The amendments to the new Companies’ Act of Republika Srpska, the sub-sovereign entity within Bosnia and Herzegovina, entered into force on 2 March 2023. We offer an overview of the most important changes pertaining to limited liability companies (LLCs), this being the most common corporate form for private investments.
The popularity of LLCs is largely attributable to no capital requirement – an LLC can be established with the founding capital of symbolic BAM 1 (for comparison, the minimum founding capital for an LLC established in the other sub-sovereign entity, the Federation of Bosnia and Herzegovina, is BAM 1.000). The minimum capital requirement remains the same for single-member LLCs, whereas in case of LLC with multiple shareholders, each would have to pay in BAM 1. There is also a new rule that in case the registered capital is equal to or larger than BAM 5.000, half of that amount has to be paid-in before the company’s registration, while the remainder has to be invested within two years from the registration date.
LLC’s quotas can be traded on the stock exchange
A revolutionary novelty concerns the possibility for LLC to have its quotas registered with the Central Register of Securities (CRS), in addition to the standard registration with the Commercial Register. LLC’s quotas registered with CRS can be traded at the stock exchange. It remains to be seen whether there will be any private companies who will avail themselves of this possibility.
Abandonment of the consensus requirement
Crucial shareholder resolutions, such as on the amendments to the memorandum of association, profit distribution, and disposal of high-value assets, are no longer subject to the requirement of unanimous shareholders vote by default. The new law requires a two-third majority of all votes for these matters. The memorandum of association can relax this statutory supermajority requirement by stipulating for a simple majority of all votes.
The rules on exit and expulsion of shareholders are now more elaborate
Shareholder who has fully paid its capital contribution can exit the LLC any time and for no reason, provided it does not request any compensation for the share. In contrast, the shareholder who wants to exit the company for cause and have its share redeemed by the company must obtain a court decision to that effect, unless the shareholders’ assembly approves the exit within 60 days from the receipt of the shareholder’s request. The request to the court may be submitted within six months from acquiring the knowledge of the cause and in any event within three years from the occurrence of the cause. Upon the shareholder’s exit, the share becomes a treasury share. The shareholder entitled to a redemption price may request that the treasury share be pledged as security for the claim. The company may not pay dividends until it has paid the redemption price to the exiting shareholder.
By a shareholders’ resolution rendered to that effect by a two-third majority of votes (not counting the votes of the affected shareholder), LLC may expel its shareholder who has failed to make a capital contribution in time. Prior to the new law, the expulsion was possible only pursuant to a court decision to that effect.
Extended claim preclusion deadlines and statutes of limitation
The preclusionary deadline for LLC’s claims against persons having fiduciary duty to the company for breach of the rules on avoidance of conflict of interest and non-compete obligations is extended to 6 months from the day of acquiring knowledge for the breach (subjective deadline) and 10 years from the day when the breach occurred (objective deadline). Previously, subjective deadline was 60 days, whereas the objective deadline was three years.
The statute of limitations for a shareholder’s claim against the company arising out of the shareholder status (e.g. claim for unpaid dividends) is extended from three to 10 years.
Finally, the statute of limitations for claims of the company’s creditors against the company’s shareholders (in those case where such claims are permitted, such as under the theory of the piercing of corporate veil or after the liquidation of the company) is six months from acquiring the knowledge of the relevant cause of action and 10 years from the liquidation of the company or, as the case may be, from the date the defendant ceased to be the shareholder.
New rules on cross-border mergers
The amended Companies’ Act surprisingly introduces detailed rules on cross-border mergers involving a company from Republika Srpska and a company from another country, whereby one of those companies ceases to exist by merging into the other company, or both companies merge into a third one which they have created for that purpose. It is still to be seen whether the new chapter on cross-border mergers will find any application in practice. The viability of any outbound cross-border merger will necessarily depend also on the law of the country of the foreign company participating in a cross-border merger It is yet to be seen whether there will be any commercial interest for inbound cross-border mergers.
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