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

The Company Law (Official Gazette of the Republic of Serbia Nos. 36/2011, 99/2011, 83/2014, 5/2015, 44/2018, 95/2018,91/2019 and 109/2021).

Give a brief summary of this entity form, including

Does the entity possess separate legal personality?

The LTD has legal personality.

(Maximum) period of existence

There is no maximum period of existence; the LTD can be incorporated either for an indefinite or definite period of time.

Governing document(s)

The LTD is governed by its Memorandum of Association.

Liability of incorporators / shareholders

As a general rule, the liability of the LTD cannot pass to the incorporators/shareholders except in specific circumstances: (1) if there are grounds for the piercing of the corporate veil; (2) if an "in-kind" (non-monetary) share capital contribution was valued by way of an agreement between the shareholders (instead of an evaluation made by a third party – a certified evaluator) in which case the creditors can challenge the shareholders’ evaluation and shareholders may be liable to pay up in cash the difference between the initially agreed value and the market value subsequently determined by the court; (3) up to the value of the contributions which were not fully contributed into the LTD; in case of compulsory liquidation (which is a consequence of certain irregularities such as failure to file financial statements for two consequential years, or operates without a director for more than three months, or similar), controlling shareholder remains liable for the obligations of the liquidated company for three years.

(Governing) bodies

Corporate governance in the LTD can be organised as a:

• One-tier system, in which case the corporate bodies are:
• Shareholders’ Assembly; and
• One or more directors.
• Two-tier system, in which case the corporate bodies are:
• Shareholders’ Assembly;
• One or more directors; and
• Supervisory board.

Other particularities

NA

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

Starting from 1 January 2025, provisions on cross border mergers and acquisition for LTDs will formally be applicable under the Company Law. Such cross-border mergers and acquisitions will be possible if they occur between: (i) a Serbian LTD, and (ii) an LTD/JSC registered on the territory of a European Union member state, or a state which is a party to the Agreement on European Economic Area.

Serbian LTDs can acquire assets abroad including shares in foreign companies.

Can this type of entity be publicly listed or held?

No.

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

No, an LTD is organised for the purpose of earning profits.

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

Main documents required

The main documents required for incorporation are:

• A certificate of incorporation of the shareholders (e.g. excerpt issued in its country of origin) – issued by the competent authority containing official seal and stamp, and legalised, or if the shareholder is a natural person, a copy of his/her identity card (for Serbian citizens) or passport (for foreign citizens);
• A Memorandum of Association which must be notarised and legalised. However, if the prospective shareholder has an electronic certificate issued in Serbia or is a legal entity incorporated under Serbian laws with a legal representative holding an electronic certificate in Serbia, the Memorandum of Association does not require notarization. Instead, it can be in digitalized and signed using a certified electronic certificate issued in Serbia;
• Proof of the contributed share capital, if contribution is made before incorporation (from the bank in case of monetary contribution or, in case of a non-monetary contribution, the agreement of the shareholders or evaluation from the certified evaluator);
• Completed registration form; and
• Proof of payment of the registration fee.

Involvement of notary, company register, governmental authorities

Involvement of notary: Certain foreign documents (documents obtained from non-Serbian registries, corporate decisions of foreign entities or documents generally signed in a foreign country) to be provided to the Serbian authorities in the registration process are generally subject to certification requirements which are notarisation and/or legalisation of the document. Depending on the country of origin of a document, legalisation means either (i) additional certification of a document by competent government bodies in the country of origin of the document; or (ii) certification of a document with an apostille if the country in question is a party to the Hague Convention on use of apostille dated 5 October 1961. As an exception, legalisation is not required if there is a bilateral agreement between Serbia and such country. Therefore, certification requirements for each non-Serbian document must be determined in each specific case depending on the type of document and country of origin of the document in question. Due to a recent development, it is now mandatory to incorporate LTDs electronically. Consequently, all documents must be submitted to the SBRA in electronic format. This implies that all documents need to be authenticated using an electronic certificate by a notary public or an attorney registered in the directory of lawyers of the Bar Association of Serbia. Foreign documents originally issued electronically must be converted into hard copies and notarized by a foreign notary public. These certified hard copies of foreign documents then need to be digitalized in Serbia and finally authenticated using an electronic certificate provided by a notary public or attorney at law.

Company register: A company is deemed incorporated and legally permitted to commence its business upon registration in the Serbian Business Registers Agency (SBRA).

Governmental authority: Depending on the type of business to be performed by the LTD, pre-approval of the governmental authority may be required.

Timing (estimate)

Timing: SBRA will register incorporation of the LTD within five (5) business days from the date of submitting the required documents. Timing necessary for preparation, notarisation, legalisation, and collection of required documents depends on different circumstances, but it usually takes two (2) to three (3) weeks.

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

Main costs: Notary/legalisation fee (depending on the country in which documents are notarised/legalised), translation fee (depending on the volume of documents to be translated to Serbian language) notary certification fee (depending on the volume of documents to be certified using an electronic signature in Serbia), and registration fee (approx. EUR 50).

Business: An LTD can engage in all legally permitted activities, but its predominant business activity (taken from an exhaustive list of business activities provided by Serbian laws) must be defined in the Memorandum of Association and registered with the SBRA. There are certain activities (e.g. financial services and insurance services), that may only be performed by an entity incorporated in a certain legal form (e.g. JSC), and certain activities (e.g. trade in poisonous goods, medicines, or weapons) that may be subject to licensing requirements.

All documents prepared in a foreign language must be translated by a certified translator in Serbia before being submitted to the SBRA (in original or certified copy).

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

NA

Minimum number of incorporators / shareholders and residency requirements

There must be at least one (1) incorporator/shareholder in the LTD. There are no residency requirements for incorporators/shareholders.

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

There must be at least one (1) director in the LTD. There are no residency requirements for directors.

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

There is a minimum share capital requirement of RSD 100 (approximately EUR 1), which does not have to be paid/contributed before registration but must be paid within five (5) years after registration of the Memorandum of Association.

The capital contributions by shareholders may be in money – Serbian dinars or a foreign convertible currency – or "in-kind" such as equipment, goods, know-how etc. In any case, the capital is expressed in Serbian dinars.

In case of monetary share capital, in order for the shareholders to make such contribution, an account needs to be opened with a bank operating in Serbia.

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

Shareholders may authorise a Serbian lawyer or other individual to execute the Memorandum of Association and other required documentation on behalf of shareholders, and to conduct the registration procedure in general – so for that purpose the physical presence of shareholders or representatives of shareholders in Serbia is not required.

However, the director’s presence is required for certain post-incorporation activities (e.g. bank account opening, collecting the issued electronic certificate, registration of the ultimate beneficial owner of the LTD before the SBRA etc.).

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

A tax identification number is required but it is obtained at the moment of the registration of the LTD before the SBRA together with the registration number of the LTD.

What is the title of the applicable company registry?

Serbian Business Registers Agency.

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 following information of the LTD is publicly available on the registries maintained by the SBRA:

• Memorandum of Association;
• Name and address of the LTD;
• Legal form of the LTD;
• Legal status of the LTD (active, deleted, in liquidation, in bankruptcy);
• Registration number;
• Address for receipt of emails;
• Contact phone and webpage (optional);
• Tax identification number (TIN);
• Incorporation date;
• Prevailing business activity;
• Bank accounts;
• Period of existence;
• Name, gender, and personal number (if Serbian citizen) or name and passport number (if foreign citizen) of directors, other officers (if any), proxies (if any) and supervisory board members (if any);
• Share capital value;
• Contributions of shareholders value and date of contribution;
• Name, registered seat, and registration number in country of origin for the shareholders;
• ‘Share’ in the company which is expressed as a percentage (e.g. 5%, 10%, 51%, 100%);
• Published documents on any bankruptcy;
• Various annotations such as a decision of increase of the share capital, a decision on status change);
• Financial statements;
• Liens and encumbrances on the shares;
• Liens and encumbrances on assets of the entity;
• All decisions issued by the SBRA;
• Various corporate resolutions and material notifications (e.g. resignation letter, a decision on increase/decrease of share capital, merger documents etc.);
• Branches;
• Information regarding the financial leasing agreements entered by the LTD;
• Information on injunctions;
• Information on temporary restrictions of rights of persons;
• Information on companies which are registered as bidders; and
• Ultimate beneficial owner.

SBRA maintains inter alia: company registry, pledge registry, financial leasing agreements registry, financial statement registries etc. Publicly available information on the LTD, in addition to the SBRA, may be also obtained from the intellectual property registry, central bank registries, the land and buildings registry, rating data base (for subscribed users) etc. Serbian LTDs have an obligation to disclose the details of their ultimate beneficial owner(s) to the registry maintained with the SBRA. Also, Serbian LTDs in certain cases are obliged to disclose the details of their ultimate beneficial owners to other entities (e.g. to Serbian banks due to the KYC process).

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

Directors represent the LTD, carry out management duties in the interest of the LTD, observe any limitation in their authorisation as provided in the Memorandum of Association, shareholders’ agreements, company’s by-laws, and corporate resolutions adopted/issued by corporate bodies.

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

A director can be appointed/dismissed or replaced by a decision of the Shareholders’ Assembly, or the Supervisory Board (if the LTD is organised in two-tier corporate governance system). Any change needs to be registered with the SBRA.

At the moment of incorporation directors are appointed in the Memorandum of Association (or separate resolution) by the incorporators/shareholders (to be submitted to the SBRA at the moment of incorporation).

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

Under the Company Law, the only prescribed form for the statutory representative of the LTD is director (one (1) or more). In addition to directors, the LTD may appoint corporate officers (who may be registered with the SBRA as other representatives).

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?

In the LTD, there is no formal difference between the executive and non-executive directors under the Company law. A LTD cannot have a Management Board (or Board of Directors) like the joint stock company pursuant to the Companies Law.

The corporate governance of a LTD can be organised as either:

• One-tier system: Besides the Shareholders’ Assembly, the LTD has one or more directors; or
• Two-tier system: Besides the Shareholders’ Assembly, there is a Supervisory Board which controls one or more directors.

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

The Shareholders of the LTD constitute the Shareholders’ Assembly the main tasks of which are –

• appointment and dismissal of director(s) (in one-tier system);
• appointment and dismissal of the members of the supervisory board (in two-tier system);
• increase and decrease of the share capital;
• amendments to the Memorandum of Association;
• status changes and changes in legal form;
• distribution of profit and coverage of losses;
• acquisition and disposal of high-value assets;
• approval of the financial statements;
• opening of liquidation and bankruptcy proceeding;
• obligations of the shareholders to make additional payments and on return of those payments; and
• withdrawal and cancellation of a shares.

The tasks and responsibilities of the Shareholders’ Assembly are provided in the law, the Memorandum of Association, the shareholders’ agreement, and company’s by-laws.

In case of a single shareholder LTD, the only shareholder of the LTD (who owns 100% share in LTD) performs the functions of the Shareholders’ Assembly and thus there is no need for convening and holding sessions of the Shareholders’ Assembly (as the powers and duties of such body are in the hand of the single shareholder).

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

For the ordinary session of the Shareholders’ Assembly the quorum is the ordinary majority of the total number of the shareholders with the right to vote. Furthermore, the matter is approved if the majority of the shareholders who are present have voted in favour of it. These requirements are different for a reconvened session for which the quorum is one-third of the shareholders with the right to vote.

In general, the decisions are rendered by the shareholders in accordance with the ordinary majority of vote (50% plus one (1) rule), but this general rule can be varied by a specified majority required by the Company Law (e.g. increase and decrease of the share capital, status, and legal form changes, initiating liquidation or bankruptcy procedure etc.) or by the Memorandum of Association.

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

No.

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

The LTD has to submit its annual financial statements twice per year before the SBRA. LTDs must submit (i) statements for statistical purposes (which are not publicly available) by 28 February of the current year for the previous year and (ii) regular financial statements (publicly available) by 30 June of the current year for the previous year. Starting from 1 January 2022, both the statistical and regular financial statements must be jointly submitted by 31 March of the current year for the previous year to the SBRA. This must be done electronically by the director of the LTD who must establish a qualified electronic signature before the Serbian certification body.

Is the entity permitted to determine its own financial year?

Yes, upon approval obtained from the competent authority but only if its parent company, which is a foreign entity, has a financial year determined differently than the calendar year. In such case, the subsidiary (Serbian LTD) is obliged to apply the different financial year for at least five (5) years starting from the moment of its application.

Generally, the financial year lasts from 1 January until 31 December.

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

Audit (external) is mandatory for regular annual financial statements of large and medium-sized LTDs classified in accordance with the law regulating accounting, as well as for those whose business income earned in the preceding business year exceeds EUR 4.4 million in RSD equivalent (statutory audit).

Audit of the consolidated financial statements is mandatory for parent companies that prepare consolidated financial statements in accordance with the law regulating accounting (statutory audit).

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

A company is obliged to either employ an internal accountant or to engage an external accountant agency immediately after incorporation.

There are no residency requirements for such person.

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

Ownership interest in LTD is the share. A shareholder can only have one (1) ‘share’ in the company which is expressed as a percentage (e.g. 5%, 10%, 51%, 100%).

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

No, there are no different classes of shares.

What documentation is required for the transfer of ownership interests?

As a general rule, the transfer of the ownership interests in the LTD is effected pursuant to an agreement on the transfer of share, but as explained immediately below notarisation and registration formalities are required.

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

Yes, the following formalities need to be undertaken:

• Agreement on transfer of share needs to be notarised with the notary public in Serbia or abroad. In case of notarisation abroad, further legalisation is required (as explained under Section II);
• Proof on identity of new shareholder needs to be obtained (as explained under Section II);
• The above documents need to be provided to the SBRA for purpose of registration of transfer of share together with the registration form and proof on payment of the registration fee;
• Approvals of government authorities may be required (i.e. merger clearance, Ministry of Finance/National Bank for certain LTDs involved in banking and finance activities etc.);
• Data on name, residence address, and address for the receipt of mail of the new shareholder is maintained with the company’s records. However, this does not affect the validity of registration of the transfer of share.

The agreement regarding the transfer of share serves as the legal basis for the transfer of share, but the transfer of share is deemed finalised upon registration with the SBRA. Therefore, new shareholder is deemed to be a shareholder of the LTD only upon registration of the transfer of share with the SBRA.

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

There are no stamp duties, aside from the notary fee payable at signing of the share transfer agreement.

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

Shares are not issued as such (like in joint stock companies) since the shareholder of the LTD is deemed to be owner of the share (and can have only one (1) share) in such LTD upon registration with the SBRA either after finalisation of incorporation procedure or the share transfer procedure.

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?

"In-kind" (non-monetary) share capital contribution can be valued by way of an agreement between all the shareholders or an evaluation made by a third party – a certified evaluator. Creditors can challenge the shareholders’ evaluation and shareholders may be liable to pay up in cash the difference between the initially agreed value and the market value subsequently determined by the court. Because of this, it is recommended that in-kind contributions always be valued by an outside certified evaluator.

An appraisal shall be registered and published before the SBRA and shall include in particular: (1) Description of each asset or right included in the contribution in kind; (2) specification of appraisal methods used; (3) declaration that the appraised value is at least equal to the nominal value of acquired share.

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

As a general rule, the LTD may cancel the share of its shareholder only under circumstances and under manner determined in the Memorandum of Association based on decision of the Shareholders’ Assembly. However, the share may be cancelled contrary to the procedure determined in the Memorandum of Association, provided that the shareholder whose share is being cancelled has voted for such decision.

The LTD may acquire its own shares (treasury share) in cases determined in the Company Law (e.g. withdrawal of shareholder, exclusion of shareholder, purchase of share from shareholder etc.). Such share may be cancelled in which case the share capital decrease procedure must be performed.

A share capital reduction procedure can only be undertaken if the requirements related to protection of creditors are fulfilled (as determined in the Company Law) with exceptions respecting certain share capital reductions which may be performed without observing such rule (e.g. reductions in case of loss coverage).

Any requirements with respect to distributions to shareholders?

The Shareholders’ Assembly must adopt a resolution on profit distribution in order to make distribution of profit (dividends) to shareholders. Dividends must be paid no later than six (6) months from the date of the decision on payment of dividends. Such profit distribution may be made only with loss coverage (if any).

In any case, limitation of payments to shareholders should be observed. The Company Law provides that a company may not carry out any payments to the shareholder if, based on the last annual financial statements of the company, the net assets of the company are lower, or would become lower by such payments, than paid-in share capital of the company increased for the mandatory reserves (if any). In addition, the total amount of payments to shareholders in a business year may not exceed profits at the end of that year, increased for undistributed profit from previous years and the amount of distributable reserves (if any), and decreased for uncovered losses from previous years and the amount of mandatory reserves (if any). In case of unpermitted payments, the shareholders receiving the payments would have to return the payment, if they knew or should have known that such payments were not permitted.

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

Yes.

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

The LTD should observe maintenance costs related to its office address (e.g. rent payment, utility costs etc.), payment of directors remunerations (if any), accounting services provided by external accountant (if not employed by the LTD), employees’ salaries, registration fees regarding registration of corporate changes within the LTD and annual financial statements, taxes, various administrative fees and similar.

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

The general profit tax rate of the company is 15%.

In case of a dividend paid to the non-resident shareholder from a LTD registered in the territory of Serbia, a withholding tax at the rate of 20% will be levied, unless an applicable bilateral double taxation treaty provides otherwise.

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

LTD is the business entity form most commonly used in Serbia because of its simple management system and the low amount of the mandatory share capital.

Recently, LTDs can only be incorporated electronically, by using an electronic certificate obtained from one (1) of the certification bodies in Serbia (this inter alia implies creating an account on the eID.gov.rs web portal, which was introduced as mandatory).

The 2019 Company Law introduced a new way to issue shares which are called reserved own shares, which the LTD acquires from the shareholders without consideration, for the purpose of granting a financial instrument – a right to acquire shares. This financial instrument (a right to acquire shares) is most similar to employee share options since it provides a person with the right to acquire the share at a certain predesignated price on the maturity date. However, this process also has a number of elements which are specific for the Serbian jurisdiction and different from the general rules governing typical employee share options (e.g. this financial instrument can be provided to any person, not only employees, however it cannot be pledged).