Introduction
The Serbian Companies Act has a number of new and amended provisions.
Registration of companies as users of e-government services
Effective from 27 April 2023, companies will be required to register as users of e-government services. This means they will have electronic mailbox to receive electronic mail from public authorities.
Legal entity can be a director
The amendments provide that a company may have a legal entity as its director. It is no longer required to have at least one individual as director.
Personal interest in a company’s transaction
Directors, other representatives, registered proxy holders and controlling and significant shareholders have a duty to report to the company their personal interest in any of the company’s proposed transactions. Such prior disclosure is required provided that the value of the assets involved in the proposed transaction is 10% or more of the book value of the total assets of the company (as shown in the last year’s annual balance sheet). The amendments add more details on what a disclosure notice sent to the company must contain: the nature and terms of the proposed transaction, the value of the assets involved, the price to be paid/received, the payment and other relevant terms, as well as the description of the nature and scope of personal interest involved in the transaction.
Following the receipt of the disclosure notice, the company must procure a fair valuation of the assets involved in the transaction in accordance with IFRS 13 “Fair Value Measurement”.
Both the valuation report and the disclosure notice must be attached to the decision of the relevant governing body (depending on the circumstances this could be a board of directors, a supervisory board or a shareholders’ assembly) approving the proposed transaction. The fair value of the subject-matter of the proposed transaction determined by the valuation report must be eventually applied to the actual transaction, i.e. the transaction must be entered into at the fair value price. If not, the company (or the shareholders on its behalf) may file a claim to unwind the transaction. Moreover, entering into the transaction at a price which is different from the fair value of the asset involved is now sanctioned as a crime.
At any time between the moment the company approves the transaction until the transaction is entered into, the company must publish a notice of intent to conclude the transaction involving personal interest. Publication of the notice of intent is made on the company’s webpage or on the webpage of the commercial register. A notice of intent must basically include all information from the disclosure notice, plus information about the counterparty and how it is related to the company.
Information on all transaction entered into by the company in which personal interest was involved must be disclosed in the annual financial statements of the company. Details to be disclosed are those that must be included in the disclosure notice and the notice of intent.
Accession of third parties to the company
The shareholders’ assembly should nominate a person to enter on behalf of the company into an accession agreement with a new shareholder. The accession agreement must be in writing, and the signatures must be notarized.
Remuneration policy in public joint-stock companies; annual remuneration report
A small number of joint-stock companies which remain listed at the Belgrade Stock Exchange are now hit with a new compliance requirement – to have a remuneration policy for directors and supervisory board members. This is part of the harmonization with the Directive (EU) 2017/828 as regards the encouragement of long-term shareholder engagement. The remuneration policy must be comprehensible and detailed, i.e. must include a number of mandatory items (e.g. an explanation on how the remuneration contributes to business strategy, long-term development and sustainability of the company, an overview of all fixed and variable elements comprising the remuneration, including their respective pro-rata share in the overall remuneration, all shares and warrants, issued or to be issued by the company or its related party, in kind benefits of any kind included in the remuneration, financial and non-financial KPIs required for payment of variable remuneration, criteria to determine whether KPIs have been achieved or not etc.). Notably, a model of directors’ employment or management agreement should be disclosed within the remuneration policy.
The remuneration policy is subject to the shareholders’ approval. If the shareholders reject the first policy, the company may continue with its current remuneration practices. The board is required to propose the remuneration policy to the shareholders at least once in four years. Once approved by the shareholders, the policy must be implemented until amended or replaced with a new policy. The approved policy must be published on the company’s website for as long as it remains valid.
Public joint-stock companies are now also required to prepare and submit to the shareholders a report on annual remuneration paid to all current or former directors and supervisory board members (if applicable) in that year. A mandatory content of this report is also set out in a detailed manner and for the most part includes the same elements as required for the remuneration policy, plus additions such as e.g. a comparable overview of movements of remunerations, the company’s results and average salaries paid in the last five years. Auditors of the company are required to examine this report and issue an opinion. The report is discussed and put to a vote at the shareholders’ meeting and following that, it must remain published on the company’s website for at least 10 years.
Rights of shareholders to access information about directors’/board members’ remuneration
Private joint-stock companies and limited liability companies are required to provide any shareholder(s) holding directly at least 5% of the share capital of the company information about the amount and structure of remuneration of any director, executive director or board member. Information must be provided within three days from receipt of the request, free of charge. This includes making available such information on the company’s website. In case information about directors’ and board members’ remuneration is designated as a business secret, the shareholder(s) are required to sign a non-disclosure statement.
