Main source of law authorising the entity form
- Law on Business Companies of Federation of Bosnia and Herzegovina (“Official Gazette of the Federation of Bosnia and Herzegovina”, no. 81/15).
- Law on Business Companies of Republic of Srpska (“Official Gazette of the Republic of Srpska”, nos. 127/08, 58/09, 100/11, 67/13).
Summary of the entity form
Does the entity possess separate legal personality?
The d.d. has legal personality.
Maximum period of existence
There is no maximum period of existence; d.d. can be incorporated for an indefinite or a definite period.
The d.d. is governed by its memorandum of association and articles of association.
Liability of incorporators / shareholders
Incorporators/shareholders are not personally liable for the debts of the company. Limited liability is subject to limited instances of piercing the corporate veil.
- In the FBiH, governing bodies are the general assembly (“skupština”), supervisory board (“nadzorni odbor”), management (“uprava”) and audit committee (“odbor za reviziju”).
- In the RS, governing bodies are the general assembly (“skupština”), managing board and executive board (“upravni odbor” i “izvršni odbor”), and internal audit and audit committee (“interna revizija” i “odbor za reviziju”).
Ability to be involved in international restructurings (cross border mergers, asset acquisitions, equity acquisitions, etc.)
Under the laws in BIH it is not possible for d.d. to be involved in international restructurings, although it can be involved in asset or equity acquisitions.
Can this form of entity be listed or publicly held?
Yes, this form of entity can be listed or publicly held.
Each open joint stock company (“otvoreno dioničko društvo”) is publicly listed and closed joint stock company (“zatvoreno dioničko društvo”) is not required to be publicly listed.
Can this form of entity by used for a non-profit or charitable organization?
No, given its nature as a commercial entity, with the ability to make profit distributions, and being subject to corporate income tax.
Summary of the process of incorporation, formation and organization
Main documents required
- Memorandum of association in one of official local languages with verified signatures of incorporators;
- Articles of association, executed before a public notary in one of official local languages (for the FBIH);
- Approval of the authorised Securities Committee and Registry of Securities if it is prescribed by special law;
- 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, executed before a public notary;
- Verified forms containing signatures of the company’s representatives and statements on accepting the duties;
- Verified statement of the person(s) authorized to represent the company that they have not been found guilty for a criminal offence and minor offence incompatible with the activities of company management, 5 years from legal validity of a ruling;
- Verified copies of Identity Cards (or Passports for foreign citizens) of the designated representatives of the Company;
- Copy of the excerpt from the relevant court’s register verifying the ownership of the persons who enter a non-monetary capital and rights;
- Evidence of payment of share capital on a temporary bank account;
- Other documents depending from the special activity of the company (i.e. prior approval and license, or document regarding foreigner appointed as director, etc.).
Involvement of notary, company register, governmental authorities
Notary, register of business companies before the competent court, securities committee, registry of securities and tax authorities are involved.
- At least within 15 days from the founding assembly meeting, the managing board must submit the request for registration at the Registry of emitters (“Registar emitenata”) with Securities Committee (“Komisija za vrijednosne papire”) and based on the Securities Committee’s decision on registration in the Securities registry, the managing board may file for incorporation of the joint stock company.
- In FBIH, the required time for incorporation at the relevant municipal court in most cases is up to 10-15 working days from the date of submitting complete application and documentation. And in the RS generally required time for incorporation at relevant district commercial court is 3 working days.
- Post-registration procedures take approximately two–three months to complete.
Main costs, including registration and similar fees (excluding legal fees)
- Main costs are depending from the initial share capital and court tax, as well as other documentation verification requirements (translations, verification, apostille).
- In the FBIH, court tax depending on the competent court before which the registration procedure is initiated (ranging from approx. EUR 30 to EUR 200) + costs of publication in the Official Gazette paid upon notice.
- In the RS, compensation for work of APIF is approx. EUR 18 + costs of publication in the Official Gazette paid upon notice and administrative taxes in the amount of approx. EUR 50, and court tax approx. EUR 200.
- Notary public costs for verifying the memorandum of association and articles of association depending on the initial share capital and verification of other required documents.
Minimum number of incorporators / shareholders and residency requirements
There must be at least one incorporator upon incorporation, and there are no residency requirements for incorporators.
Minimum number of directors (or other applicable officers) and residency requirements
There must be at least one director upon incorporation, and if foreigner one must have work permit and at least temporary residence permit.
Minimum share capital, or equivalent, and payment requirements (including opening a bank account)
- BAM 50,000 (approx. EUR 25,000) in the FBIH, and
- BAM 20,000 (approx. EUR 10,000) for closed joint stock company or BAM 50,000 (approx. EUR 25,000) for open joint stock company in the RS.
Prior to the incorporation it is necessary to obtain the evidence of payment of share capital on a temporary bank account.
Is the physical presence of incorporators / directors required in the jurisdiction for incorporation?
The physical presence of incorporators is not required since execution of the notarial deed of incorporation may be carried out by virtue of a power of attorney.
Is a tax identification number, or equivalent, required? If so, how is it obtained?
Tax identification number is required and entities’ tax authority provides a tax identification number upon registration of the company, in a post-registration procedure. The Indirect Taxation Authority of BIH issues the VAT number after the tax identification number is obtained in a separate procedure.
What is the title of the applicable (public) company registry?
- Register of Business Companies (“Registar poslovnih subjekata”) before the competent court in the FBIH; and
- Register of Business Companies (“Registar poslovnih subjekata”) before the competent district commercial court in RS, while the APIF (“Agencija za posredničke, informatičke i finansijske usluge”) receives and processes the incorporation application and forwards it to the competent district commercial court in the RS.
Which information must be filed at the (company) register and will it be publicly available?
The information listed below must be filed at the Register of Business Entities:
- Memorandum of Association;
- Articles of Association;
- Direct ownership identification;
- Information on the person(s) authorized to represent the company, and their limitations;
- Share capital, ownership and structure;
- Insolvency, good standing and liquidation;
- Tax numbers;
- Business activities;
- Other information depending from the special activity of the company (i.e. prior approval and license, or document regarding foreigner appointed as director, etc.).
Registers of Business Companies are publicly available.
Title and responsibilities of the executive body and its members
- The management (“uprava”) which consists of a director (“direktor”) or a director and executive directors (“direktor” i “izvršni direktori”).
- The management and its members represent the company in internal and foreign trade and must carry out management duties in the interests of the company in accordance with the objects as provided in the articles of association.
How are the members of executive body appointed, dismissed and replaced?
Initially, the members of executive body can be appointed in the memorandum of association or in the decision on appointment, and thereafter appointment or dismissal of the members of executive body is carried out by the decision of the supervisory board.
Is it competent to appoint corporate directors?
No, the executive body is not competent to appoint corporate directors.
Must / can the company have non-executive directors? Would they be in a separate body (two-tier structure) or in a one-tier board (with executive and non-executives)?
Entities’ laws does not stipulate that d.d. can appoint non-executive directors.
What is the title of the body of owners / shareholders / members, and what are the main tasks / responsibilities?
The general assembly (consisting of the shareholders of the company) and it has all rights and responsibilities provided to it by law and the articles of association. The main tasks and responsibilities are to pass a resolution on the matters such as:
- Increase and decrease of share capital;
- Issuing new shares;
- Limitation or exclusion of pre-emptive rights;
- Adopting annual audit reports;
- Distribution of profit and dividend payment;
- Statutory changes;
- Appointment or dismissal of members of supervisory board and audit committee and appointment of external audit;
- Appointment of internal audit and confirmation of their reports;
- Other tasks and responsibilities stipulated by the law and articles of association.
What are the majority and quorum requirements for decisions by the shareholders? Can they be varied or changed?
The general assembly may hold a meeting if there is a quorum of 30% of shares with voting rights.
The general assembly decides with a simple majority of represented share capital (51%) with voting rights, except where majority of 2/3 of represented share capital with voting rights is required by the law or articles of association.
Any special governance regimes (e.g. depending on size, being listed at a stock exchange, or other criteria)?
In the RS:
- Internal audit can be determined in the closed joint stock company by the memorandum or articles of association; and
- In the open joint stock company whose shares are listed at the official stock market internal audit must be determined and it can have the audit committee.
What are the periodic accounting obligations incumbent upon the entity? To whom must those accounts be submitted?
The company must maintain accounting records in accordance with relevant laws and that are sufficient to determine the financial position of the company at any moment. Each year, the annual accounts must be filed with the FIA (“Finansijsko-informatička agencija”) in FBIH and with APIF at the RS on the beginning of the year for previous year.
Additionally, medium (between 50 and 250 employees a year; asset value between EUR 500,000 and EUR 2,000,000; annual income EUR 1,000,000 and EUR 4,000,000) and large companies (more than 250 employees a year; asset value more than EUR 2,000,000; annual income more than EUR 4,000,000) are obliged to file the semi-annual accounts with the tax authority in the FBIH and with the APIF in the RS.
Is the entity permitted to determine its own financial year?
No, since one financial year is equivalent with one calendar year.
Is the entity subject to any statutory (external) auditor obligations?
Medium and large companies are obliged to have their accounts externally audited.
Requirements to appoint other persons (officers, secretary, internal auditor / accountants). If so, what are their functions? Are there any residency requirements?
Entities’ laws do not prescribe additional requirements to appoint other persons. Procedure and requirements for appointment of other persons, i.e. officers, secretary, internal auditor, accountants etc. can be determined by articles of association of the company.
What is the title designated to 'ownership interests' (e.g. shares, quota, interests, membership)?
Share or stock.
Are different classes of ownership interests possible? If so, what are examples of different classes?
Different classes of ownership interests are possible such as:
- ordinary or regular share;
- preference share or priority share;
- non-voting share or dividends; and
- employees’ share.
Transfer of ownership interests: what documentation is required for the transfer of ownership interests?
In the FBIH, transfer of ownership interests is done by sale, written agreement and by inheritance.
For any transfer of share a notarial deed of transfer must be executed before a public notary in the RS. According to the law, other shareholders have pre-emptive rights, which applies to the closed joint stock company.
Each transaction of ownership interests must be filed to relevant Registry of emitters.
Any (further) formal requirements required for the transfer of ownership (notary, approvals, stamping, filings, corporate records)?
The transfer of share must be registered with the relevant Registry of emitters.
Are there any applicable stamp duties imposed when transferring ownership interests?
How are shares issued? (including information on payment obligations, registration requirements)
Subject to the articles of association, any share issue must be adopted by the general assembly upon the proposal of the supervisory board. Payment of new shares in cash can be made in instalments no longer than 6 months from the date of the Securities Committee’s decision on successful share issue. Detailed payment obligations of the shareholder are determined by the decision on share issue.
Share issue must be registered with the entities’ Registry of emitters and entities’ Register of Business Companies.
Further information on equity contributions
In the d.d. share capital may consist of cash, property and rights.
It is required to provide the 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.
Share premium contributions are not possible.
Requirements with respect to share cancellation, share repurchase and other capital reductions
- Share in the d.d. is transferable.
- In the closed joint stock company each shareholder have the pre-emptive right of share repurchases.
- Shareholder withdrawing from the d.d. and thus cancelling its share has the compensation rights in the amount of market value of its share.
- Capital reductions can also occur by withdrawing its own share, then by withdrawing from the share issue which is not paid in full by the date of the decision on the reduction of capital, and decreasing the share value (not lower that the legal minimum) through an amendment of the articles of association and its registration with the relevant authorities.
Any requirements with respect to distributions to shareholders?
Generally, the general assembly must adopt a resolution to make a distribution. The profit is shared among the shareholders proportionally with their share, if otherwise is not agreed.
Can the owners or shareholders adopt a restrictive or governing agreement among themselves such as a Shareholders Agreement?
Yes, although the provisions in such agreement should not contradict the law or the articles of association.
Which are the annual maintenance costs of maintaining the existence and legal good standing of such an entity (excluding legal fees)?
The company must maintain its business address and have director or director and executive director(s). The shareholders must each year hold their annual general assembly (or adopt a resolution in writing). In addition annual and semi-annual accounts must be prepared and adopted each year and the applicable tax filings must be made, as well as the annual public utility fee on emphasized company name must be paid.
What are the general corporate tax rates? (Specify if there is a national and local distinction).
The general corporate tax rate is 10%.
Summary of any specific matters, e.g. major legal developments
In the FBIH, the “one-stop registration system” is expected, which is already being applied in the RS (i.e. via APIF). Otherwise, no imminent major legal developments are expected in 2018.