Mergers and acquisitions in Serbia often come with a familiar strategic fork in the road: should the transaction be structured as a share deal or an asset deal? While the concepts are well-known to international practitioners, their legal, tax, and practical consequences under Serbian law deserve closer attention.
Rather than focusing on statutory theory, this text takes a practical approach, explaining how asset deals and share deals function under Serbian law, why parties tend to favor one structure over another, and which issues most often prove decisive in actual transactions.
1. The Big Picture: Two Routes to Acquiring a Business
At a very high level, the difference is simple:
- In a share deal, the buyer acquires shares or quotas in a Serbian company and thereby takes over the company itself, with all its assets, contracts, rights, and (known and unknown) liabilities.
- In an asset deal, the buyer acquires selected assets (and sometimes liabilities) from the target company, while the legal entity selling those assets remains in place.
This distinction exists in all jurisdictions, but Serbian law gives each structure some very specific features that can materially affect risk allocation, timing, tax exposure, and post-closing integration.
2. Share Deals under Serbian Law
What Is a Share Deal in Serbia?
In a share deal, the buyer acquires:
- Ownership quotas in a limited liability company (LLC), or
- Shares in a joint-stock company.
The most common structure in Serbian M&A is the transfer of quotas in a DOO, as this is by far the most prevalent corporate form.
From a legal perspective, the company remains an unchanged entity after closing – only the ownership changes. All assets, employees, contracts, licenses, and liabilities stay with the company.
Why do Buyers and Sellers Like Share Deals?
Share deals are often preferred because they are:
- Structurally simple – one transfer instrument, one target
- Operationally seamless – the business continues without interruptions
- Contract-friendly – no need to assign each individual contract.
Under Serbian law, most commercial contracts, permits, and licenses remain valid after a change of ownership, unless they explicitly contain change-of-control clauses.
For sellers, share deals are often attractive because:
- The sale proceeds go directly to shareholders, not the company
- The transaction is usually tax-efficient (more on this below)
- The seller can exit cleanly, without having to wind down the company.
Hidden Liabilities: The Buyer’s Main Concern
The downside of a share deal is also well known: the buyer inherits the company “warts and all.” Under Serbian law, this includes:
- Historical tax liabilities
- Employment-related claims
- Regulatory breaches
- Contractual disputes
- Contingent and off-balance-sheet risks.
Even if these issues predate the acquisition, the company – and therefore indirectly the buyer – remains liable. This is why legal, tax, and financial due diligence is absolutely central in Serbian share deals.
Where risks are identified, they are typically addressed through:
- Price adjustments
- Representations and warranties
- Indemnities
- Escrow or holdback mechanisms.
3. Asset Deals under Serbian Law
What Is an Asset Deal?
In an asset deal, the company itself (not its shareholders) sells specific assets to the buyer. These may include:
- Real estate
- Machinery and equipment
- Inventory
- Intellectual property
- Customer and supplier contracts
- Brand and goodwill
- Employees or defined teams assigned to the business being transferred
The buyer can, in principle, pick and choose what they want to acquire.
Transfer of Assets: More Formal Than It Looks
Under Serbian law, assets do not move as a single bundle by default. Unlike a share deal, where ownership of the company automatically carries all underlying assets, an asset deal requires individual treatment of each asset category. Depending on the nature of the assets, this may involve:
- A specific transfer agreement
- Registration (for real estate or intellectual property)
- Third-party consent (particularly for contracts).
As a result, asset deals tend to be more documentation-heavy and administratively demanding than share deals, and they often require careful sequencing to ensure all transfers are effective at closing.
Employees in Asset Deals
Serbian Labor Law recognizes a “change of employer” under which the successor employer may take over the predecessor’s employment contracts. In such cases, the predecessor must notify affected employees in writing, and employment contracts and internal employment bylaws transfer to the successor employer under the statutory regime.
Employees, however, have a right to refuse the transfer within a short deadline after notification; if they refuse (or do not respond), the predecessor employer may terminate their employment.
In practice, this means that employee transfer in an asset deal is not “automatic” in every scenario. Whether employees move with the business depends on how the transaction is structured and whether it qualifies as a “change of employer” under Serbian labor rules.
Where it does not (or where key employees refuse to transfer), workforce continuity is typically achieved through new employment arrangements with the buyer, alongside careful handling of termination risks and timing.
Liabilities: Can You Leave Them Behind?
One of the main attractions of an asset deal is the ability to ring-fence liabilities. As a general rule under Serbian law, the buyer assumes only those liabilities it expressly agrees to take over, whereas all other liabilities remain with the selling company.
There are, however, important statutory exceptions. Certain obligations may transfer regardless of contractual allocation, particularly in relation to:
- Employment-related claims
- Specific tax liabilities connected to the transferred assets
- Environmental obligations attached to land, facilities, or operations.
These exceptions mean that asset deals, while flexible, require careful legal structuring and close coordination with local advisors to ensure that liability allocation works as intended.
4. Tax Treatment: A Key Driver of Deal Structure
Tax considerations are often one of the primary drivers behind the choice between a share deal and an asset deal in Serbia. While the headline tax rates are relatively modest, the overall tax outcome can differ significantly depending on the structure.
Taxation of Share Deals
In a share deal, the tax position is generally straightforward and predictable:
- The seller (shareholder) is taxed on the realized capital gain
- For individual shareholders, capital gains tax is generally 15%
- For corporate sellers, capital gains are subject to corporate income tax at 15%.
From the buyer’s perspective, share acquisitions are typically tax-neutral at closing.
This relative simplicity and tax efficiency are key reasons why share deals dominate Serbian M&A practice, particularly where sellers are motivated by a clean and tax-efficient exit.
Taxation of Asset Deals
Asset deals are usually less tax-efficient for sellers, at least at first glance. Common tax implications include:
- Corporate income tax payable by the selling company on the realized gain
- Potential VAT exposure, depending on the nature of the assets and whether the transaction qualifies as a transfer of a going concern
- Real estate transfer tax or VAT, where immovable property is involved.
If the selling company subsequently distributes the sale proceeds to its shareholders, a second layer of taxation may apply, further reducing net returns.
From the buyer’s perspective, however, asset deals can offer meaningful tax advantages. In particular, they may allow the buyer to:
- Step up the tax base of acquired assets
- Depreciate assets at a higher value going forward
- Reduce exposure to historic tax risks embedded in the target company.
As a result, tax considerations often pull buyers and sellers in different directions. A proper tax analysis – ideally coordinated with legal structuring – is therefore essential and must always be performed on a case-by-case basis.
5. Due Diligence: Different Focus, Same Importance
Whether the transaction is structured as a share deal or an asset deal, due diligence remains a cornerstone of any M&A process. What differs is not its importance, but its focus and depth.
Due Diligence in Share Deals
In a share deal, due diligence is necessarily broad, as the buyer is acquiring the company as a whole and stepping into its entire legal and economic history. The review typically focuses on:
- Full corporate history and ownership
- Compliance with Serbian company and corporate governance rules
- Tax filings, audits, and potential exposures
- Employment relationships and labor compliance
- Existing or threatened litigation and regulatory matters.
The objective is to build a complete risk picture and to identify any issues that may require contractual protection or price adjustments.
Due Diligence in Asset Deals
In asset deals, the scope is narrower but often more technical and execution-driven. The key questions usually include:
- Does the seller have clear legal title to the assets?
- Are the assets subject to pledges, mortgages, or other encumbrances?
- Can key contracts be assigned or novated to the buyer?
- Which liabilities may transfer automatically under Serbian law?
While fewer areas are reviewed, each point tends to require closer scrutiny, as deficiencies can directly affect the buyer’s ability to operate the acquired business post-closing.
6. Carve-Outs and Partial Divestments
Asset deals are particularly common in carve-out scenarios, where a seller wishes to divest only a specific part of their business rather than the entire legal entity. This structure allows sellers to retain their core operations while monetizing non-core or standalone segments.
Typical carve-out examples include:
- Sale of a distinct business line or activity
- Sale of a brand, trademark, or product portfolio
- Spin-off of a regional or country-specific operation.
Under Serbian law, such carve-outs are entirely feasible, but they require careful planning and precise execution. In particular, attention must be paid to:
- Clear identification and transfer of relevant assets and employees
- Transitional services arrangements to ensure business continuity post-closing
- Careful separation and allocation of shared contracts, IT systems, and intellectual property.
In practice, carve-out transactions tend to be legally intensive, as they require disentangling assets and operations that were not originally designed to function independently. At the same time, they offer a high degree of commercial flexibility, making them an attractive option where a clean share sale is neither possible nor desirable.
Regulatory and Consent Issues
Change of Control vs. Assignment
One of the most important, and often underestimated, practical differences between share deals and asset deals under Serbian law relates to third-party consents and regulatory approvals.
In a share deal, the legal identity of the target company remains unchanged. As a result:
- Commercial contracts generally remain in force
- No formal assignment takes place
- Consents are usually required only if contracts include change-of-control clauses.
While such clauses are not universal in Serbian commercial practice, they are increasingly common in financing agreements, key supply or distribution contracts, and contracts with international counterparties. Where triggered, these clauses can give counterparties termination rights or require prior approval, directly affecting deal timing and certainty.
By contrast, an asset deal almost always involves the assignment or novation of contracts. Under Serbian law, assignment typically requires the consent of the counterparty unless the contract explicitly allows transfer without consent.
In practice, this means that:
- Each material contract must be reviewed individually
- Negotiations with multiple counterparties may be required
- A single withheld consent can jeopardize the commercial rationale of the transaction.
As a result, asset deals often involve greater execution risk and longer transaction timelines.
Licenses and Permits
Regulated activities require particularly careful structuring. In sectors such as banking, energy, telecommunications, pharmaceuticals, or healthcare, the impact of the chosen deal structure can be decisive.
In many cases:
- Licenses and permits remain valid following a share deal, as the licensed entity continues to exist unchanged
- The same licenses cannot be transferred in an asset deal and must be reissued to the buyer.
Re-licensing may involve regulatory scrutiny, minimum capital requirements, technical approvals, or lengthy administrative procedures. In some industries, there is also no guarantee that a new license will be granted at all.
Given the complexity of Serbian M&A transactions and the practical realities of regulatory interaction, licensing considerations alone can, and often do, determine whether a transaction is structured as a share deal or an asset deal, regardless of tax or liability-driven preferences.
For foreign investors, early identification of regulatory touchpoints and proactive engagement with local advisors and authorities is critical to avoiding delays and deal-breaking surprises.
8. Negotiation Dynamics: There Is No One-Size-Fits-All
In practice, the final transaction structure is rarely dictated by legal theory alone. More often, it is the product of commercial negotiation, shaped by risk appetite, tax planning, timing constraints, and bargaining power.
- Buyers will frequently favor asset deals as a risk-management tool. By acquiring only selected assets, buyers aim to avoid inheriting historical liabilities, particularly those that are difficult to quantify during due diligence, such as tax exposure, employment claims, or regulatory non-compliance. This preference is especially pronounced where due diligence reveals red flags, incomplete records, or aggressive past practices.
- Sellers, on the other hand, typically prefer share deals, primarily for tax efficiency and clean exit reasons. A share sale allows shareholders to receive proceeds directly, often with lower overall tax leakage, and to walk away from the business without the need to retain a legal entity burdened with residual liabilities. From the seller’s perspective, asset deals may feel like a partial exit with lingering responsibility.
As a result, Serbian transactions often land somewhere in the middle. Risk is reallocated contractually rather than structurally, through a combination of:
- Detailed representations and warranties
- Specific indemnities for identified risks
- Purchase price adjustments or earn-outs
- Escrow accounts or holdback arrangements.
These tools allow parties to proceed with a share deal while addressing buyer concerns, or to make an asset deal commercially palatable for the seller.
Importantly, Serbian M&A practice has matured significantly over the past decade. Market-standard solutions familiar to international practitioners, such as warranty packages and locked-box mechanisms, are increasingly common, particularly in cross-border and private equity transactions.
As a result, deal outcomes are less rigidly tied to the formal structure and more reflective of negotiated risk allocation and commercial reality.
To sum up, the choice between an asset deal and a share deal under Serbian law is not merely technical – it is strategic. Share deals offer simplicity, continuity, and tax efficiency, but require strong due diligence and contractual protection.
On the other hand, asset deals provide flexibility and risk isolation, at the cost of complexity, consents, and often higher tax leakage.
For foreign investors and advisors, the key takeaway is this: Serbia is a deal-friendly jurisdiction, but local legal and tax nuances matter. With proper planning, realistic risk allocation, and experienced local counsel, both structures can be used successfully to achieve commercial objectives.
If there is one universal rule, it is this: expect to negotiate and expect the structure to evolve as diligence unfolds.
