What is the main source of law authorising this entity form?
The Company Law
Give a brief summary of this entity form, including
Does the entity possess separate legal personality?
Yes, AD has legal personality.
(Maximum) period of existence
There is no limit regarding the period of existence.
Governing document(s)
Governing documents are articles of association.
Liability of incorporators / shareholders
Shareholders are not responsible for their company’s obligations.
(Governing) bodies
Mandatory bodies are the assembly, the board of directors, the executive director, the secretary of the company and the independent auditor.
Other particularities
N/A
Can this type of entity be involved in international transactions and restructurings (e.g. cross border mergers, asset acquisitions, equity acquisitions, etc.)?
Yes, according to the Montenegrin law there is possibility for international restructurings, mergers, asset acquisitions etc.
Can this type of entity be publicly listed or held?
Yes.
Can this type of entity be used for a non-profit or charitable organization?
No, because there are other forms of organization for registration of non-profit organization. Gaining of profit is immanent for this form.
Give a brief summary of the process of incorporation, formation, or organization, including
Main documents required
Documents required in the incorporation procedure:
Shareholders’ Agreement or Decision on incorporation (has to be notarized)
Articles of Association
Decision on appointing board of directors, auditors, secretary and executive director
The decision of the Securities Commission (which means that the approval for the initial issuance of shares from the Securities Commission and the implementation of the public call for subscription and payment of shares was successful)
With the one-member joint-stock company, the purchase of all shares will be performed during the establishment without the public invitation for subscription and payment of shares.
Involvement of notary, company register, governmental authorities
A company is deemed incorporated and legally permitted to commence its business upon registration in the Central Registry of Commercial Entities (“CRCE”). Upon registration, the CRCE issues an incorporation certificate.
Timing (estimate)
If all the required documentation is appropriately submitted, the CRCE is obliged to register the limited liability company within 5 days from the moment of the submission of the documentation. In most cases, the CRCE complies with the prescribed deadline.
Furthermore, post-registration procedures including opening of a bank account and the creation of a stamp can be completed within an additional 7 to 10 days. Therefore, the time period necessary for a company to become fully operational is cc. 30 days, as of submission of all documentation to the CRCE.
Main costs, including registration and similar fees (excluding legal fees)
The costs involve:
Administrative fees (approx. EUR 120);
Costs of certified translation, if any (EUR 15 per translator’s page);
Is a description of the anticipated business or purpose of the entity required for incorporation, formation or organization?
N/A
Minimum number of incorporators / shareholders and residency requirements
There must be at least one incorporator, and there are no residency requirements.
Minimum number of directors (or other applicable officers) and residency requirements
The Board of directors as the mandatory body must have at least three members.
Minimum share capital, or equivalent, and payment requirements (including opening a bank account)
There is a minimum issued share capital of EUR 25,000.00 and there is obligation for every AD to have opened bank account immediately upon incorporation.
Is the physical presence of incorporators / directors required in the jurisdiction for incorporation, formation or organization?
No. The whole incorporation process can be done through an authorized representative, so the physical presence of the incorporators is not obligatory.
Is a tax identification number, or equivalent, required? If so, how is it obtained?
Yes. Tax identification number is required. It is obtained before CRCE, during registration process.
What is the title of the applicable company registry?
Central Registry of Commercial Entities ( “CRCE”, Centralni registar privrednih subjekata)
What types of information must be filed at the (company) register, and which of them will it be publicly available, e.g.: Articles, Ownership identification (direct and/or indirect ownership, 'beneficial owners'), Group structure, Share capital, Directors, Accounts, Insolvency, good-standing, liquidation, Liens and encumbrances on the shares, Liens and encumbrances on assets of the entity, Other (e.g. litigation, tax matters)
The founding agreement or decision on foundation (if there is a sole shareholder);
The articles of association;
A list of the names of the members of the board of directors of the joint stock company, i.e. the supervisory and management board of the joint stock company and the decision on their appointment;
The previous name of the members of the board of directors, i.e. the supervisory and management board, in the event of a change of name, date and place of their birth, their unique identification number, permanent or temporary residence;
Statements of the members of the board of directors, i.e. the supervisory and management board on citizenship;
Data on occupations of members of the board of directors, i.e. supervisory and management board, as well as data on membership in other boards, functions in which they are located, as well as the place of registration of these companies, if they are not registered in Montenegro;
Name and address of the auditor, name and address of the executive director and secretary of the company, if any in the company and decisions on the appointment of these persons;
Name and address of the members of the audit board, if formed in the company in accordance with the regulations in the field of audit, as well as decisions on their appointment;
Signed statements of acceptance of the appointment of members of the board of directors and executive director of the joint stock company, or members of the supervisory and management board of the joint stock company, auditor and secretary of the company, if any;
Decision of the Capital Market Commission confirming the success of the public issue procedure in the successive establishment of joint stock companies, i.e., decision of the Capital Market Commission on recording the founding issue of shares, for a company being established simultaneously;
E-mail address;
Address for receiving mail, if any;
Data on persons authorized to represent the company with the scope of authorization for representation (individually or collectively);
Proof of payment of the registration fee..
Registration documents contain information whether persons authorized to represent a company can act collectively or as individuals.
What is the title of the executive body and its members? What are their main duties, tasks and responsibilities?
Executive directors:
- conduct the operations of the company; and
- are legal representatives of the company.
How are the members of the executive body appointed, dismissed and replaced?
The Members of the executive body are appointed, dismissed and replaced by the resolution of the Shareholders’ Assembly.
Is it possible to appoint corporate directors or must all directors be natural persons?
No.
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?
Members of the board of the directors can be only non-executive directors. They are appointed, dismissed and replaced by the Shareholders’ Assembly. They are in a separate body (two-tier structure).
What is the title of the body of owners / shareholders / members, and what are the main tasks / responsibilities / powers of that body?
Assembly is the title of the owners’ body, and main tasks and responsibilities are the following:
- make amendments to the articles of association;
- appoint and dismiss members of the board of directors, auditor and liquidator;
- decide on the remuneration policy and compensation of members of the board of directors;
- adopt the annual financial statements and report on the company’s operations;
- make a decision on the disposal of the assets of the company (purchase, sale, lease, replacement, acquisition or otherwise disposal) of a value greater than 20% of the carrying amount of the company's assets (large value assets) if the articles of association have not established a lower value;
- make a decision on the distribution of profit;
- increase or decrease the capital of the company determined by the articles of association;
- make a decision on voluntary liquidation of the company, restructuring or filing a motion for initiation of bankruptcy proceedings;
- approve the assessment of non-cash deposits.
What are the majority and quorum requirements for decisions by the shareholders? Can they be varied or changed?
The majority will depend on the decision upon which has to be voted, and it can be ordinary or qualified. If shareholders who own at least half of the total number of voting shares are present, they represent the quorum. By changing the articles of association owners may change the required majority, but not below the limit prescribed by law.
Any special governance regimes (e.g. depending on size, being listed at a stock exchange, or other criteria)?
There is a special governance regime for the public AD.
What are the periodic accounting obligations incumbent upon the entity? To whom must those accounts be submitted?
The company is obliged to prepare annual financial statements and consolidated statements with the status as of December 31 of the business year, i.e. on the day of registration of statutory changes (merger, acquisition, division) and on the day of issuance of the decision on voluntary liquidation of the company. The company is also obliged to submit management report to the Tax administration.
Is the entity permitted to determine its own financial year?
No.
Is the entity subject to any statutory (external) auditor obligations?
Yes, external auditor has to review all financial reports.
Requirements to appoint other persons (officers, secretary, internal auditor / accountants). If so, what are their functions? Are there any residency requirements?
No.
What is the title designated for ‘ownership interests' (e.g. shares, quota, interests, membership)?
Ownership interests are called stocks (“akcije ”).
Are different classes of ownership interests possible? If so, what are some examples of different classes?
Yes, there might be two different types of shares: (i) ordinary shares (“ obične akcije”) and (ii) preferential shares, which grant special powers to the sahreholders such as the right to a dividend in a pre-set cash amount (“preferencijalne akcije”).
What documentation is required for the transfer of ownership interests?
The transfer of the shares of the non-public AD is done through the share transfer agreement which has to be notarized.
The transfer of the shares of the public AD is performed by the transfer of the shares to the account of the acquirer of the shares by the Securities Commission and clearing house after the public offering is terminated.
Are there any additional formal requirements required for the transfer of ownership (notary, approvals, stamping, filings, corporate records)?
Transfer of the ownership has to be registered before the Central Depositary Agency.
Are there any applicable stamp duties imposed when transferring ownership interests?
Yes. In case of sale or transfer of shares in a legal entity, the profit from such transaction is taxed at the rate of 9%
How are shares issued? (including information on payment obligations, registration requirements)
The share issuance process is described in following steps:
Issued shares must be registered with Central Deposit Agency, from which moment rights and obligations arise.
Further information on equity contributions, e.g. , Non-cash payments on shares; (Share premium) contributions without issuance of shares , Can partially paid shares/ownership interests permitted and what are the restrictions on them?
Equity contributions can be monetary or non-monetary. Non-monetary contribution made to a company shall be appraised by one or more certified independent experts. Experts can be natural persons, legal entities or firm, with relevant license for appraisal.
Any requirements with respect to share cancellation, share repurchase and other capital reductions
The AD may purchase its own shares, in accordance with the Articles of Association or the Board of Directors’ decision, based on the approval of the Shareholders Assembly, but the acquired shares must not exceed 10% of the company’s share capital. The AD is obliged to cancel its own shares that have not been resold 3 years from the date of acquisition within three days from the date of expiry of the deadline without the need for a separate decision of the Shareholders Assembly
A company’s share capital may be reduced by a decision of its Shareholders Assembly, but not below the minimal amount of share capital. A decision on share capital reduction shall be passed by the Shareholders Assembly by a three-quarters majority of the voting power present. A decision on share capital reduction shall specify the objective, the volume and the manner of such reduction.
A company’s share capital may be reduced through:
- withdrawal and cancellation of shares held by shareholders;
- cancellation of company’s own shares;
- reduction of par value of shares, or of their accounting value in case of non-par shares.
Any requirements with respect to distributions to shareholders?
The Company cannot make a capital reduction unless it offers additional guarantees for its obligations to any creditor who requested so.
Can the owners or shareholders adopt a restrictive or governing agreement among themselves such as a Shareholders Agreement?
Yes, and it is common in practice.
Which are the typical annual maintenance costs of maintaining the existence and legal good standing of such an entity (excluding legal fees)?
There is a company’s obligation to pay an external auditor. The amount will depend on the volume of business.
What are the general corporate tax rates? (Specify if there is a national versus local distinction).
The rate of profit tax is proportional and amounts to 9% of the tax base.
Summary of any specific matters, e.g. recent or prospective major legal developments
No material major legal developments are expected in 2021. Generally, AD is less common entity type than limited liability company because of the:
- significantly higher minimum share capital;
- more difficult incorporation procedure; and
- more complicated management structure.