Compliance Time – Montenegrin Companies to Harmonize Their Business With the New Company Act

December 14, 2020

Compliance Time – Montenegrin Companies to Harmonize Their Business With the New Company Act

December 14, 2020

Milan Samardžić

Milan Samardžić

Partner

Nemanja Providžalo

Nemanja Providžalo

Senior Associate

By adopting the new Company Act on 11 July 2020 (the “Act”), Montenegro made a big leap in the area of Corporate Law, although “big leap” maybe isn’t a phrase strong enough to describe the number of changes the Montenegrin Corporate Law went through, having in mind that the new Company Act is three times more extensive compared to the previous one.

This, of course, also means that all companies will have to harmonize their operations with the new law, some of them sooner than later. The Act prescribes that all Joint Stock Companies (“JSC”) and Limited Liability Companies (“LLC”) who are treated as companies of public interest or classified as large companies from the accounting aspect, will have to harmonize their business with the Act within 9 months as of the date when Act entered into force i.e., 11 April 2020.

Other companies are not excluded from having to harmonize their operations with the Act, however, they are left with more than enough time for this, as the Act determines that they should harmonize within 18 months as of the date when Act enters into force, i.e., 1 January 2022.

As April is not so far from now, it would be good to recall what are the biggest changes adopted in the new Act. The list below is not an exhaustive one, but rather a selection of major changes introduced by the new Act, which we consider most important for the process of harmonization:

  1. New Act introduces differentiation between share capital and net share capital, defining net share capital as the difference between the value of the company`s assets and the company`s liabilities. Nonmonetary stakes can be composed of either objects or rights, however, work or services as nonmonetary stakes can only be possible within such legal entities incorporated as partnerships or limited partnerships.
  2. Public interest companies are not a new company form, but rather a type of LLC`s or JSC`s which issues securities and other financial instruments on the regulated market in Montenegro or abroad.
  3. A lot of changes have been introduced to the JSC, among which:
  • Rights of the shareholder are now prescribed in detail, determining property and non-property rights of the shareholder;
  • Introduction of two-tier management system consisting of assembly, the supervisory board, and management board. The companies still have the option to opt for a one-tier management system;
  • The Board of directors consists of at least three members, save for the board of directors of a public interest company, which has to consist of at least five members. The Board of directors has to consist of at least 1/3 independent members while a public interest company`s board of directors has to consist of at least 2/5 independent members;
  • Public interest companies have to appoint a secretary of the company, while other companies may decide to appoint a secretary if they wish. In companies where there is no secretary, the executive director is responsible for performing tasks within the secretary`s competence.

 

  1. Changes to the LLC were not that broad, but still introduced important novelties:
  • Assembly becomes a mandatory body of the LLC, save for LLC`s which consist of only one shareholder which can opt for Assembly;
  • LLC can have additional bodies determined by the Act,
  • LLC whose securities are listed on the Organized securities market in Montenegro or classified as large companies must have the same bodies as JSC;
  • The shareholder can pledge his share or part of the share, but the pledgee has no right to vote until he becomes a member of the company.

 

One more important harmonization obligation is that all entrepreneurs and partnerships that weren’t previously registered are now obliged to register within the Central Register of Business Entities within nine months from the date of entry into the force of the Act, i.e., 11 April 2021.

If you need any help regarding the harmonization procedure, feel free to contact us.

 

 

This text is for informational purposes only and should not be considered legal advice. Should you require any additional information, feel free to contact us.

Contact:

Milan Samardžić, Partner
milan.samardzic@sog.rs

Nemanja Providžalo, Senior Associate
nemanja.providzalo@sog.rs

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