way better than in 2020. “The banking sector has been on fire as well, especially following the latest round of consolidations.” With the recent M&A transactions in the banking sector, Stojanovic reports that the total number of banks in Serbia has dropped to 20, “and with all the expected consolidations, it should drop even further by 2023.” 

Rounding out the high-performing sectors of the economy, Stojanovic highlights IT, healthcare and pharma, the food industry, and real estate.

“I expect the market to be even more stable in the new year, especially due to the mass vaccination efforts in the country,” Stojanovic says. “More market movement is expected and the first half of 2022 should see an even higher number of M&A transactions – most so in the IT, banking, and renewable energy sectors,” he says in conclusion.

NKO Partners has advised CTP on the acquisition of land from the City of Novi Sad.

According to the firm, the land is “intended for development on behalf of the Nidec Elesys Corporation, which deals in manufacturing and sales of automotive inverters and ECUs. The project is proclaimed to be of national interest to the Republic of Serbia by the Serbian Government.”

The deal follows another acquisition earlier this year, also “earmarked for development on behalf of the Nidec Corporation, a Japan-based company operating in the global brushless DC motor market” (as reported by CEE Legal Matters on July 7, 2021).

The NKO’s team was led by Partner Djordje Nikolic.

Karanovic & Partners has appointed Bojana Miljanovic Hussey as Partner.

Specializing in competition law, Miljanovic Hussey has been with Karanovic & Partners for over eleven years, having first joined the firm in 2010. She holds a master’s degree from the University of San Francisco in International Transactions and Comparative Law.

“I am delighted and very proud to have been promoted to a Partner in a firm where I have started my career more than eleven years ago,” Hussey commented. “It is especially rewarding to be given an opportunity to partner with some of the people who trained me at the start of my legal career and others whom I have respected for many years. I have been extremely lucky to have worked with some remarkable legal and commercial minds over the years and I am eager to continue the work with them to drive the firm’s values and ambition forward. Also, I am ever so grateful to my other colleagues and clients who have made my professional journey enjoyable and motivating.”

CMS has advised UK-based Hystead Limited on its sale of the Delta City shopping mall in Belgrade, Serbia, to MPC Properties for EUR 115 million. Samardzic, Oreski, & Grbovic advised MPC Properties on the deal. 

According to CMS, “MPC Properties is one of the leaders in construction and real estate management in the region.” Hystead Limited is majority-owned by South African Hyprop Investments.

CMS’ team was led by Partners Maja Stepanovic and Milica Popovic and included Partner Ivan Gazdic and lawyer Marija Marosan.

Samardzic, Oreski, & Grbovic’s team included Partner Milos Gledovic and Senior Associates Milan Novakov, Andja Nikolic, and Ivan Nikolic.

Serbian law firm Matkovic & Partners has announced it opened an office in Freetown, Sierra Leone.

According to the firm, the office will “focus on our expanding mining and energy industry practices in West Africa and will serve as a hub for the rest of the continent.”

Kanu & Associates Partner Emmanuel Tondoneh will join the firm as an ‘external member’ and will be the Partner for West Africa operations.

On 19 November 2021 the Parliament of the Republic of Serbia enacted yet another amendment to the Company Law. This is the seventh change of this piece of legislation in its 10 year long legal life. We focus here on the two which may have far-reaching consequences to the landscape of limited liability companies (LLC) in Serbia.

Agreement between the Company and a New Shareholder

The amendments introduce a rather confusing provision requiring that for a third party to become a shareholder in a LLC, an agreement between that party and the company itself must be made (person nominated by the shareholders meeting signs on behalf of the company).

It seems that the purpose of this amendment is to provide a legal basis for the existing practice where in case of a capital increase by a third party, the Serbian registration authority – Business Registries Agency required an agreement on accession to be signed between existing and new shareholders.

On the other hand, according to the Business Registries Agency, this provision will apply only in special (in practice very rare) cases where the company’s memorandum of association provides that consent of the company itself is required for transfer of the share to a third party.

What our concern is  that the wording of the provision is such that this provision apparently applies even if a third party becomes a shareholder by acquiring shares from the existing shareholder.

Requiring such an agreement does not only seem to lack purpose but is arguably detrimental to the status of minority shareholders in LLC’s. It appears that this provision will give the right to majority shareholders to block the minority shareholders to rightfully transfer their shares to third parties (by blocking execution of such an agreement at the level of shareholders’ meeting). We believe that this was not the intention of the lawmakers but is apparently an unfortunate inadvertent effect.

Since this change applies to all LLC’s, it appears that this change will also affect the relations between the majority and minority shareholders in the existing LLC’s in the manner explained above.

Nullity of Share Transfer Agreement

The law introduces a provision that in case a nullity of a share transfer agreement is established by a court ruling, the parties can request from the Business Registries Agency to change the registration of the title to the affected share.

It is not clear whether this newly introduced clause will override the principle of reliance in the registered data, providing that the parties cannot bear negative consequences if they relied on the registered data (which is of paramount importance for the certainty of legal transactions), and whether subsequent acquirers of the share (in case of sale chain) acting in good faith would bear consequences to their title to the share if the title of one of the previous sellers in the sale chain would be declared null. We hope these tensions will be resolved in court practice in favour of the reliance principle, but until then the huge legal certainty remains.

We will follow up with the news on other major amendments to the Company Law introduced this November.

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

Harrisons has advised the EBRD on an EUR 8 million loan to the city of Novi Sad for the purchase of up to ten electric buses and the accompanying charging infrastructure.

According to Harrisons, “this investment, as part of the EBRD’s Green Cities Programme, will enable citizens of Serbia’s second-largest city to benefit from more comfortable, greener public transport.”

“In 2019 and 2020, Harrisons previously advised the EBRD on a loan facility to the Novi Sad public transport company for the purchase of 29 new buses, as part of their ongoing fleet renewal program. These buses which significantly reduce polluting emissions have been in use in Novi Sad since March 2021,” the firm informed.

The Harrisons team included Principal Mark Harrison, Consultant Ines Matijevic-Papulin, and Associate Mina Markovic.

On September 24, 2021, CEE Legal Matters reported that Karanovic & Partners had announced it entered into an agreement with Gypsy Roma Urban Balkan Beats to provide ongoing pro bono legal support on contracts, scholarships, and copyright matters. CEE In-House Matters spoke with Caroline Roboh, Founder and CEO of Gypsy Roma Urban Balkan Beats (GRUBB), to learn more about the matter.

CEEIHM: To start, tell us a bit about Gypsy Roma Urban Balkan Beats and its mission.

Caroline: It’s a wonderful opportunity for me as founder of the GRUBB Foundation, to tell your readers a bit of what we do and the role that our Pro Bono lawyers have played over the years.

GRUBB was created 15 years ago to help young Roma stay at school and get a better job prospect. We started with tutoring programs. in our two centres in Serbia, in Belgrade and Nis and soon added artistic workshops, giving the children valuable soft skills and allowing their voices to be heard. In 2011 we created the GRUBB Show with the help of international artists. It toured in major theatres in several countries and an updated version will be performed in 2023. In 2015 we created Pretty Loud, the first Roma Girl Band which has attracted a lot of attention internationally.

CEEIHM: The association was founded in the UK but operates predominantly in Serbia. Why did you opt for this setup?

Caroline: Whilst our educational centers are located in Serbia, our artistic and representation activities are international. I am based in the UK, where we set up the GRUBB Forward Charity which owns GRUBB Production CIC which founded the GRUBB Foundation in Serbia. We have a transparent system linking a UK charity, with strong rules and tax advantages for donors, a CIC (Community Interest Company), which is our commercial entity, and GRUBB Fondacija which funds all our educational and artistic activities in Serbia. This way, any profit generated by the CIC goes to the Charity which donates it to the Serbian Foundation. The UK is the only country which offers a specific kind of entity for social enterprises, Community Interest Company. We are aiming to become completely sustainable within the next five years and not depend on donations. We wanted to have a long-term sustainable structure that is as efficient as possible.

CEEIHM: As we reported, Karanovic & Partners provide ongoing pro bono legal support to the organization. What type of assistance does that entail specifically?

Caroline: Karanovic and Partners have been generously helping us with our legal needs including contracts with our many partners, from the UN to local schools, employment contracts, music production and agency agreements to name a few. 

CEEIHM: Why were copyright matters relevant for your operation?

Caroline: We write and develop songs, shows, write books, and as such copyright matters are of the utmost importance for us. We are getting increasing attention worldwide with our music and Roma Women activism, we need to protect our work so the royalties and profits can go to the authors, the performers and to fund the educational programmes. The firm helps us with that.

CEEIHM: Why did you choose Karanovic & Partners as your partner in this matter?

Caroline: Senior Partners Patricia Gannon and Dejan Nikolic originally assisted me on the legal matters involved with buying a property which became the GRUBB Centre in Nis, over 15 years ago already. We were lucky to get senior management commitment to the project and the firm committed to work pro bono for us. As it’s a full services firm we get top lawyers in many practice areas supporting us. It takes a certain vision to work with a small NGO like ours. We’ve had, consistently over the years, a very prompt and strong support from them, making us always feel like priority clients.

We are immensely grateful for this, as we see so many small charities like us struggle and sometimes fail because they cannot afford the legal advice they need. It really does make all the difference to a small charity, to know that you are compliant with the law and you. have a competent team supporting you.

Originally reported by CEE In-House Matters.

On 17 November 2021, the National Assembly of the Republic of Serbia adopted the amendments to the Companies Act (“Official Gazette of the RS”, No. 109/2021) (the „Act“) which entered into force on 27 November 2021.

The amendments aim:

• to promote the protection of minority shareholders,
• to implement acquis communautaire into the Serbian corporate law, as well as,
• to eliminate shortcomings that have arisen during the application of the Act (status of entrepreneurs, registered seat, electronic administration services, compulsory liquidation, etc.).

Additional Protection of Minority Shareholders

The amendments specify legal provisions referring to the conclusion of legal transactions and undertaking of legal actions which imply personal interest when it comes to:

• content of the notice on existence of personal interest;
• data that a company is obliged to publish (including the intention for the conclusion of legal transactions and undertaking of legal actions which imply personal interest when for limited liability companies as well as joint-stock companies);
• reporting on such legal transactions, and/or undertakings in the annual financial statements; and
• right to a lawsuit if the transaction was not concluded, i.e. the action was not undertaken at fair value.

Additionally, a limited liability company and a non-public joint-stock company must provide information 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 3 days upon receipt of the request, if such request is filed by a shareholder of a limited liability company or a non-public joint-stock company holding at least 5% of shares.

The assessment of the items or rights that are the subject of the legal transaction or undertaking if the value of transaction or undertaking which imply personal interest amounts to or exceeds 10% of the value of the total assets of the company, is now to be performed at the fair value (instead of the market value), under the IFRS 13 — Fair Value Measurement. 

Remuneration in Public Joint-Stock Companies

Public joint-stock companies are obliged to adopt a compensation policy for directors (and supervisory board members, in case of two-tier corporate governance), within one year as of the day the amendments have entered into force (27 November 2022). The amendments to the Act provide mandatory elements of compensation policy, the manner of voting on the policy, and a report of compensations.

Preventing Registration of a Fictitious Seat of a Company

The address of the company’s seat includes the city, municipality, street or square, house number, floor, and apartment number, in accordance with the regulations governing the territorial organization. Companies, including entrepreneurs, must register missing data before the Serbian Business Registers Agency (“SBRA”) within one year as of the day the amendments have entered into force (27 November 2022).

Any interested party (creditor, state authority, owner of the premises where the company has its registered seat) is entitled to file a lawsuit if the owner of the premises where the company is registered has not allowed the use of such premises for performing the company’s business activities. The company needs to change the registered seat within 30 days as of the day the judgment becomes final and binding. Otherwise, the SBRA will initiate compulsory liquidation against the company.

Share Capital of a Company Purchased from Insolvency 

The share capital of a company purchased from insolvency amounts to the purchase price from the sale and purchase agreement and it represents a non-monetary stake of the buyer. If such share capital is less than the value of the minimum share capital provided by the law (e.g. RSD 3,000,000.00 for joint-stock companies), the buyer is obliged to register the missing amount within six months from the date of termination of the insolvency proceedings. 

Other relevant amendments

Companies are obliged to register as users of e-governance, under the E-Government Act, to enable communication between government authorities and companies.

When the law requests registration of the decisions of the shareholders’ assembly (increase or decrease of the share capital, initiation of a liquidation proceeding, etc.), a lawsuit for annulment of such decision may be filed within 30 days as of registration of such decision (the amendments to the Act excluded the deadline of 3 months as of the enacting of such decision).

Companies are obliged to register data on the gender of natural persons who have to be registered under the Act (shareholders, representatives, members of boards depending on the legal form of a company, etc.).

An Agreement on the Accession of a New Shareholder into the Company has to be signed in a written form with certified signatures of a new shareholder and a person authorized by the decision of the company’s shareholders’ assembly on approving such accession (not shareholders themselves).

A judgment declaring the share transfer agreement is null and void affects the company and shareholders (not only parties to the proceeding). Parties to the proceeding, i.e. their legal successors, are entitled to request registration of changes of shareholders of the company who were registered based on such share transfer agreement.

Finally, the amendments to the Act include rules concerning the encouragement of long-term shareholder engagement in public joint-stock companies, regulating the identification of shareholders and their notifying, as well as role and status of mediators, which will apply upon Serbia’s accession to the EU.

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 Andja Nikolic, Senior Associate, Samardzic, Oreski & Grbovic

The deadline for preparation of general acts and their obligatory submission to the competent Archive is approaching – December 31, 2021.

We remind you that the obligation of companies, among other things, is to:

1. Render and adopt general acts: (i) Rulebook on the manner of recording, classification, archiving and storage of archival material and documentary material, (ii) List of categories of archival material and documentary material with retention periods, (iii) Rulebook on the manner of recording, protection and use of electronic documents, and submit them to the competent Archive for approval, no later than December 31, 2021. If you have not been registered with the competent Archive so far, it is necessary to submit a copy of the Incorporation act and an registry excerpt from the Business Registers Agency, along with the contact details of the responsible person in charge of the archival material.
2. Arrange and classify archival material and documentary material,
3. Prepare a transcript of the Archive Book and submit it to the competent Archive by April 30, 2022,
4. Undertake other actions and measures in order to protect archival material and documentary material as prescribed by the Law, and that, inter alia:

1. Provide adequate space and equipment for the storage of archival material, as well as electronic form material;
2. Designate a responsible person for the protection and handling of archival material;
3. Record, mark and classify archival material, and ensure permanent storage of archival material in electronic form, its maintenance and migration;
4. Keep an archive book in the prescribed form;
5. Submit to the competent archive a transcript of the archive book no later than April 30 of each current year for the previous one – the obligation applies from 2022. The archive book is an inventory record, i.e. list of all documentary material kept on any basis by the creator and holder. All documentary material is entered in the Archive Book on an annual basis, and then marked with the corresponding archive numbers. Archive book can be kept in book form or in electronic form and includes a list of documents from the year of the company incorporation until the last completed calendar year;
6. Inform the competent archive and obtain an opinion in case of status change, relocation, adaptation of space or similar activities;
7. Select archival material and extract for destruction worthless documentary material whose storage period has expired, one year from the date of expiration of the determined period;
8. Enable the competent person of the archive to perform supervision and act in accordance with the imposed measures and deadlines;
9. i) Notify the competent archive of all changes related to archival material within 30 days from the date of such change;
10. Provide professional training and development;
11. Destroy the expired documents. The competent public archive issues a destruction permit for the documentary material recorded in the archive book;
12. Submit the arranged and listed archival material to the competent public archive after the expiration of the period of 30 years from its creation;
13. Adopt the Plan of measures for protection of archival material and documentary material in case of risk of catastrophes and emergency situations and in cases of emergencies, to state in the minutes the time and circumstances that occurred and to inform the competent archive without delay.

The creator and holder of archival material and documentary material is obliged to keep the archival material as a whole – the archival fund. If the archive material and documentary material are in electronic form, it is obliged to carry out procedures and techniques for storage, as well as to use an information system that guarantees the protection, authenticity and integrity of the electronic document.

Misdemeanour fines in the amount of RSD 50,000 to RSD 2,000,000 are prescribed for non-compliance with legal obligations.

At the same time, we would like to inform you that the Decree on Unique Technical-Technological Requirements and Procedures for Preservation and Protection of Archival Materials and Documentary Material in Electronic Form (“Official Gazette of RS”, No. 107/2021) has been adopted and in force since November 20, 2021, but will be applied deferred, from September 1, 2022. Thus, the handing over of the transcript of the Archive Book in 2022 will be possible in paper form, while from September 1, 2022 the electronic archiving will be obligatory. The Decree was passed on the basis of the Law on Archival Material and Archival Activity, and until the beginning of its application, creators and holders of documentary material in electronic form are obliged to perform electronic archiving in accordance with the Decree on conditions for document preparation for reliable electronic storage and document formats suitable for long-term storage (“Official Gazette of RS”, No. 86/2018) and the Rulebook on conditions for procedures and technological solutions used during reliable electronic storage of documents (“Official Gazette of RS “, No. 94/2018 and 87/2020).

By Jelena Stankovic Lukic, Partner, JPM Jankovic Popovic Mitic