Company Formation in Serbia in 7 Steps

15
Jun 2018

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Company formation Serbia Company registration serbia

You wish to establish a company in the Republic of Serbia? You are not a resident, but you would like to enter the Serbian market as a new entity?

The first questions that come up to your mind are probably: Who can found a company in Serbia? What type of legal entity could and should I establish? What are the differences between them?

If you are looking for the answers to these questions, you should stay tuned to this text, because you are the one that is eligible to found a company in Serbia!

The legal entity in Serbia can be founded by any person – private or legal person, regardless of the citizenship. The possibility to establish a business entity in Serbia, is the same for everyone, without any limitations or special conditions regarding the country of origin.

Furthermore, besides the fact that a shareholder can originate from any country in the world, even the legal representative of the company does not have to be a citizen of Serbia. Therefore, there are multiple structural variations possible – shareholder and the director both foreigners, the shareholder nonresident and resident as a director or resident as the shareholder and nonresident as the director.

Hence, when establishing a company your hands are free in giving the founding and managing roles to whomever you choose. However, depending on the legal basis on which you are engaging these persons, they might have the obligation to obtain a temporary residence permit in Serbia as well as the work permit.

STEP 1: Choose an Adequate Legal Form For You

The Law on Companies proscribes that company forms that are existing in Serbia are Limited liability company (hereinafter: LLC), Joint-stock company, General partnership company and Limited partnership company.

The differences between these forms are significant, therefore it is important to know the most important information regarding each, so that you can decide which form is the most suitable regarding your interest.

The basic characteristic of certain forms are:

1.1. LCC

By The Law on Companies, LLC presents a company in which 1 or more company members are shareholders in the company’s share capital. Generally speaking, the members are not liable for the company’s obligations. More precisely, they are liable only up to the amount of their stakes invested in the company. However, the members will be liable if they abuse the rules of the members’ limited liability for the company’s obligations. In most cases, LLC is a company with few members and a low amount of share capital.[1]

On the basis of their share in the company, members can manage the company’s profit and decide whether they want to distribute it among them or not. LCC is usually a company with the small amount of shared capital and a small number of members – shareholders. This form of legal entity is suitable for medium and small businesses.

1.2. Joint-stock company

The share capital of the Joint-stock company is divided into shares and the company’s share capital must be 3.000.000 dinars at the minimum, whereas, in businesses that are regulated by lex specialis limitation can be set even higher.

The shares of the joint-stock company can be owned by one or more person and the general remarks on them are registered in the Central Securities Registry, Depository and Clearing House.

Shareholders perform as a General Assembly of the company, where the number of votes is equal to the number of the shares they own.

1.3. Limited partnership company

The limited partnership company represents some kind of hybrid of a company with shared capital and general partnership company in the sense that some members of this company are limitedly liable for the company’s obligations whereas other members have unlimited liability and are responsible with all of their assets.

Even though this legal form is proscribed by the Statute, there are hardly any legal entities formed in this way.

1.4. General partnership company

Members of the general partnership company are partners and all of them are fully responsible and liable for the obligations of the company. This form of company exists only if there are at least two partners registered as founders. All decisions regarding the company, partners are making together.

Should I establish a new company or can I purchase a shelf company?

For those who want to operate quickly, the most interesting is the opportunity to buy a company that is already established and set for that purpose.

Even though this possibility is not used in its full spectrum, the chance to avoid the complex and time-consuming bureaucracy and bank procedures is a trick that you can use ti your advantage. Especially in case of nonresident founder. However, this procedure also requires unavoidable paperwork, hence, if you need more information on this, feel free to contact   office@zuniclaw.com.

STEP 2: Choose the Appropriate Business Name for Your Company

The company conducts business activities under its business name registered at the Business Registers Agency (hereinafter: “the BRA”). When choosing the business name, it is important to follow certain rules. That is due to the fact that the business name not in accordance with the rules prescribed by the law cannot be registered, which is often the reason for dismissing the application for company registration in Serbia.

a) Business name = name + legal form + registered office address

b) Business name has to be written in Serbian, in Cyrillic or Latin script

It is important to pay attention to whether the Cyrillic or Latin script is used in the business name, as well as to the mode in which the business name is written in the founding act and in the application for company registration. In both of those, the business name has to be written in the same script, using the same small and big captions. The discrepancy between the two acts in that regard is a ground for dismissing the application!

c) Business name can be written in a foreign language, contain foreign words or characters, can be written in the Latin script in English, as well as contain Roman and Arabic numerals

d) IT IS PARAMOUNT for the business name not to be identical or similar to the business name of another company!

The business name of the company has to be different from another company’s business name so that it does not cause confusion between the two companies. If identical or similar business name is already registered, the application for registration will be dismissed! In addition, even if registration is successful, a newly established company may be sued by another company with a similar business name, if the similarity between the names causes confusion and if these two companies have a similar field of activity.

For more information on this matter, visit our previous blog post on company formation in Serbia.

STEP 3: Register the Business Address

Registering the business address is obligatory in the process of establishing and registering the company at the BRA.

However, there are few addresses that are necessary and we will explain each one of them in the priority order:

3.1. Тhe business seat address

This is the most important address for the business entity. Furthermore, it is also included in the company’s business name, therefore it is one of the first things to be decided on in the in the process of establishing a company.

It is also important from the multiple other aspects such as procedural, strategic as well as legal, since it is also a factor that sets the judicial jurisdiction of the court.

3.2. Mailing address

It is not emphasized if it is not different from the business seat address. However, if the company, in reality, is not receiving and collecting its mail from the business seat address, then the separate mailing address needs to be registered as well.

3.3. Email address

According to the amendments to the Law on Companies, that came into force in 2018, all legal entities must register their e-mail address.

3.4. Virtual seat address

Today, when a lot of people are working as business nomads, the traditional form of business registry seems overrated and unnecessary.

Why would you commit to one space? Why would you enter into new unnecessary contracts with landlords or the property sellers? Your business does not require this kind of expenses?

We understand that. Precisely in those cases, there is an option of registering a virtual company seat, as an official and formal company seat.

The virtual seat actually represents the set of services that the provider of the virtual seat is offering and taking over for your company. By providing these services at the virtual address the purpose of the company seat is fulfilled.

The service of the virtual seat provides the user with the necessary seat address of the company, the possibility of occasional use of the adequate office space, receiving the mail for the company, registered phone number and acceptance of calls with filtering and forwarding messages to the company.

If this caught your attention and you would like to know more about this, contact the office@zuniclaw.com.

STEP 4: Draft the Memorandum of Association

A Memorandum of Association is the constitutive act of every LLC, which may be in the form of:

  • DECISION ON THE FORMATION OF THE LLC – if one person is the founder of the LLC
  • ARTICLES OF ASSOCIATION – if several persons are the founders of the  LLC

When drafting a memorandum of association of the LLC, bear in mind to include all its obligatory elements, prescribed by the Company law:

  • Name, residence and personal identification number for the Serbian citizens/passport number for foreigners (natural persons), or business name, seat and company registration number (legal persons) – for LLC members
  • Business name and seat of the LLC
  • The prevailing business activity of the LLC
  • The total amount of the LLC’s share capital
  • Amount of the monetary deposit, or financial value and the description of the non-monetary deposit for each member of the LLC
  • Time of making contributions in cash and kind into the Company’s share capital [1]
  • A share of each LLC member in the LLC’s share capital, expressed in %
  • Deciding on the LLC’s bodies and their competences

Regarding the expenses of a company formation in Serbia, either the company or the founders bear those.[2] However, unless otherwise specified in the Memorandum of Association, the founders will have to bear these expenses.[3]Therefore, we recommend providing the founders will bear these costs in the MoA, as well as for the founders’ right to reimburse expenses from the company for the establishment.

Remarks concerning the content of the MoA:

  • SHARE CAPITAL OF THE LLC:

The share capital of companies, LLC included, is the members’ subscribed cash value of the contribution to the company. What is meant under “subscribed contribution” is the registration of the amount of the contribution by members, in accordance with which members are obliged to subscribe/register the contribution.

The contribution can either be cash or in kind (only in objects and rights) and they are expressed in RSD currency. The minimum amount of the registered share capital (monetary and non – monetary) is 100.00 RSD unless the law prescribes for a higher amount.

When establishing the company, members are not required to subscribe/register their contribution, but only to enter their amount. However, it is necessary to stipulate the deadline in the MoA for subscribing/registering the contribution, the latest 5 years from the effective date of the MoA.

If you would like to pay the share capital when establishing a company, it is necessary to deposit the share capital into the bank’s temporary account prior to filing the application for company registration in the Agency. The bank will then issue a certificate confirming you deposited the share capital, which is filed with the application for company registration with the Agency. After the Agency issues its decision on company registration, it is necessary to open the company bank account, to which the bank then transfers the previously subscribed share capital from the temporary account.

  • LLC CORPORATE GOVERNANCE: When establishing the LLC, the founders decide (upon their decision) whether the company’s corporate governance shall be one-tier or two-tier.
  • One-tier corporate governance = one or more representatives (most commonly general managers) govern the company
  • Two-tier corporate governance = one or more managers + supervisory board

STEP 5: Notarize the Signature(s) of the LLC Founder(s) on the MoA and submitting the Paperwork for LLC Registration to the BRA

The Company law stipulates that, when establishing a company, the signature(s) of the founder(s) needs to be notarized. This can be performed in the office of a notary public.

Submit your application to register to the BRA

The LLC registration procedure is done in the BRA via a one-counter registration system, which enables that the LLC, along with registration, receives:

  • Company number (CN)
  • Tax identification number (TIN)
  • Health insurance number, issued by the National Health Insurance Fund (NHIF)

The procedure begins by filing the application for registration, with the accompanying paperwork, which may be done directly in the BRA’s seat in Belgrade, in BRA’s organizational units, or by mail. Either the founder or the person authorized by the founder submits the paperwork.

The deadline for filing the application for registration is 15 days from the effective date of the MoA. It is also required for the decision on the appointment of company’s representative and/or supervising committee to be registered in that period unless it is a part of the founding act.

Completing and Notarizing the OP Form

In order to be able to dispose of the funds on the bank account, which you would open in accordance with the following step, the so-called “OP form” needs to be completed, i.e. the form of notarized signatures of persons authorized for representation. You can download the form of the Internet, complete it easily.

After the OP form is completed, the company’s representative is required to sign it in the office of a notary public, and is then notarized by the notary public.

The founders often want to know how many times they will need to personally show up during the whole procedure of establishing a company. This is especially important for the those who are not staying in Serbia.

Therefore, the fact that the presence of the founder is completely avoidable, makes the whole procedures very convenient for everyone who is interested to go through this quickly. In fact, every step of the process can be completed by the lawyer empowered by the Power of Attorney, even the signing the Memorandum of Association if the lawyer is given a special Power of Attorney.

STEP 6: Open a Company Bank Account

After the BRA enacts the decision on registration of the LLC, you will need to open the company’s bank account in the bank of your choice.

The procedure of opening a bank account of a company established in Serbia by a legal person is more complicated, as, in addition to the listed paperwork, requires submitting additional paperwork (Personal identification document of the end owner of a legal entity, the company’s founder, in the form of excerpt from the competent authority’s register and the founding act of the company’s founder). The complexity of this procedure has shown that, in practice, it is necessary to hire an attorney at law in order to avoid making mistakes.

During their many years of experience, Zunic law firm developed a successful cooperation with many banks in Serbia and it is fully familiar with their requirements in the procedure of opening the bank accounts. Therefore, our clients are provided with highly professional service regarding all bank procedures.

STEP 7: What You Need To Do After Your Company Is Registered

Regardless of your business plans on when to start operating or the aim of establishing a company, once the legal entity is registered the obligatory legal norms are applicable to every subject in the Register.

You have guessed it, it is the obligation to tax authorities.

Therefore, in the first 15 days since registering at the BRA, the entity must submit its first tax application, known as the advanced tax application. Besides the purpose of applying and registering of a new entity at the tax authorities, the point of this advance tax obligation is also to subjectively evaluate the potential profit of the company in the first year of starting a business. This evaluation is the factor that would set the company’s tax obligation in that year.

Baring I mind that not everybody is or should be knowledgeable in the procedures before the tax authorities, the professional assistance is always recommended. Especially because having the electronic signature is crucial in order to submit the tax application as well as in many other steps in the process of establishing and running a business in Serbia.

To get basic information on what the electronic signature actually is, what it is used for and who can issue it, you can read our guide on using the electronic signature.

STEP 8. OPTIONAL: Make a seal

According to the law in force, companies are no longer required to use seals in their business conduct. Due to that, this is not an obligatory step, but an additional possibility at the founders’ disposal. By a rule, the companies use seals.

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