On its way to becoming a full Member State of the European Union, Serbia must harmonize its laws with EU laws. Among other expected changes, Serbia will have to amend its Companies Act (the “Act”). The Ministry of Economy has already established a working group in order to prepare a draft of amendments to the Act. One of the expected changes is the enabling of cross-border mergers of companies.
After Serbia becomes an EU Member State, its companies will be able to merge with companies incorporated in other EU Member States and establish cross-border companies. This would be a huge step towards improving the position of Serbian companies in the EU market and increase their competitiveness.
At the EU level, cross-border companies are regulated under the Directive on Cross-Border Mergers of Limited Liability Companies. This Directive defines a cross-border company as a company incorporated under the law of an EU country where the registered office or main place of business is in the EU, and provided that at least 2 of them are governed by the law of different EU countries.
One of the main problems which legislator will face is to include within the Act adequate protection for creditors’ claims against the company proposed for the merger. Prior to adopting the decision on a merger, a Serbian company will have to publish a merger plan on the website of the Serbian Business Registry Agency to inform its creditors of the same. If the company’s creditors can prove that their claims are jeopardized, there should be a mechanism available to them to protect their claims. One possible mechanism could be to establish a pledge on company’s movable and immovable assets.
Additionally, Serbia will have to introduce new rules concerning the registration of cross-border companies’ registered office. In this regard, the Serbian legislator will have to find a mechanism which would allow cross-border companies to change their registered office from one EU country to another, but protecting the position of the company’s minority shareholders, creditors and employees.
A draft of the proposed changes of the Act is expected by the end of the year and could herald significant changes for the Serbian merger market and possibly attract additional interest of foreign investors in Serbia.