Liability of Directors and Shareholders in Serbia: When Do Directors and Owners Become Personally Liable for Company Debts?

Updated: April 2026  |  Next review: October 2026

Many directors and shareholders in Serbia start from the incorrect assumption that liability for company debts is exclusively a matter of the company, and not their personal matter. This is generally the case, but there are certain exceptions to this rule that every director or company owner should be aware of. The Companies Act (ZPD) prescribes when a director may be personally liable, not only during their mandate, but also years after leaving the position. This text explains the legal framework that must be understood before a person assumes a directorship in a Serbian company or becomes its shareholder.

What does a director owe to the company and why is it not just a moral obligation?

A director is not merely an executive body that signs contracts and other documentation. They have specific duties toward the company defined by law, the breach of which directly leads to personal liability.

• One of these duties is the Duty of Care (Business Judgment Rule), which requires the director to act conscientiously, with the diligence of a prudent businessperson, in the reasonable belief that they are acting in the company's best interest. This duty implies that it is not sufficient to act in good faith only, but the director must actively seek relevant information and consult experts (e.g. lawyers specialized in corporate law) when the situation requires it. If damage is caused, the burden of proof lies on the director, who must prove that they acted diligently, and not on the company to prove that they did not. We note that this reversed burden of proof applies specifically to claims based on breach of special duties, while in criminal and misdemeanour proceedings the general rule applies that the burden of proof lies with the prosecutor or competent authority.

• Another specific duty of the director toward the company is Fiduciary Duty, which implies that the director must not place personal interest above the interest of the company. The law defines the concept of "personal interest" very broadly: it includes not only transactions between the director and the company, but also transactions with persons financially connected to the director, use of company assets for personal purposes, misuse of insider information, as well as diversion of business opportunities of the company for personal benefit. The law prescribes that the director must disclose any actual or potential conflict of interest before entering into a transaction.

  A specific consequence of breaching the rules on personal interest is that if the court, in proceedings initiated by a claim, establishes a breach of the rules on approval of transactions involving personal interest, it must impose a temporary restriction on the right to perform the function of director, supervisory board member, representative or procurator for a period of 12 months. This decision is submitted to the Serbian Business Registers Agency (APR) for registration and publication. This is a specific status-related consequence tied exclusively to this type of breach, meaning that it does not automatically apply to every breach of special duties.

• The statutory obligation to submit financial statements is an obligation that is often underestimated in practice by certain companies that are not particularly operationally active, and whose breach may have serious consequences. The director, as the legal representative, is responsible for the proper submission of the company's financial statements. Failure to submit reports for two consecutive years constitutes a legal ground for compulsory liquidation of the company. Foreign directors who are not familiar with Serbian accounting deadlines should pay particular attention to this obligation.

• We particularly emphasize that the duty to keep business secrets and the duty of non-compete are not limited only to the duration of the mandate. More on this below.

Who can sue the director and within what time limit?

This is a question that is of particular interest to foreign investors and lawyers advising clients acquiring companies in Serbia. The answer is: the circle of potential claimants is broader than most assume.

A claim against a director for damages may be filed by:

• The company itself, as the directly injured party;
• A shareholder who has suffered damage (individual claim);
• One or more shareholders, who in their own name, but on behalf of the company, file a so-called derivative claim, provided that they hold at least 5% of share capital and that they have previously requested the company in writing to initiate proceedings itself, and the company refused or failed to act within 30 days (mandatory prerequisites).

With regard to limitation periods for claims arising from breach of special duties of directors toward the company, the subjective period is 6 months from the day of becoming aware of the breach, while the objective period is 5 years from the day the breach was committed. For claims relating exclusively to compensation of damage caused to the company, a special limitation period of 3 years from the occurrence of damage applies.

Practice shows that derivative actions in Serbia are rare and underdeveloped, partly due to insufficient awareness of minority shareholders, and partly due to insufficiently developed case law in this area. However, it is important to emphasize that the legal framework exists and is applied. Founders who wish to regulate these matters in advance can do so through a shareholders agreement, which can specify procedures prior to initiating derivative actions and conditions for removing a director.

Does director liability cease when they leave the position?

No. This is perhaps the most common misconception in practice. Dismissal or resignation, and consequently deletion from the Serbian Business Registers Agency, does not extinguish the director's liability for actions taken during the mandate. The objective period of 5 years runs from the day the breach was committed, which theoretically means that a former director may be called to account several years after leaving the company.

A particularly sensitive issue is the duty to keep business secrets. The law prescribes that the director must keep business secrets for at least 2 years after termination of the function. By the articles of association, a company decision or a contract, this period may be extended (but not longer than 5 years). A business secret is any information that is not publicly known and whose disclosure could cause damage to the company. Exceptions are narrow: legal obligation of disclosure, necessity to protect company interests, or reporting a criminal offence.

The same applies to the duty of non-compete. It applies during the entire mandate and may be extended by the articles of association for up to 2 years after termination.

From a practical standpoint, the key recommendation is a formal handover of duties with precise documentation of the company's status at the moment of departure. Informal departure "by word" leaves the director in legal uncertainty, i.e. without evidence of the condition they found and the condition they left behind.

When is a director liable with their own assets?

The basic rule of company law is that the company is liable for its debts with its own assets, and not with the assets of the director or shareholders. However, Serbian law provides for situations in which a director may be personally liable with their own assets due to breach of special duties prescribed by the Companies Act.

When a director, by breaching the duty of care, duty of loyalty, non-compete or duty to keep business secrets, causes damage to the company, they are personally liable with their own assets because their liability is subjective and based on fault, and not on their position in the company. In this respect, the legal personality of the company does not protect the director from the consequences of their own unlawful actions.

In addition to liability toward the company, a director may also be liable toward creditors and third parties, but only in exceptional situations. These are cases where the damage arose as a consequence of the director's personal actions outside the scope of their authority, fraudulent conduct, or provision of false information on which a third party relied. A classic example is a director who personally guarantees the performance of a contract or provides false information about the company's solvency to a business partner.

In certain cases, if the director is simultaneously a shareholder, both bases of liability may be cumulative: both as a director and as a shareholder (piercing the corporate veil). This is a common situation in smaller LLCs where the founder is also the sole director.

Liability of Shareholders: Exceptions to the Rule

As a rule, shareholders in a Serbian limited liability company (LLC) are not liable for the company's obligations. This is the fundamental characteristic of a limited liability company. However, there are two important statutory exceptions that business owners must be aware of.

1. Piercing the corporate veil allows the court to remove the "shield" of limited liability and directly reach the private assets of shareholders. This may occur in the following situations: a shareholder used the company to harm creditors (for example, by transferring assets to themselves or to related parties; by commingling the assets of the shareholder and the company, thereby preventing creditors from collecting their claims; or by using the company as an instrument to achieve objectives that would otherwise be prohibited to the shareholder as an individual). Piercing the corporate veil does not occur automatically but requires court proceedings and proof that one of the statutory grounds has been met.

2. Liability in liquidation proceedings: if a company is deleted from the register through liquidation and has outstanding obligations, creditors may seek satisfaction directly from shareholders who received assets in the distribution of the liquidation surplus, up to the value received. Therefore, it is not enough to be a passive owner: if you received assets in liquidation and the company's obligations toward creditors were not settled, you become personally liable. On the other hand, if the company is deleted from the register through compulsory liquidation, the Companies Act provides an important exception under which controlling shareholders are liable without limitation with their personal assets for the company's debts (regardless of the amount of liquidation surplus received or whether they received anything at all). This is particularly important in the context of exit strategy planning and restructuring. Foreign investors planning to close a Serbian entity must be aware that the distribution of assets without settling debts may create personal liability for shareholders. Addressing these scenarios in a shareholders agreement before entering into liquidation can be critical for protecting each member individually.

Collective Liability and the Issue of Abstention from Voting

In companies with multiple directors, a board of directors is formed. When a decision is adopted by the board of directors as a collective body, all directors who voted in favor of that decision are liable for the damage. This is logical, but Serbian law goes one step further.

A director who abstained from voting is, for the purposes of liability, treated as if they voted in favor of the decision. The only way for a director to avoid liability for a collective decision is to vote against it and have that dissent recorded in the minutes. A director who was not present at the meeting has a period of 8 days from becoming aware of the adopted decision to object in writing; otherwise, they are deemed to have voted in favor of that decision.

This is particularly important in practice for directors who sit on boards of multiple companies or who are nominated by foreign parent companies. Passivity and abstention do not protect against liability. Only voting against, with documented dissent, provides protection.

Criminal, Misdemeanour and Economic Offence Liability

In addition to civil liability, a director also bears criminal liability. The Serbian Criminal Code provides for a number of offences relevant to directors: abuse of trust in performing business activities, tax evasion, disclosure of business secrets, damage to business reputation and creditworthiness, money laundering, document forgery, and others. The penalties are significant: for more serious forms of criminal offences where the damage exceeds 10 million dinars (approximately EUR 85,000), imprisonment from 6 months to 5 years is prescribed, along with a fine. For giving false statements in proceedings prescribed by the Companies Act, where damage exceeds this threshold, imprisonment from 1 to 10 years is prescribed. Criminal liability is personal in nature and cannot be transferred to the company.

A specific segment that is often overlooked is misdemeanour liability and liability for economic offences. The director, as the responsible person in a legal entity, may be personally fined if the company fails to comply with tax regulations, accounting obligations, occupational health and safety rules, personal data protection regulations, or other regulatory requirements. For example, if a company fails to submit financial statements within the statutory deadline, in addition to a fine imposed on the company, a fine is also imposed on the director as the responsible person. An important practical note is that in misdemeanour and economic offence proceedings, the company may pay the fine on behalf of the director. However, this does not eliminate the director's liability itself. A ban on performing the function or a temporary prohibition on the company's operations are sanctions that cannot be "bought off" in this way.

How Can a Director Protect Themselves?

The legal framework of Serbian company law, as also concluded by domestic legal theory, resembles more a presumption of director liability than a presumption of diligence, at least when it comes to civil claims based on breach of special duties. The director must prove that they acted properly, rather than the company having to prove that they did not. This makes protection against liability an active obligation, rather than a passive position.

The key protective mechanisms are:

• Formal handover of duties with precise documentation of the company's condition upon assuming and leaving office;
• Documentation of business decisions: every significant decision should be supported by information, analyses and expert opinions. An investment that was justified at the time of decision-making, but subsequently resulted in a loss, as a rule does not trigger director liability;
• Voting "against" and ensuring that such dissent is recorded in the minutes when the director disagrees with a board decision;
• Disclosure of personal interest to the competent body before entering into any transaction where a potential conflict of interest exists;
• Regular monitoring of accounting and regulatory deadlines, particularly deadlines for submission of financial statements;
• D&O insurance (Directors & Officers Liability Insurance), a standard practice in developed corporate systems, increasingly present in Serbia, covering damage arising from ordinary negligence (but not from intent or gross negligence).

For foreign directors, we particularly recommend entering into a comprehensive agreement regulating in detail the rights and obligations of a director who is not a Serbian national, as well as adopting appropriate internal company acts. The relationship between directors and shareholders can also be regulated in detail through a shareholders agreement, which is particularly useful when there are multiple owners with different expectations and roles. For a more detailed analysis of director protection mechanisms and structuring governance arrangements in Serbian companies, it is advisable to consult lawyers specialized in corporate law.

Conclusion

Director liability in Serbia is not limited by the term of office nor by the company's assets. Under Serbian law, this liability is broader, longer-lasting, and stricter than many assume. A director may be personally liable (with their own assets) for damage caused by breach of statutory duties, and in certain cases for up to 5 years after the breach occurred. A breach of conflict-of-interest rules also carries an additional status consequence: a temporary ban on performing the function of director for 12 months.

Piercing the corporate veil may extend to the private assets of shareholders, and in certain cases also to the assets of directors who are simultaneously founders of the company. Criminal and misdemeanour liability are not excluded. Passivity within the board does not provide protection; only active and documented voting "against" may release a director from liability for collective decisions.

For those operating in Serbia or considering entering the Serbian market, understanding this framework is not optional, but a prerequisite for responsible corporate governance.

Frequently Asked Questions

When is a director in Serbia personally liable with their own assets?

A director is personally liable with their own assets when they cause damage to the company by breaching statutory special duties under the Companies Act: the duty of care, fiduciary duty, non-compete, or duty to keep business secrets. Liability is subjective and based on fault, not on the director's position. In exceptional cases, liability extends to third parties if damage arose from fraudulent conduct or provision of false information.

Does director liability in Serbia end when they are deleted from the APR register?

No. Deletion from the Serbian Business Registers Agency does not extinguish liability for actions taken during the mandate. The objective limitation period is 5 years from the day the breach was committed. A former director may be sued several years after leaving, provided that both the subjective period (6 months from awareness) and the objective period (5 years) are still running.

What is piercing the corporate veil and when does it apply in Serbia?

Piercing the corporate veil is a judicial mechanism that allows creditors to bypass limited liability and collect directly from the private assets of LLC shareholders. It applies when a shareholder used the company to harm creditors, commingled personal and company assets, or used the company to achieve objectives otherwise prohibited to individuals. It does not occur automatically; it requires court proceedings and proof of a statutory ground.

Does abstention from voting on a board decision protect a director from liability?

No. Serbian law treats a director who abstained from voting identically to one who voted "in favor" for the purposes of liability. The only protection is active voting "against" with dissent recorded in the minutes. A director absent from the meeting must object in writing within 8 days of becoming aware of the decision.

If the company pays the fine on behalf of the director, is the director released from liability?

In misdemeanour and economic offence proceedings, the company may pay the fine, but this does not eliminate the director's personal liability. A ban on performing the function or a temporary prohibition on the company's operations cannot be "bought off" in this way. The director remains recorded as the responsible person in the proceedings regardless of who paid the fine.

How long do director obligations last after leaving the position?

The duty to keep business secrets lasts at least 2 years after leaving (extendable to 5 years by the articles of association or contract). The non-compete applies during the mandate and may be extended for up to 2 years after leaving. Liability for actions during the mandate may be pursued for up to 5 years from when the breach occurred.

What are the key protective mechanisms for directors in Serbia?

Key mechanisms include: formal handover of duties with documentation, documented business decisions, voting "against" with dissent in the minutes, disclosure of conflicts of interest before entering transactions, regular monitoring of accounting deadlines, and D&O insurance (Directors & Officers Liability Insurance). For foreign directors, a comprehensive directorship agreement is particularly recommended.

Can a foreign investor be personally liable for the debts of a Serbian company in liquidation?

Yes. If a foreign investor receives assets in the distribution of the liquidation surplus, and the company has unsettled obligations to creditors, the investor is liable up to the value received. In compulsory liquidation, controlling shareholders are liable without limitation with their personal assets for the company's debts, regardless of the amount of surplus received.

Check your position before a dispute begins

Zunic Law provides advisory support to directors and shareholders in corporate law: structuring governance arrangements, preparing D&O documentation, and representing clients in disputes. Contact us through our corporate and commercial law practice page.

About the Authors