Amendments to the Company Law
The Law on Changes and Amendments to Company Law (hereinafter: „Amendments of CL”) became effective on 09 June 2018, aiming to overcome the problems related to application of previous provisions of the Company Law (hereinafter: „CL”). Amendments of CL make changes and introduce additional conditions in internal procedures for approval of transactions or actions involving personal interest of persons with special fiduciary duties towards a company.
Herein below are six novelties introduced to the Article 66 of CL, which regulates approval of legal transactions and actions in case when there is a personal interest of a person with fiduciary duties towards a company:
- Definition of related legal transactions and actions – Several related legal transactions or actions carried out over the course of one year are considered as one legal transaction, provided that they are undertaken with the aim to achieve the same goal or purpose, or if their connection arises from the nature of the legal transaction for the purpose of whose realization they are undertaken. However, exceptionally, it shall not be deemed that there is a single transaction in cases when at the same time there is a creation of pledge, mortgage, or other security interest by a company as a security of its own obligations under the credit or loan agreement, or other legal transaction, in which case the highest value of individual legal action shall be taken as a value of the respective transaction.
In cases where several related transactions are considered as one legal transaction, it is deemed that the time of occurrence of such transaction is the time of the most recent transaction or action. Consequently, for such transactions only one approval by the company shall suffice.
- Obligation to make valuation of market value of objects or rights that are subject matter of a legal transaction or action – If value of a legal transaction or action amounts to 10% or more of book value of total asset of the company indicated in the last annual balance sheet, the company is obliged, after receiving notification thereof, to engage a certified court expert, an auditor or another authorized person to make valuation of object or right that are subject matter of a transaction in question. Such person shall make a valuation report that represents an integral part of the decision approving that transaction.
- Company is obliged to publish a notification about approval of legal transaction or action on their web site or on website of Serbian Business Registers Agency – Joint-stocks companies and limited liability companies are obliged to publish a notification about concluded legal transaction or undertaken legal action with details of the transaction and/or action in question, as well as facts about nature and scope of personal interest of participant in the legal transaction in question, within 15 days from the day of concluding legal transaction or taking of legal action.
- Amendments of CL stipulate that approval of transaction or action shall not be required although there is a personal interest:
- If the Republic of Serbia, autonomous province or local unit of self-government is a shareholder with significant holding in company`s share capital or controlling shareholder; and
- For transactions value of which is less than 10% of total book value of all assets of the company as indicated in the last annual balance sheet of the company.
- Amendments of CL determine majority for passing of an approval decision:
- In a joint-stocks company if there is a personal interest of any stockholder for transaction or action, for its approval it is necessary that there is a consent by a simple majority of all directors, or of the Supervisory Board members.
- In case of a limited liability company Amendments of CL provide that, if director has a personal interest, undertaking a legal transaction or action shall be approved by a simple majority of all disinterested shareholders of the company. Previously, the CL required consent of all company shareholders in this case.
- Amendments of CL stipulate an obligation to notify a General Meeting about approved transaction or action – If the Board of Directors or Supervisory Board approve a legal transaction or action in which there is a personal interest, the company is obliged, regardless of legal form, to notify of that fact the General Meeting in its first next session. Previously the CL stipulated this obligation only in case of a joint–stock company.