The Alternative Investment Funds Act (“AIFA”), was adopted in 2019 and is the first Serbian law regulating venture capital funds (“VC funds”), that started applying in April 2020. Because Serbia is well known as a country competitive in technology, the expansion of the Serbian venture capital market was reasonably expected. However, this expectation was not met. Namely, until now the establishment of several venture capital funds in Serbia was announced.
Nevertheless, this fact is not surprising bearing in mind that AIFA started applying at the moment when the whole world was faced with the Covid-19 pandemic that severely disrupted business plans around the globe. As the world gradually returned to normal after COVID-19, VC funds once again became the attractive options for potential business and investment in Serbia.
Table of contents
What are Venture Capital Funds?
TL;DR: A VC fund is a private placement alternative investment fund, established as an open-ended or closed-ended AIF, whose main goal is investing in startups and companies in the initial stage of development. Its units cannot be sold through a public offering, only to professional and semi-professional investors.
VC funds are private placement alternative investment funds (“AIFs”), that can be established as open-ended or closed-ended AIFs, investing their capital in startups and other newly established companies or companies that are in the initial stage of development. What does this practically mean?
First of all, a VC fund is a private placement AIF, which means that its units cannot be sold through a public offering, but rather through a private offering to professional and so-called semi-professional investors.
AIFA distinguishes two forms of AIFs: open-ended or closed-ended AIFs. The main difference between these AIFs is that holders of units of an open-ended AIF may request at any time from AIF to repurchase its units, while holders of units of a closed-ended AIF do not have such right.
A VC fund is a special type of AIF that is established with the main goal of investing in startups and other companies at the initial stage of development.
Who Establishes and Manages Venture Capital Funds?
TL;DR: VC funds can only be established and managed by alternative investment fund management companies headquartered in Serbia, licensed by the Securities Commission. A Management Company is small or large depending on the value of assets it manages, and the minimum monetary capital is EUR 70,000 for small and EUR 125,000 for large companies.
According to AIFA, VC funds (as well as all other types of AIFs) can only be established and managed by alternative investment funds management companies (“Management Companies”). Management Companies are legal entities headquartered in Serbia whose regular business activity is managing one or more AIFs. It is important to note that AIFA also recognizes close-ended AIFs with internal management, that are at the same time both, AIF and Management Company.
One Management Company can establish and manage one VC fund but also can establish and manage several VC funds, as well as any other type of AIFs, such as private equity funds or real estate funds. In other words, one Management Company can establish several AIFs, regardless of the AIFs’ type, provided that all conditions defined under AIFA are fulfilled.
Depending on the value of AIFs’ assets managed by the Management Company, AIFA distinguishes two types of Management Companies: small and large. Management Company must be established as a large one:
If the value of the assets of AIFs managed by the Management Company exceeds EUR 25 million, provided that such AIFs use financial leverage; or
If the value of assets of AIFs managed by the Management Company exceeds EUR 75 million, provided that such AIFs do not use financial leverage, and the investors do not have the right to request from the AIF to repurchase their units within 5 years as of the date of their initial investment.
Consequently, if the value of the assets of the AIFs managed by one Management Company does not exceed the said amounts, it can be organized as a small one.
Prior to establishing a Management Company, it is necessary to obtain a license from the Securities Commission (“Commission”). To obtain such a license, both small and large Management Companies must fulfill a set of conditions, defined under the AIFA and applicable bylaws. However, in order to ease the entering into the AIF market in Serbia, AIFA imposes less restrictive requirements for small Management Companies, compared to those that must be fulfilled by large Management Companies.
Additionally, the AIFA imposes minimum capital requirements that Management Companies must fulfill, in order to conduct their business operations. Depending on the type of Management Company, such capital requirements differ:
The minimum monetary capital for the large Management Companies amounts to EUR 125,000.00 (or EUR 300,000.00 for closed-ended AIFs with internal management); and
The minimum monetary capital for the small Management Companies amounts to EUR 70,000.00 (or EUR 150,000.00 for closed-ended AIFs with internal management).
Management Companies may have non-monetary capital as well, but the above-mentioned monetary capital requirements must be fulfilled at any time.
It is important to note that a small Management Company may become a large Management Company and vice versa, after obtaining the Commission’s approval. Namely, it can be expected that a Management Company will be initially established as a small one. However, after a certain period, the value of assets of AIFs managed by such a Management Company will grow and the Management Company will be obliged to transform into a large one. Of course, to obtain a license for a large Management Company it is necessary to fulfill capital requirements, as well as all other requirements defined under AIFA and applicable bylaws.
Does VC Fund Need a License?
TL;DR: Yes. Before establishing a VC fund, the Management Company must obtain a license from the Commission and prove that conditions relating both to the fund and to the Management Company itself are met. It must also adopt the fund’s operating rules, conduct a risk assessment and define the investment strategy.
Yes, the venture capital fund needs a license. Prior to establishing a VC fund, the Managing Company must obtain a license. The Commission is a competent authority that issues licenses for VC funds.
In order to get a license for a VC fund, the Managing Company must provide adequate proof that the set of conditions defined under AIFA are fulfilled. These requirements can be divided into two groups:
Conditions that must be fulfilled by a VC fund that will be established after obtaining the Commission’s approval; and
Conditions that must be fulfilled by a Management Company.
Depending on the form of a VC fund (i.e., depending on if a VC fund is established as a legal entity or a separate set of assets) AIFA imposes different requirements that must be fulfilled. In addition to these requirements, each VC fund must have operating rules that define all important characteristics of the VC fund, based on which investors can decide whether they will invest in the VC fund or not. Moreover, the Management Company has an obligation to conduct the risk assessment for the VC fund before applying for a license, as well as the investment strategy, and to ensure that the VC fund fulfills all other conditions defined under the law and applicable bylaws.
Despite the fact that the Commission granted a license to the Management Company before it was registered, the Management Company must also provide the Commission with the documentation proving that it has the adequate organizational structure to manage the VC fund.
Who Monitors VC Fund’s Assets?
TL;DR: A VC fund’s assets are safeguarded and overseen by a depositary, a credit institution incorporated in Serbia and appointed by the Management Company. The Commission approves the depositary separately for each fund, and changing the depositary requires its prior written approval.
Another important player in the VC fund’s life cycle is a depositary: an entity responsible for the safekeeping, cash monitoring, and oversight of the AIF’s assets. Each VC fund (as well as all other AIFs) must have a depositary which is appointed by the Management Company.
According to AIFA, a depositary may be a credit institution incorporated in Serbia, which has the approval of the Commission for a specific fund. Together with the application for a VC fund license, the Management Company must file a request for issuance of approval for the depositary. There is no general approval for a depositary, but the Commission decides whether the Managing Company hired an adequate financial institution as a depositary of the specific VC fund.
If the Management Company desires to change a depositary of VC fund, it must obtain prior written approval from a Commission.
VC Funds’ Investments
TL;DR: At least 70% of a VC fund’s assets must be invested in startups, companies in the initial stage of development or other newly established companies, while up to 30% can be invested in other assets. The fund’s investment policy is set out in its operating rules.
VC fund is an AIF that invests its capital in startups and other companies in the initial stage of development. The AIFA imposes certain limitations when it comes to the investments of VC funds. Namely, at least 70% of the VC fund’s assets must be invested in startups, companies that are in the initial stage of development, or other newly established companies, while up to 30% of its assets can be invested in other properties.
VC fund’s investment policy must be determined under the operating rules. Additionally, operating rules must provide information regarding the assets into which the VC fund will invest, as well as all potential risks and investment limitations.
Who invests in Venture Capital Funds?
TL;DR: Only professional and semi-professional investors can invest in VC funds, while retail investors cannot. Whether a retail investor qualifies as semi-professional is determined by the Management Company in each specific case.
As we mentioned above, VC funds are private placement funds. Hence only professional and so-called semi-professional investors can invest in VC funds. In other words, retail investors cannot invest in VC funds.
Professional investors are persons who are licensed and monitored by a relevant supervisory authority for their operations on the financial market (such as credit institutions, insurance companies, pension funds, collective investment institutions, etc.), Republic of Serbia, autonomous provinces, and local government authorities, as well as other states or national and regional authorities, the National Bank of Serbia and central banks of foreign states, international and supranational institutions (such as the International Monetary Fund, the European Central Bank, the European Investment Bank, and other similar international organizations). Additionally, professional investors are also legal entities that fulfill at least two out of three following criteria:
The total value of assets amounts to at least EUR 20,000,000;
The annual business revenue amounts to at least EUR 40,000,000;
Have funds in the minimum amount of EUR 2,000,000.
Semi-professional investors are retail investors who fulfill the following criteria:
Have undertaken to make a one-off investment in an AIF in the minimum amount of EUR 5,000; and
For whom the Management Company determined that they have sufficient experience in the capital market and professional knowledge to understand investment risks and to determine whether the AIF meets their investment objectives.
AIFA does not define criteria for semi-professional investors in detail, but it leaves it to the Management Companies to determine whether the retail investor is qualified to be a semi-professional investor or not in each specific case. The Management Company must conduct a detailed check of a potential semi-professional investor and keep the documentation that proves that it has all the necessary qualifications for a semi-professional investor.
Serbia is well known as a country that has highly qualified technology experts with great educational backgrounds and a fast-growing IT market. Recognising that a larger number of AIFs and a broader investor base would contribute to the development of the domestic capital market, the National Assembly adopted amendments to the Law in late November 2024 (Official Gazette of the Republic of Serbia, No. 94/2024). Among other things, the amendments reduced the minimum one-off payment for a semi-professional investor from EUR 50,000 to EUR 5,000, and reduced other amounts (for private-offer AIFs and private equity funds). Further amendments aligning the Law with EU rules (including pre-marketing activities and ELTIF funds) were published in the Official Gazette of the Republic of Serbia, No. 109/2025.
It can be reasonably expected that during the following years, the Serbian VC funds market will develop into a strong competitive market that will offer multiple investment opportunities. Do you plan to take part in such development?
Frequently Asked Questions
Who can establish a venture capital fund in Serbia?
According to AIFA, VC funds can only be established and managed by alternative investment fund management companies. These are legal entities headquartered in Serbia whose regular business activity is managing one or more AIFs. One Management Company can establish and manage several VC funds, as well as other types of AIFs.
Is a license required to establish a venture capital fund?
Yes. A license from the Securities Commission must be obtained both by the Management Company and for the VC fund itself, before establishment. The Management Company must prove that the conditions defined under AIFA are fulfilled, adopt the fund’s operating rules, conduct a risk assessment and define the investment strategy.
What is the minimum capital of a VC fund management company?
The minimum monetary capital for large Management Companies amounts to EUR 125,000 (EUR 300,000 for closed-ended AIFs with internal management), and for small Management Companies EUR 70,000 (EUR 150,000 for closed-ended AIFs with internal management). These requirements must be fulfilled at any time.
When must a management company be established as a large one?
When the value of the assets of AIFs it manages exceeds EUR 25 million and such AIFs use financial leverage, or when it exceeds EUR 75 million, the AIFs do not use financial leverage and the investors do not have the right to request repurchase of their units within 5 years as of the date of their initial investment. Otherwise, the Management Company can be organized as a small one.
What share of its assets must a VC fund invest in startups?
At least 70% of a VC fund’s assets must be invested in equity or equity-like instruments of start-ups, early-stage companies or newly established companies. The remaining 30% (at most) may be invested only in asset types permitted by the Law and the fund rules (for example, loans to companies in which the fund has already invested). Financial leverage is not permitted. The fund’s investment policy must be set out in its rules of business.
Who can invest in a venture capital fund?
Only professional and semi-professional investors; retail investors cannot invest in VC funds. Professional investors are those who meet the conditions for a professional client under the law governing the capital market, for example supervised financial institutions, the state and international institutions, as well as legal entities meeting at least two of three criteria: assets of at least EUR 20,000,000, annual operating revenue of at least EUR 40,000,000, or own funds of at least EUR 2,000,000. A semi-professional investor is a retail investor who commits to a one-off payment of at least EUR 5,000 and whom the management company assesses as having sufficient experience and expertise to understand the investment risks. Whether a retail investor qualifies as semi-professional is assessed by the management company.
Reviewed by: Vitomir Žunić, Managing Partner · View profile
Updated by: David Bojić, Senior Associate · View profile
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