Offering of securities to company employees through some form of employee profit sharing plan is a common way for companies around the world to reward their top managers and employees. Employee Participation in Investments Program (hereinafter: “EPIP”) is a generic term taken from the EU Directive 2004/39/EC, and although it is thoroughly regulated in most of the countries of the EU, this legal concept remains to a large extent unregulated in Serbia, and this is also the stance that the Serbian Securities Commission (hereinafter: the “SSC”) has adopted in its only opinion up to date pertaining to the issue of EPIP’s and related investment services, in 2014 (hereinafter: the “Opinion 2014”).
In its Opinion 2014, the SSC elaborated that pursuant to Serbian regulations governing capital markets, every offer of securities, including offers made by foreign entities (with or without a prospectus and regardless of whether it is intended for all investors in Serbia or a certain circle of domestic entities) represents a public offer which should be implemented by authorized investment companies, through competent institutions, in the prescribed manner and within the set deadlines, in accordance with the provisions of the Capital Markets Act (hereinafter: the “CMA”).
Additionally, in the Opinion of Serbian Securities Commission provided in 2012 (hereinafter: the “Opinion 2012”) SSC pointed out that, bearing in mind the relatively low level of development of the domestic financial market, the CMA does not regulate cross-border issuance of securities, which will have to be regulated in the process of harmonization of national legislation with EU law. In this respect, the SSC adopted the position that in accordance with existing regulations, offering of securities issued by foreign entities as such is not possible in Serbia, due to the application of lex rei site principle, i.e. application of domestic law, which requires a public offer with or without a published prospectus. This should be particularly relevant in the case when shares of a foreign founder are offered to employees of its Serbian subsidiary.