LAV Z. DIMOVIĆ
Incorporating a company is the beginning of its legal organisation, rather than the end. Relations between founders, directors’ authority, financing, contracts with business partners and the disposal of assets raise questions whose importance often becomes apparent only when ownership changes or disagreements arise between members.
Corporate law covers the formation and organisation of businesses, their internal relationships, commercial transactions and the registration of changes throughout their operations.
Company formation and relations between founders
When forming a Serbian limited liability company, known as a društvo sa ograničenom odgovornošću or DOO, the founders need to determine more than the basic registration particulars. They should also address management arrangements, the limits of representatives’ authority and the rules for making decisions.
For companies with several members, it is particularly important to agree in advance how the business will be financed, how ownership interests may be transferred, how profits will be distributed and how disagreements will be handled.
The founding document and any members’ agreement should reflect the founders’ actual relationship. The statutory default rules may not always be the most suitable arrangement for a particular venture, especially where members have different financial roles or expectations concerning management.
Changes in ownership and transfers of ownership interests
A sale or other transfer of an ownership interest in a DOO requires a review of the conditions imposed by law and the company’s constitutional documents. In addition to agreement on price, relevant issues may include pre-emption rights, specific approvals, pledges over the interest and members’ existing obligations to the company.
For more complex transactions, the contract should address payment conditions, responsibility for historical liabilities, the parties’ representations and the sequence of registration steps.
A separate legal review may be necessary where the acquisition gives the buyer control of a company with employees, substantial contractual commitments, real estate or pending court proceedings.
Corporate agreements and the disposal of assets
Companies frequently need to regulate loans, assignments of receivables, assumptions of debt, obligations between related parties and other commercial relationships.
The legal analysis of these transactions includes checking authority to enter into them, potential conflicts of interest and any requirement to obtain approval from the competent corporate body.
Transactions involving assets of substantial value require particular care. Their legal treatment depends not only on what the parties intend to agree, but also on the value of the assets, the nature of the transaction and the corporate rules applicable to the company concerned.
Continuing a sole proprietor’s business as a DOO
Moving from a sole proprietorship to a limited liability company requires registration, property, tax and contractual matters to be coordinated.
The statutory procedure for continuing a sole proprietor’s business in company form is not the same as simply incorporating a DOO and separately deregistering the sole proprietor. Legal succession, responsibility for earlier liabilities, employees’ status and the transfer of business assets all need to be considered before registration.
Corporate governance and registration with the Serbian Business Registers Agency
Changes to directors, registered offices, business names, founding documents, members and other registered particulars require appropriate decisions and supporting documentation.
Corporate governance also involves properly defining representatives’ authority, managing conflicts of interest and ensuring that decisions of corporate bodies comply with the law.
Corporate documentation serves a purpose beyond satisfying registration requirements. It should make it possible, at any time, to identify members’ rights, the company’s obligations and the legal basis for significant business decisions.