What is the main source of law authorising this entity form?

Company Law of Federation of Bosnia and Herzegovina ("Official Gazette of FBiH", no. 81/2015 and 75/2021) (“Company Law”).

Give a brief summary of the entity form:

Does the entity possess separate legal personality?

Yes, the Company possesses separate legal personality.

(Maximum) period of existence

There is no maximum-period of existence for the Company; it can be established for either limited or unlimited period.

Governing document(s)

The governing documents are Memorandum of Incorporation and Articles of Association.

Liability of incorporators / shareholders

Incorporators/shareholders are not personally liable for the Company’s obligations save in exceptional circumstances (e.g. in the instance of a corporate veil piercing event).

(Governing) bodies

The governing bodies are the Management Board and the Assembly.

Other particularities

Can this type of entity be involved in international transactions and restructurings (e.g. cross border mergers, asset acquisitions and divestitures, equity acquisitions, conversions etc.)?

Yes, the Company can participate in international transactions and restructuring, provided that such transactions and restructuring are in accordance with Law on Foreign Exchange of FBiH (“Official Gazette FBiH” no. 47/2010) (e.g. cross boarder share swaps, compensations etc. are not allowed).

Can this type of entity be publicly listed or held, or its securities be issued to members of the public?

No, the Company cannot be publicly listed or held.

Can this type of entity be used for a non-profit or charitable organization?

No, due to its commercial nature, which entails that it is structured to generate profits and distribute corporate income among its shareholders or members.

Give a brief summary of the process of incorporation, formation, or organization, including:

Main documents required

Memorandum of Incorporation duly notarized by the BiH notary;

Decision on appointment of the person(s) authorized to represent the Company in domestic and foreign trade, if the representative(s) were not appointed in the Memorandum of Incorporation;

Notarized forms containing signatures of the Company’s representatives and statements on accepting the duties;

Power of Attorney for signing and submitting the incorporation documents, if needed;

Notarized incorporator’s statement that it does not have any shares in the legal entities registered in BiH. If the incorporator has shares in other companies in BiH, it is required to deliver a proof that all tax obligations of these companies are paid;

Notarized copies of Identity Cards (or Passports for foreign citizens) of the designated representatives of the Company;

Notarized copy of the excerpt from the Business Entities Registry (“Registry”) where the incorporator is registered (if the incorporator is a legal entity) or the appropriate identification document for natural persons;

Evidence that the incorporator from BiH does not have any unpaid tax obligations;

Evidence of payment of share capital on the temporary bank account;

Excerpt from the relevant registry providing proof of the ownership over the shares in property and rights and court expert opinion on the value of the shares in property and rights;

Evidence of the payment of the court fee;

Duly completed application forms for the purposes of post-registration procedures;

Lease agreement for the premises where the Company has its registered offic address, which will be submitted to the Tax Authorities post-registration.

Involvement of notary, company register, governmental authorities

To establish of the Company, a notary must certify key documents and signatures, the involvement of the relevant register is crucial for the registration process, while tax institutions play an important role in issuing certificates.

Timing (estimate)

The estimated timeframe is 15 days for domestic incorporators, but it may take up to 30 days for foreign incorporators.

Main costs, including registration and similar fees (excluding legal fees)

The main costs including registration and similar fees approximately amount to 1,135.00 BAM (approx. 580.00 EUR).

Is a description of the anticipated business or purpose of the entity required for incorporation, formation or organization?

Description of the anticipated business is registered in the Registry, and their classification is listed in the extract from the Registry.

Minimum number of incorporators / shareholders and residency requirements

The minimum number of incorporators/shareholders is one (1) and there are no nationality or residency requirements.

Minimum number of directors (or other applicable officers) and residency requirements

The Company must have at least one (1) director and there are no nationality or residency requirements except for certain cases where the director must be present (explained in question 12).

Minimum share capital, or equivalent, and payment requirements (including opening a bank account)

The minimum share capital of the Company with one or more incorporators is 1,000.00 BAM (approx. 511.00 EUR), but the value of an individual contribution cannot be less than 100.00 BAM (approx. 51.00 EUR).

Is the physical presence of incorporators/directors/shareholders required in the jurisdiction for incorporation, formation, or organisation?

In general, incorporators/directors/shareholders do not need to be present; they can appoint an authorized representative. However, it should be noted that certain commercial registries require director’s presence for the incorporation process and that banks also require director’s presence to open the Company’s bank account.

Is a tax identification number, or equivalent, required? If so, how is it obtained?

Yes, a tax identification number is required. Following the registration before the Registry, the Company is required to submit tax ID number application to the relevant tax authority.

What is the title of the applicable company registry?

The applicable company registry in FBiH is the Business Entities Registry of the Municipal Court where the headquarters of the Company are situated, i.e. is a judicial body.

What types of information must be filed at the (company) register, and which of them will it be publicly available, e.g.:

The information and documents listed below must be filed with the Registry (which are all publicly available):

• Company name and registered office, including the full name and residence of all incorporators/shareholders of the registered entity;
• Date, day, and time of submission of the registration application;
• Company name and Company’s registered office;
• Company’s abbreviated name;
• Court ID number and tax ID number;
• Company’s legal form;
• Company’s title, number, and date of the notarized Memorandum of Incorporation;
• Name, surname, and position of the Company’s authorized representative;
• Authorized representative’s scope of authority;
• Amount of registered share capital;
• Amount of share capital paid in cash;
• Value of share capital in assets and rights;
• Percentage share of each incorporator in the share capital of the registered Company (in cash, rights, and assets);
• Activities of the registered entity with section codes of activities as per the current classification of activities.

What is the title of the executive body and its members? What are their main duties, tasks and responsibilities?

The Management Board is the executive body, and their main duties are to oversee business operations, represent the Company and to execute all business decisions. It is responsible for ensuring that the company’s business activities comply with the law. All other duties can be specified in the Articles of Association

How are the members of the executive body appointed, dismissed and replaced?

The Management Board is appointed in the Memorandum of Incorporation or by a separat decision, while subsequent dismissal and replacement of Management Board members is done by an Assembly decision or by a single shareholder decision.

Is it possible to appoint corporate directors or must all directors be natural persons?

All directors must be natural persons.

Is there a requirement to have non-executive directors? How are they appointed, dismissed and replaced? Do non-executive directors serve on a separate body (two-tier structure) or can a one-tier board (with executive and non-executives) be appointed, or is some alternate structure used?

Company to have non-executive directors in FBiH. The Management Board can have only one (1) Board member (i.e. CEO) or more members with registered scope of authorities and eventual limitations in representation of the Company.

What is the title of the body of owners / shareholders / members, and what are the main tasks / responsibilities / powers of that body?

The main responsibilities of the Assembly include deciding on the annual financial statement, profit distribution, covering of losses and other obligations prescribed by the Articles of Association.

What are the majority and quorum requirements for decisions by the shareholders? Can they be varied or changed?

The Assembly can make decisions if members, either personally or through proxies, represent shares constituting 1/2 of the Company's share capital. If a quorum for decision-making is not achieved, the Assembly is adjourned and reconvened with the same agenda no later than 15 days from the originally scheduled date where the Assembly can make decisions if shares representing 1/5 of the Company's share capital are represented. A two-thirds majority vote is required for increasing and decreasing the share capital as well for the change of form and for other cases prescribed by the Articles of Association.

Any special governance regimes (e.g. depending on size, being listed at a stock exchange, or other criteria)?

A Supervisory Board is mandatory for a Company that has more than ten members and a Company that has a share capital exceeding 1,000,000.00 KM (approx. 511,000.00 EUR), with at least two shareholders. The Supervisory Board must have at least three members appointed by the Assembly.

What are the periodic accounting obligations incumbent upon the entity? To whom must those accounts be submitted?

Annual accounts must be adopted by the Assembly. The accounts must be submitted to the Financial Information Agency.

Is the entity permitted to determine its own financial year?

The financial year is the same as the calendar year, the only exception is when a local daughter company is having a holding company abroad with a financial year different from the calendar year can have different financial year with the prior approval of the Minister of Finance. [NTD, I would suggest rewording as follows: A company’s financial year end is December 31, unless it is held or controlled by a foreign company that has a different financial year end date, in which case the company may have a different financial year end with approval of the Minister of Finance.]

Is the entity subject to any statutory (external) auditor obligations?

The entity can be a subject to external auditor obligations. According to the Law on Accounting and Auditing in the Federation of Bosnia and Herzegovina ("Official Gazette of the FBiH No. 15/2021), external auditing is mandatory for medium-sized, large companies and public companies. Medium-sized companies are those whose business asset value on the date of preparing the financial statements ranges between 4,000,000.00 BAM (approx. 2,374,900.00 EUR) and 20,000,000.00 BAM (approx. 10,187,400.00 EUR), with total annual revenue ranging between 8,000,000.00 BAM (approx. 4,074,980.00 EUR) and 40,000,000.00 BAM (approx. 20,374,900.00 EUR). The average number of employees in the year for which the financial statements are submitted must not be fewer than 50 and not exceed 249. Large companies are those that exceed the threshold values of at least two of the following criteria as of the date of preparing the financial statements: the average value of business assets at the end of the financial year of 20,000,000.00 BAM (approx. 10,187,400.00 EUR), total annual revenue of 40,000,000.00 BAM (approx. 20,374,900.00 EUR), and average number of employees in the year of 249.

Requirements to appoint other persons (officers, secretary, internal auditor / accountants). If so, what are their functions? Are there any residency requirements?

Certified accountants, whether internal or external, are required to ensure compliance with regulatory standards and financial reporting requirements, within the territory of Bosnia and Herzegovina.

What is the title designated for 'ownership interests' (e.g. shares, quota, interests, membership)?

The title designated for 'ownership interests' is shares.

Are different classes of ownership interests possible? If so, what are some examples of different classes?

No, different classes of ownership interests/shares are not possible.

What documentation is required for the transfer of ownership interests?

Documentation required for the transfer if shares includes: Share Purchase and Transfer Agreement; Resolution on Amendments of the Articles of Association; Extract from the register for the shareholders, and Power of Attorney from a local company/shareholders for the registration of the share transfer if done by the attorney at law/representative.

Are there any additional formal requirements required for the transfer of ownership (notary, approvals, stamping, filings, corporate records)?

Share Transfer Agreement must be locally notarized for the purpose of registration of the share transfer before the Registry, and subsequently that change must be registered before the Federal Statistic Bureau, Tax Authority and Indirect Tax Authority (if the Company has VAT number).

Are there any applicable stamp duties imposed when transferring ownership interests?

N/A

How are shares issued? (including information on payment obligations, registration requirements)

Shares cannot be issued. Shares are specified in the Memorandum of Incorporation, which outline the rights and responsibilities of shareholders. Upon the company's formation, a detailed share register is established. Management Board is obligated to maintain a share register in a manner that ensures accurate and complete records of the company's members and their shares. Each shareholder holds one share, with ownership expressed as a percentage corresponding to their investment in the company's initial capital. Contributions can be made through monetary deposits into the share capital or through the transfer of ownership rights to assets, rights or intellectual property. This process ensures clarity and transparency in the distribution of ownership and voting rights within the company.

Further information on equity contributions, e.g., non-cash payments on shares, (share premium) contributions without issuances of shares, can partially paid shares/ownership interests be permitted and what are the restrictions on them?

A member of the Company may make a non-cash contribution in the form of assets and rights. These contributions must be fully transferred to the Company by the date of the application for registration of the Company’s incorporation in the Registry, ensuring that the Company can permanently and freely dispose of them. A member who contributes assets or rights cannot retain any rights over them nor impose any restrictions on the Company. The value of contributions in assets and rights in a Company is determined based on an assessment agreed upon by all incorporators in the agreement. The assessment must include a description, the method of valuation, the estimated value of the contributions, and an evaluation of whether the contribution corresponds to the value of the subscribed shares in the Company paid with that contribution.

No, there is no such concept of share premium contributions.

No, partially paid shares are not permitted.

Any requirements with respect to share cancellation, share repurchase and other capital reductions

The former member who has withdrawn or been excluded has the right to compensation equivalent to the market value of their shares as of the date of termination of membership. If the member's contribution was in the form of a right to use a specific asset, it shall be returned to the member upon expiry of the period specified in the contract or Articles of Association, which cannot exceed three months. Upon expiry of this period, the Company has the right to use the asset until the former member fulfils their obligations to the Company. Additionally, shareholders have the right of first refusal in case of share transfer.

The share capital of a Company can be reduced by a decision of the Company's Assembly, in accordance with Company Law, the Memorandum of Incorporation, and the Articles of Association of the Company, but not below the amount of 1,000.00 BAM (approx. 511.00 EUR). The Company is required to submit the decision to reduce the share capital to the Business Entities Registry for registration and publish it in the "Official Gazette of the Federation of Bosnia and Herzegovina”.

Any requirements with respect to distributions to shareholders?

Profit is distributed among the shareholders of the Company in proportion to their shares, unless otherwise agreed.

Can the owners or shareholders adopt a restrictive or governing agreement among themselves such as a Shareholders Agreement?

Yes, owners or shareholders have the option to adopt an agreement outlining their rights and obligations. This agreement must be drafted in accordance with Company Law regulations.

Which are the typical annual maintenance costs of maintaining the existence and legal good standing of such an entity (excluding legal fees)?

The typical annual maintenance costs are:

• Corporate Income Tax: Payment of corporate income tax at the applicable rate of 10%.
• Utility Fees: Costs for utilities such as electricity, water, gas, and waste management services.
• Accounting Services: Fees for accounting services, particularly if the services are external
• Employee Salaries: Payment of employee salaries and associated contributions.
• Office Rent: Rental expenses for office premises.
• Professional Fees: Costs consulting and auditing services.
• Maintenance and Repairs: Expenses for the upkeep and repair of office equipment and facilities.
• Insurance: Premiums for various insurance policies, including property, liability, and employee insurance.
• Office Supplies: Costs for office supplies and materials.
• Marketing and Advertising: Expenses for marketing, advertising, and promotional activities.
• Transportation and Travel: Costs related to business travel and transportation.
• Other administrative fees

What are the general corporate tax rates? (Specify if there is a national versus local distinction).

According to the Corporate Income Tax Law of the FBiH ("Official Gazette of the FBiH", No. 15/2016 and 15/2020) the corporate income tax rate is 10%.

Summary of any specific matters, e.g. recent or prospective major legal developments

N/A