If you have ever considered an asset deal in Serbia, or may be in a position to do that in the future, then the following 10 points offer a simple and brief overview of some of the issues to keep in mind:
1. Assets do not (always) come without debts. According to the Article 452 of Serbian Law on Contracts and Torts, a person that acquires assets becomes liable for debts related to such acquired assets jointly and severally with the transferor, up to the value of such assets. According to the paragraph 2 of this Article, any provision of a contract excluding or limiting such liability does not have legal effect towards creditors. So, buyers beware!
2. EU “Transfer of Undertakings” directive does not apply in Serbia. This is because Serbia is not yet member state of the EU. Serbian Labor Law has some rules regarding the “change of employer” situation, but these rules generally do not catch the situation of sale and transfer of assets where employees work.
3. Leveraging assets to finance acquisition may be permitted. Serbian Company Law prohibits so-called “financial assistance”, i.e. that a company provides any kind (direct or indirect) support for acquisition of its shares. However, this ban is generally not applicable in case of assets disposals.
4. Encumbrances generally remain valid post acquisition. Unless otherwise agreed with creditors, mortgages, pledges and other encumbrances on assets generally remain valid and burden the assets even after the change of their owner (although there may be some limited exceptions to this rule – e.g. in case of acquisition of assets in insolvency and/or enforcement procedure).
5. Modus of acquisition depends on type of assets. Like in many other legal systems, in order for the asset acquisition to be perfected, Serbian law requires both iustus titulus (i.e. legal ground for acquisition – most often a contract) and modus acquirendi (i.e. mode of acquisition of the respective assets). The modus of acquisition depends on the type of assets. Sometimes there will be a registration requirement. For example, for real properties this is registration of ownership with the land registry, and for IP rights this is registration of the respective right with the relevant IP registry. And for most of the movables this is a simple handover (unless there is a public registry for the relevant assets – e.g. for motor vehicles). So, this should be always carefully planned and considered.
6. Transactions with assets of “high-value” require approval of the Shareholders’ Meeting. Under Serbian Company Law, if the company acquires, i.e. disposes of the assets, the purchase value and/or selling value and/or market value of which at the moment of rendering the relevant decision accounts for 30% or more of the book value of the total company’s assets presented in the latest annual balance sheet, then such transaction must be approved by the shareholders’ meeting (and adoption of such decision generally triggers the buy-out right for dissenting minority shareholders).
7. Merger approval may be required. Asset deals may also trigger obligation to obtain a merger approval, similarly as share deals.
8. Acquisition of real property by foreigners depends on “reciprocity”. Generally, foreign companies may acquire real properties in Serbia only under the requirement of “reciprocity”, i.e. if Serbian companies may acquire real properties in their country of origin. Yet, this limitation is in practice often easily by-passed in a way that real properties are acquired through a local Serbian company.
9. Governing law. In principle, whenever there is a “foreign element” to a transaction, parties may choose foreign law to govern their contract. However, in some cases this is not permitted. For example, for transactions relating to real properties in Serbia is always exclusively applicable Serbian law.
10. Forum for disputes. Similarly as with the governing law, whenever there is a “foreign element” to a transaction, parties are in principle allowed to choose a foreign court or arbitration as a dispute resolution forum. However, there are some limitations in this regard as well. For example, Serbian courts have exclusive jurisdiction for disputes relating to the ownership or other property rights on real estate located in Serbia, as well as for disputes related to lease of such real estate.
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