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Home/News/M&A structures and regulation in Serbia

M&A structures and regulation in Serbia

Structure and process, legal regulation and consents


How are acquisitions and disposals of privately owned companies, businesses or assets structured in your jurisdiction? What might a typical transaction process involve and how long does it usually take?

The two most common types of business combinations are purchases of shares in a limited liability company (LLC) or purchases of shares in a joint stock company (JSC). Depending on the type of JSC, shares may be purchased on the stock exchange or directly from the owners of such shares. Another form of acquisition is a status change, namely, merger by acquisition, merger by formation of new companies, division or separation. Assets are usually acquired through sale and purchase agreements, where one company transfers ownership of its assets to another company.

A typical transaction process will usually start with the signing of a non-disclosure agreement, followed by due diligence, negotiations regarding the terms and conditions of the transaction, the signing of a framework agreement and sale and purchase agreement, and the fulfilment of closing and post-closing conditions.

The duration of the transaction process will depend on the complexity of the issue. Nevertheless, the usual time frame for a transaction is approximately three months.

Legal regulation

Which laws regulate private acquisitions and disposals in your jurisdiction? Must the acquisition of shares in a company, a business or assets be governed by local law?

The laws regulating private acquisitions and disposals in the Serbian jurisdiction are as follows:

the Law on Companies;
the Law on Takeover of Joint Stock Companies;
the Law on Capital Market;
the Law on Protection of Competition;
the Law on Contracts and Torts;
the Law on Foreign Exchange;
the Law on Procedure of Registration in the Serbian Business Register Agency;
the Law on Electronic Document, Electronic Identification and Trust Services for Electronic Transactions;
the Law on Pledge Rights over Movable Assets entered in the Register;
the Law on Mortgages;
the Law on State Geodetic Authority and Cadastre; and
the Law on Ultimate Beneficial Owners Registry.

Usually, the procedure will be governed by the laws of Serbia. However, it is not prohibited to agree on a foreign law being applicable under an obligation to comply with the imperative norms of Serbian law. In the case of a sale of immovable property, Serbian law has exclusive jurisdiction.

Legal title

What legal title to shares in a company, a business or assets does a buyer acquire? Is this legal title prescribed by law or can the level of assurance be negotiated by a buyer? Does legal title to shares in a company, a business or assets transfer automatically by operation of law? Is there a difference between legal and beneficial title?

In respect of shares, the buyer acquires full legal title to the shares, which means it can freely dispose of them. Such title may be limited in terms of the rights of third parties where some of them are pledge or pre-emption rights.

Regarding assets, the buyer will also acquire full legal title, which may be limited in terms of the rights of third parties, these being pledge rights, preliminary injunctions (a prohibition on disposal and alienation) or pre-emption rights. In the case of immovable assets, title may also be limited by servitude.

Legal title is defined by law. The subject matter of negotiations may be the transfer of ownership rights conditioned by certain acts of the buyer. One such example is a transfer of ownership rights after payment of the entire amount of the purchase price.

Legal title to both shares in a company and immovable property is transferred by registration in public registers: for companies, in the Serbian Business Register Agency (SBRA) for LLCs, and the Central Depository and Clearing House for JSCs; and the Land Registry (Cadastre) for immovable property.

The Serbian legal system recognises the beneficial title to shares through the Law on Ultimate Beneficial Owners of Shares that prescribes that the company has a duty to inscribe its beneficial owner being and individual. Other than that Serbian legal system recognises beneficial owners through the Institute of custody banks that hold shares in the name and for the account of group of people.

Multiple sellers

Specifically in relation to the acquisition or disposal of shares in a company, where there are multiple sellers, must everyone agree to sell for the buyer to acquire all shares? If not, how can minority sellers that refuse to sell be squeezed out or dragged along by a buyer?

Unless otherwise stated in a company’s articles of association, shareholders of an LLC have a pre-emption right to equity interest subject to a transfer to a third party. Therefore, a transferor of equity interest should offer his or her equity interest to other company members prior to transfer to a third party. If no shareholder uses such pre-emption right, a transferor of equity interest may, within 90 days, sell his or her own equity interest under conditions that may not be more advantageous than those in the offer. Prior consent of the company’s general meeting of shareholders may be required for the transfer of an equity interest to a buyer who is not a company member, and the general meeting can deny its consent or designate a different acquiring party. As a result, a transferor may transfer his or her own equity interest solely to a designated acquiring party. Acting contrary to these rules may lead to the voiding of a share transfer instrument.

In a JSC, upon a proposal of a shareholder holding a minimum of 90 per cent of the share capital and a minimum of 90 per cent of the votes of all ordinary shareholders, the general meeting will pass a decision on the compulsory redemption of all shares of the remaining shareholders (minority squeeze-out). A controlling shareholder holding a minimum of 90 per cent of the company’s share capital shall have an obligation to purchase the shares of every remaining shareholder on his or her written request.

Exclusion of assets or liabilities

Specifically in relation to the acquisition or disposal of a business, are there any assets or liabilities that cannot be excluded from the transaction by agreement between the parties? Are there any consents commonly required to be obtained or notifications to be made in order to effect the transfer of assets or liabilities in a business transfer?

The acquisition of a business in Serbia commonly occurs through the acquisition of an equity interest or a status change. Less often It happens through an asset deal, where, for e.g. the buyer acquires real estate (a hotel, shopping mall) and the business operations conducted there (practically, the buyer purchases ongoing business), without buying the company which previously owned the real estate. A buyer and a seller can agree which assets and liabilities will be transferred, and this may require the formation of an SPV or the conducting of status changes before the actual transfer to ensure the lawful extraction of the desired target assets.

A buyer acquiring property on a contractual basis will be liable for any debts relating to such property alongside the former owner and jointly with it. The limitation or exclusion of the buyer’s liability has no legal effect. When acquiring business or assets through a status change, the buyer will be obliged to take over the employees of the seller together with all effective general acts (such as the collective agreements), which must remain in force for at least one year following the acquisition. A buyer that acquires leased assets in the physical possession of a lessee assumes its predecessor’s place, and he or she cannot require the lessee to hand over leased property before the expiration of the lease period or without a notice period.

A transfer of assets or a business may require a previous consent from the competition protection authority or other regulatory authorities (e.g. the National Bank of Serbia (NBS), the Securities Commission), or that counterparties to commercial agreements agree to the assignment of such agreement.


Are there any legal, regulatory or governmental restrictions on the transfer of shares in a company, a business or assets in your jurisdiction? Do transactions in particular industries require consent from specific regulators or a governmental body? Are transactions commonly subject to any public or national interest considerations?

In general, the Serbian market is open, and is accessible to both foreign and domestic legal entities and individuals. When agricultural land is in question, an individual foreigner may be an owner of up to two hectares of agricultural land only if he or she is an EU citizen and fulfils certain additional criteria (mainly related to the fact that he or she is a farmer). Otherwise, a foreigner may be a founder of a company that could hold agricultural land.

Particular industries, such as banks, companies operating in the field of financial leasing, insurance companies, insurance brokers and insurance agents, associations for the management of pension funds, investment funds and broker companies, must comply with sector-specific rules. They are subject to the control of the NBS, which has the authority to give permission for their establishment, to control their business operations, as well to issue approvals on acquisitions of shares or the establishment of control over banks, and insurance, financial and leasing companies. Stock exchanges, investment funds, custody banks, companies for investment funds and broker companies are under the control of the Securities Commission. In addition, if transactions satisfy certain thresholds, they must apply for merger clearance, which is to be filed before the Commission for the Protection of Competition.

Serbia does not subject private transactions to any public or national interest considerations. However, for reasons of national security and foreign policy, if a foreigner wants to invest in a company dealing with the production of weapons such investment is subject to the approval of the Ministry of Defence.

Are any other third-party consents commonly required?

The consent of other shareholders is typically required in share transfer deals in LLCs. If a buyer acquires an ongoing business, the assignment of the relevant contracts will be possible only with the counterparty’s consent. The acquiring party will typically require the transferor to enable the transfer of assets free of any burdens, and formal written release statements of the transferor’s creditors will be necessary if target assets are pledged or mortgaged. Different regulatory consents and approvals can also be required, such as an approval for a concentration from the Serbian Commission for the Protection of Competition in the case of an acquisition of assets or a business through a merger or other status change or through share deals. The NBS issues its consent with respect to an acquisition of direct or indirect ownership in a bank, thereby enabling the acquiring party to acquire a certain percentage of the voting rights. In the case of acquiring the assets or business in a JSC through a purchase of more than 25 per cent of the JSC, the consent of the Serbian Securities Commission is required.

Regulatory filings

Must regulatory filings be made or registration (or other official) fees paid to acquire shares in a company, a business or assets in your jurisdiction?

A buyer that has acquired shares in a company must file a registration request with the SBRA and pay the prescribed administrative fees, which amount up to €30. When an application for merger clearance needs to be filed with the Commission for the Protection of Competition, the applicant will pay a fee amounting to up to €50,000.

To obtain Securities Commission approval of a bid announcement, a buyer is obliged to pay a fee of not less than approximately €2,500.

If a buyer acquires real estate, registration of its ownership title in the Real Estate Cadastre is necessary. The administrative fee for this service is, at a minimum, €50.

The effectiveness of all regulatory and registration filings is conditioned on the payment of the instructed fees.

Costs related to the services of a notary public for notarisation of a share transfer agreement or an agreement based on which the buyer acquires real estate may amount to up to €5,000.

Source; lexology