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

Company Law of Republic of Srpska (RS) ("Official Gazette of RS", no. 127/2008, 58/2009, 100/2011, 67/2013, 100/2017, 82/2019, and 17/2023) (“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)

Memorandum of Incorporation is the main governing document.

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 RS (“Official Gazette RS” no. 96/2003, 123/2006, 92/2009, 20/2014 i 20/2018).

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

The Company cannot be publicly listed or held. However, shares can be registered in the Central Securities Register, according to the Securities Market Law of RS ("Official Gazette of RS", No. 92/2006, 34/2009, 8/2012 - Constitutional Court decision, 30/2012, 59/2013, 86/2013 - Constitutional Court decision, 108/2013, 4/2017, 63/2021, 11/2022, and 63/2022) and upon completion of registration, they are considered freely transferable.

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

Decision on the appointment of the authorized representative – director;

Statement of acceptance of the director's duties;

Form of certified signatures of the authorized representatives, certified by a notary or at the municipal office;

Certified copies of personal IDs of incorporators and directors;

Certificate of residence for incorporators and directors;

Tax clearance certificate for incorporators;

Bank confirmation of the payment of share capital;

Application for registration of business entities;

Involvement of notary, company register, governmental authorities

To establish 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)

Estimated time frame is approximately 15 days.

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

Main costs amount to 400.00 BAM (approx. 204.00 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 Intermediary Agency for IT and financial services (“APIF”).

Minimum number of incorporators / shareholders and residency requirements

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

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 cash portion of the share capital of the Company must be at least 1.00 BAM (approx. 0.51 cent). The Company is required to open bank account at local bank.

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?

An identification (ID) number is required and is issued by the entity tax authorities during the post-registration process of the Company.

What is the title of the applicable company registry?

Registry of Business Entities at District Commercial Court.

The application to establish a limited liability company is submitted to the Intermediary Agency for IT and financial services (APIF) which is a governmental agency.

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

Decision on Establishment (for a single-member LLC with a minimum contribution of 1.00 BAM (approx. 0.51 cents), notarization of signatures is sufficient)

Decision on Appointment of authorized person for representation - director

Statement of Acceptance of Director's Duties (certified by a notary)

Power of Attorney Form - Form of certified signatures of authorized persons (notarized)

Personal ID for the incorporator and director (notarized by a notary or municipality)

Bank confirmation of capital contribution payment

Application for Business Entity Registration (electronically completed)

Proof of residence for the authorized representative and incorporator

Tax clearance certificate for the incorporator (confirming no tax debts)

Information on representatives, share capital, founders is publicly available. Inspection in company documents filed to the company registry may have only persons which prior prove their legal interest for those documents.

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

Management Board is the executive body, and their main duties include:

• Representing the Company and managing its affairs in accordance with the law, Memorandum of Incorporation, and members' agreement,
• Drafting the business plan proposal,
• Calling meetings of the Assembly and setting the agenda,
• Implementing decisions of the Assembly,
• Setting dates for member notification, dividend declaration, dividend payment, voting, and other matters,
• Concluding loan agreements,
• Establishing dates for profit participation entitlement, dividend payment, voting rights acquisition, and other member rights,
• Granting and revoking powers of attorney,
• Other matters specified in the Memorandum of Incorporation or members' agreement.
• If specified in the Memorandum of Incorporation, the director or Management Board is also responsible for:
• Executing decisions on buying back, withdrawing, or cancelling shares,
• Determining profit shares,
• Issuing bonds or other securities.
• Unless otherwise specified in the Memorandum of Incorporation, the director or Management Board may delegate tasks to others.

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

The shareholders of the Company elect the director or members of the Management Board at an Assembly, except for the first director or members of the first Management Board, who may be appointed by the Memorandum of Incorporation, with subsequent changes in directors or Management Board members via separate decisions of the Assembly (i.e. not requiring an amendment to the Memorandum of Incorporation). The Assembly may dismiss the director or members of the Management Board of the Company, with or without stating reasons for dismissal.

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?

There is no requirement for a Company to have non-executive directors in RS.

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

The Assembly has extensive responsibilities and obligations which include:

• Approval of transactions related to the establishment of the Company before registration,
• Election and dismissal of directors or Management Board members, and setting their compensation or salary,
• Approval of financial statements, profit distribution, loss coverage, and determining profit participation dates,
• Appointment and confirmation of internal or independent auditors, and setting their compensation,
• Appointment of a liquidator and confirmation of the liquidation balance,
• Increase and reduction of share capital, acquisition, withdrawal, and cancellation of shares, and issuance of securities,
• Authorizing acts of business units and making purchases,
• Supplementary contributions from members,
• Exclusion of a member, admission of a new member, and transfer of shares requiring Company approval,
• Status changes, change of legal form, and dissolution of the Company,
• Approval of legal transactions involving members, directors, and other persons,
• Disposal of high-value assets,
• Amendment of the Memorandum of Incorporation or members' agreement,
• Formation of a business unit,
• Operations and report adoption from the director or Management Board,
• Initiation of proceedings and granting power of attorney for Company disputes,
• Member withdrawal requests,
• Adoption of procedural rules for its own operations.

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

For the Assembly, 50% of the total voting rights of the Company members (quorum) is required, unless a higher threshold is specified in the Memorandum of Incorporation or members' agreement. If the Assembly cannot be convened or decisions cannot be made due to lack of quorum, it shall be reconvened with the same proposed agenda, at least ten days and no later than 30 days from the date of the initial summons. The quorum for the reconvened Assembly shall be one-third of the total voting rights of the members, unless a higher threshold is specified in the Memorandum of Incorporation or members' agreement.

According to Corporate Law provisions Assembly of the limited liability company decides by a two-thirds majority of the company's members, unless the articles of incorporation or the contract of the company's members stipulate otherwise on: changes on incorporation act; increase and decrease of the share capital; status changes; change of legal form and termination of the company; distribution of profits to members of the company; acquiring own company shares; disposes of company assets of high value.Question 22. Are there any special

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

No specific governance regimes are applicable.

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 annual financial reports must be submitted to the APIF.

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 RS ("Official Gazette of the FBiH No. 94/2015 and 78/2020)), external auditing is mandatory for large companies and public companies. Large companies are the companies that on the date of preparing the financial statements, exceed the threshold values of at least two of the following criteria: the average value of business assets at the end of the financial year of 4,000,000.00 BAM (approx. 2,374,900.00 EUR), total annual revenue of 8,000,000.00 BAM (approx. 4,074,980.00 EUR) and average number of employees in the year of 245.

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

Auditors or 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?

A Share Purchase and Transfer Agreement with notarized signatures of both the transferor and the transferee, or their proxies. An amendment to the Memorandum of Incorporation is not required for the transfer of shares, unless otherwise specified in the Memorandum of Incorporation. The transferee becomes a member of the Company upon providing written consent to become a member, acknowledging the binding nature of the Memorandum of Incorporation and the members' agreement, and upon entry in the share register in accordance with the law.

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

Additional formal requirements are not necessary. Transfers of ownership can be registered in the APIF.

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

There is no obligation to for transferor or transferee to pay a stamp duty.

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

Shares cannot be issued. The shareholders acquire a share in the share capital of the Company in proportion to the value of their contributions.

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?

The share capital upon founding a Company is provided through contributions by members in cash, as well as in assets and rights whose value is expressed in monetary terms. Contributions in assets and rights are converted into monetary value and must be fully made before the Company is registered. The value of contributions in assets and rights is determined based on an evaluation accepted by agreement among all incorporators. The evaluation must include a description, method of valuation, estimated value of contributions, and an assessment of whether the contribution matches the share price paid for those contributions.

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

Partially paid shares are permitted. If the cash portion of the Company's share capital equals or exceeds 5,000.00 BAM (approx. 2,556.00 EUR), at least half of this amount must be deposited into a temporary account before the Company's registration. The remainder shall be deposited according to the payment schedule for cash contributions specified in the Memorandum of Incorporation, and no later than within two years from the date of registration. There are no specific restrictions.

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

The Company shall withdraw and cancel shares in accordance with the provisions specified in the Memorandum of Incorporation or the members' agreement. The decision to withdraw and cancel shares shall be made by the Assembly, unless otherwise provided in the Memorandum of Incorporation or the members' agreement. The resolution of the Assembly to withdraw and cancel shares shall include: the basis for the withdrawal and cancellation, the amount to be paid to the member whose share is being withdrawn and cancelled, and the impact of the cancellation on the Company's share capital. This resolution shall be recorded in the book of resolutions. The member whose share is withdrawn and cancelled shall forfeit the rights and obligations associated with their shares.

The share capital can be reduced by a decision of the Assembly, ensuring it remains above the statutory minimum share capital. Registration of the reduction of the Company's share capital shall be conducted once annually, within 30 days from the date of the annual Assembly of the Company members.

Any requirements with respect to distributions to shareholders?

The Company cannot make payments of profit to its members if, after such payments:

• The net assets of the Company would be less than its share capital, increased by amounts allocated to statutory reserves and amounts that the Company is obligated to allocate to reserves for the year in which the payments are made.
• The Company would be unable to pay its debts expected to become due in the normal course of business.
• However, the Company may make payments to its members under exceptional circumstances if financial statements prepared in accordance with accounting and auditing laws indicate that such payments are reasonable given the circumstances.

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.

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 RS ("Official Gazette of RS", No. 94/2015, 1/2017, 58/2019 and 48/2024) the corporate income tax rate is 10%.

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

N/A