As a step towards harmonizing the Serbian securities legislation with relevant EU Directives, the Serbian Parliament has adopted a new Law on Capital Markets (the Law). The legislator has given market participants6 months to become familiar with the new Law, which will go into effect on 17 November 2011.
FX securities. Just as under the previous legislation, only debt securities can be issued and traded locally in foreign currency. The issuance of debt instruments in EUR or other foreign currency remains subject to the approval of the National Bank of Serbia. However, the Law no longer provides a quota for debt instruments denominated in foreign currency. It is hoped that the quota requirement will not be reintroduced by the NBS in its bylaws, which should prescribe further conditions regarding the issuance of EUR denominated bonds by domestic corporates.
Foreign securities can be offered in Serbia subject to the approval of the Securities Commission and the National Bank of Serbia.
Shares of domestic issuers can be listed abroad if they are listed on the Belgrade Stock Exchange. Domestic shares that are not listed in Serbia can be listed abroad subject to the approval of the Securities Commission.
Exceptions from the prospectus obligation. Compared to previous legislation, the list of exceptions requiring a prospectus to be published has been expandedand includes, inter alia:
- Offering to qualified investors. The Law replaces the old term “professional investor” with the new term “qualified investor” and expands the scope of persons who are deemed qualified as investors. Notably, the definition of “qualified investor” now includes any legal entity which fulfills two of the following three criteria:
- the average number of employees in the course of the financial year exceeds 250;
- the value of total assets exceeds EUR 43 million;
- annual revenues exceeds EUR 50 million.
Furthermore, the Securities Commission can grant qualified investor status to an entity that does not fulfill the above criteria but that fulfills at least two of the following criteria:
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- the average number of employees during the course of the financial year exceeds 250;
- the value of total assets exceeds EUR 20 million;
- annual revenues exceeds EUR 25 million;
and to an individual who fulfills at least two of the following criteria:
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- the investor has effected, on average, at least 10 transactions in each quarter of the preceding year, with a value of at least EUR 50 K per quarter;
- the total value of the investor’s portfolio exceeds EUR 500 K;
- the investor has at least one year of experience working in the financial sector, in a position requiring knowledge on investing in securities.
- Private placement in Serbia of no more than 100 persons who are not deemed qualified investors.
- Offering to investors each of whom will subscribe the offered securities in the value of at least EUR 50 K.
- Offering of securities issued in the nominal value of at least EUR 50 K each.
- Offering with a total value of less than EUR 100 K in the period of 12 months.
- Issuance of replacement shares.
- Offering of securities as consideration in a takeover bid process.
- Offering of securities by a listed company to its management (under certain conditions).
When securities are offered through an underwriter, the prescribed conditions are examined with respect to ultimate subscribers.
Price band. Unlike the previous legislation, the new Law enables price bands, by no longer requiring the inclusion of a determined volume and price of offered securities into the prospectus, but by permitting the prospectus to contain criteria and conditions for the determination of price and volume.
Reporting obligations. Listed companies have the obligation to prepare, publish and deliver annual, semi-annual and quarterly statements to the Securities Commission, and ensure that such statements are publicly available for a period of five years following their publication.
Delisting. As a result of the privatization process, the Belgrade Stock Exchange is overpopulated by issuers whose shares remain idle. The Law addresses this problem by prescribing the possibility for delisting, provided that:
- the issuer has less than 10,000 shareholders;
- less than 0.5% of total issued shares of the issuer have been traded in the period of six months preceding the adoption of the decision on delisting and further provided that during at least three months within a six-month period, the monthly trading volume amounted to less than 0.05% of total issued shares of such issuer.
The decision on delisting must be rendered by at least a ¾ majority of all voting shares. The dissenting shareholders have withdrawal rights.
Market manipulation. The Law contains detailed provisions on insider trading and market manipulation and criminalizes both types of behavior.
