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What does the withdrawal of the Draft Law on Business Companies mean for Serbia?

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On May 26, the Government of Serbia submitted the Draft Law on the Management of Business Companies Owned by the Republic of Serbia to the parliamentary procedure. The story of this proposal, which was met with numerous criticisms since it envisages 23 public companies becoming joint-stock or limited liability companies, however, stopped there, because Prime Minister Ana Brnabić announced its withdrawal from the procedure. On that occasion, she stated that the claims about the sale of state-owned enterprises are untrue.

The proposed law, which is still on the parliament’s website, foresees that 23 public companies will change their legal form to a joint stock company or a limited liability company in the coming period. In part of the public, it was criticized as a path that opens the door to privatization and the inflow of private capital into public companies.

When she announced that the Government would withdraw the proposed law at the request of President Aleksandar Vučić, Brnabić pointed out that the Proposal would be withdrawn in order to further communicate about the law with civil societies, non-governmental and professional organizations, as well as with citizens.

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However, she emphasized that there is no question of the sale of state enterprises, stating that this “direct disinformation was spread by the opposition” in order, as she said, to create additional confusion and upheaval.

“It is important that we, on our part, be responsible enough to hear citizens’ fears and respond to them. It is for this reason that President Aleksandar Vučić asked me that the government withdraw from the Assembly the Proposal for a Law on the Management of State-Owned Enterprises,” Brnabić said yesterday as a guest on TV Prva.

She added that according to the Law on Public Enterprises, which is currently in force, it is possible to sell or privatize a public enterprise and that this could have been done in the previous ten years, but that the government did not want it.

“On the contrary, the goal of this law is to better safeguard national and strategic interests through the professionalization of the management of public enterprises,” said Brnabić and added that this has been discussed for more than three decades.

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What was foreseen by the law whose withdrawal was announced by the Prime Minister

The intention of the law whose withdrawal was announced was, as stated by the proponents, to unify the legal framework for the establishment of general rules of ownership and management for all economic entities, reduce the current dispersion that can lead to unclear goals and support the separation of the roles of the state as owner, policy maker and regulator.

This regulation would not, as stated, affect the increase in the prices of goods and services, but, as it is claimed, positive effects on the standard of living could be expected, due to the improvement of business operations by introducing corporate management and operations in accordance with the general goals of the state.

Specified that public companies should become capital companies with the legal form of a joint-stock company or a limited liability company in which the state has the capacity of a member, i.e. a shareholder with more than 50 percent of the company’s basic capital, as well as a company in which Serbia has controlling ownership according to another basis.

The proposal specified that the law would not be applied to companies owned by Serbia that manufacture weapons and military equipment, that operate as banks, insurance and other financial institutions, companies that were established and operate in accordance with the law regulating innovation activity and to institutes. It would also bypass those companies over which privatization proceedings have been initiated, i.e. over which bankruptcy proceedings have been opened.

It Is foreseen that the capital company must not use its position that could lead to limiting competition on the market, as well as that the implementation of the principle of responsibility ensures the protection of the rights of minority owners.

It was also stated that the centralized ownership management is carried out in accordance with the goals, which are the preservation of national and strategic interests, the market and consumer protection, the reduction of social stratification in society, sustainable management of the environment and the sustainable use of Serbia’s natural resources, and the improvement of the economic, industrial and social development.

When changing the legal form, as proposed, the basic capital of the JP is converted into shares, i.e. shares, depending on the form of the company, while the legal subjectivity and business identity of the JP is retained, without liquidation, without cessation of business and without interruption of legal continuity, and the JP retains its identity in the legal and business sense.

As planned, the government would pass an act on the criteria for choosing the legal form of the capital company into which the public enterprise would be transformed. There was an obligation for those companies to submit to the Ministry of Economy a list of immovable property over which they have the right of ownership, that is, the right of use, within three years at the latest in case the law was adopted.

The government, at the proposal of the Ministry of Economy, would decide on immovable property on which capital companies have the right to use, and which would be transferred to the ownership of the capital company, after which the capital company would register the ownership rights.

It is envisaged that the Government of Serbia, at the proposal of the Ministry, no later than one year from the date of implementation of the law, will pass the necessary acts to change the legal form of public enterprises to the form of a joint-stock company or a limited liability company.

The proposal Implied the arrangement of corporate governance issues in accordance with the best international practice and professional training of state representatives in the Assembly of capital companies, persons performing the functions of directors and persons in the supervisory board.

“He better be retired”

Namanja Nenadić from Transparency Serbia believes that it is better for the proposed law on companies to be withdrawn at this moment than to be adopted, leaving so many unresolved issues.

“That announcement of a dialogue, we will see exactly how it will look. There is a good example when the law on internal affairs was withdrawn that a dialogue was really opened in which many participated and there was an opportunity to say something. This is also necessary here, even though it is formally a public discussion was organized at the end of December last year, it was not even announced in an appropriate way to collect all the necessary data, and there is a lot left that is not clear and precise enough or not good at all. We pointed out some of those things.” Nenadic told Euronews Serbia.
Nenadić says that Transparency Serbia would raise the issue of the status and appointment of the acting director in that dialogue.

According to him, the proposed law, the withdrawal of which has been announced, is worse than the current Law on Public Enterprises, because in the event of its adoption, all officials in public enterprises – acting directors, members of supervisory boards and members of the assembly would not have the status of public officials and would not submit reports on assets at the beginning and end of the mandate.

“As far as transparency as such is concerned, this draft law really foresees the publication of some documents and the monitoring of the work of public companies, primarily by the founders. However, despite the fact that a lot of data is collected, we do not have a sufficient guarantee from the law that all the necessary data will be and published, because it was said that the method of accessing that data will be regulated by a by-law. The minimum would be to prescribe in the law itself which data must be published, and not to wait for what some economy minister will prescribe tomorrow.” , Nenadić said.

When asked if the proposed law, the withdrawal of which was announced, is similar to the model by which EPS is transformed into a joint-stock company, Nenadić stated that it is similar in several ways, with the fact that he believes that “what was done with EPS is even worse than this”.


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