Serbian residents are generally allowed to acquire shares in foreign companies. However, the Serbian Capital Markets Act (“CM Act“) prohibits cross-border public offers of shares directed at Serbian residents. Public offer is defined as any notice providing sufficient information on the conditions of the offering and the securities being offered so to allow offerees to decide on the purchase of, or subscription to, the securities. Public offer of shares must be conducted in accordance with the procedure prescribed by the CM Act. This includes an obligation of foreign offeror to register the prospectus with the SEC. Moreover, foreign issuer cannot offer on the Serbian market securities denominated in foreign currency but may offer only Serbian dinar-denominated depository certificates relating to the foreign securities.

As the CM Act unfortunately does not contain any exception for cross-border employee share purchase plans (ESPPs) or share option plans (ESOPs), the Serbian Securities Commission (SEC) issued a series of opinions in the period 2012-2017 to the effect that any offer of shares for consideration, even if directed to a limited number of Serbian employees, is considered public offer and would have to be made in accordance with the foregoing general regime of the CM Act. In one of the opinions, SEC also stated that foreign companies cannot provide general investment services to Serbian employees in Serbia, such as handling of sale and purchase orders, maintenance of custody accounts and so on, even if those services arise in the limited context of ESPP/ESOP.

In March 2019, answering a narrow question, SEC confirmed that the CM Act does not apply if a Serbian employee makes on his own an initiative to acquire shares in a foreign issuer under an employee participation plan governed by a foreign law, provided no offer for the participation in the plan has been made to the employee and further provided that the investment services related to the acquisition of shares are entirely carried out abroad. Unfortunately, this new opinion does not close the issue created by the CM Act and its interpretation in the earlier SEC’s opinions. While it is clear that an unsolicited initiative of a Serbian employee to acquire shares of a foreign issuer does not amount to an offer by a foreign issuer, the new opinion does not resolve whether the initial communication of an ESPP/ESOP by a foreign issuer to the employees of the issuer’s Serbian affiliate, which normally must precede the decision of the employee to purchase the shares or acquire the share option, would be caught by the provisions of the CM Act. The confirmation by SEC in the new opinion that the CM Act does not apply to investment services entirely carried out abroad also does not go beyond restating the obvious. The question when an investment service is deemed to be provided in Serbia rather than abroad remains open.