Status change – spin-off by incorporation

Status changes refer to reorganisations within a company that, due to their significance and complexity, are specifically regulated by the Companies Act (“Official Gazette of the Republic of Serbia”, nos. 36/2011, 99/2011, 83/2014 – other law, 5/2015, 44/2018, 95/2018, 91/2019, 109/2021 and 19/2025) (hereinafter: the Companies Act).

A status change involves the reorganisation of a transferring company by transferring its assets and liabilities to another company – the acquiring company – while its members acquire shares or stocks in that company.

One or more companies, whether of the same or different legal form, may take part in a status change. A company in liquidation or bankruptcy cannot participate in a status change unless the change is carried out as a reorganisation measure in accordance with the law governing bankruptcy.

The spin-off status change has three modalities. A company may divide itself by transferring a part of its assets and obligations to:

1. One or more newly-incorporated companies which constitute a spin-off by incorporation or
2. One or more existing companies which constitute a spin-off by acquisition or
3. One or more newly-incorporated companies and one or more existing companies which constitute a mixed spin-off.

After dividing by transferring part of its assets and liabilities, the company continues to exist upon the completion of the status change, regardless of the spin-off modality.

Status Change – Spin-Off by Incorporation

A spin-off by incorporation is a form of status change in which a single company acts as the transferring entity, separating certain assets and liabilities and transferring them to one or more newly established companies, while the transferring company continues to exist with reduced share capital.

The formation of the new company is governed by the provisions of the Companies Act relating to the formation of companies in the appropriate legal form, unless otherwise provided by the specific provisions of the Companies Act that regulate status changes.

Documents Required for Implementing a Spin-Off by Incorporation

For the purpose of conducting a status change spin-off by incorporation, the board of directors, i.e. supervisory board, if the company has a two-tier management system, prepares the following by-laws and documents:

• Draft division plan as well as all the documents referred to in Article 491, paragraph 3 of the Companies Act;
• Financial statements, with the auditor’s opinion, with the balance on the day that is no more than six months before the day of adoption of the decision of the general meeting on status change;
• Auditor’s report on the completed audit of the status change;
• Report on the status change compiled by the board of directors, i.e. executive board, if the company has a two-tier management system;
• Proposal of the decision of the general meeting on the status change.

Division Plan

If only one company participates in the status change, the board of directors, i.e. supervisory board, if the company has a two-tier management system, adopts a division plan.

The division plan contains, in particular, the details listed in Article 491, paragraph 2 of  the Companies Act and its integral part constitutes the by-laws and documents referred to in Article 491, paragraph 3 of the Companies Act

The division plan shall be made in writing and certified in compliance with the law governing signature certification.

Financial Statements

For the purposes of a status change procedure, a company may use the following as its financial statements:

• Latest annual financial statements with the auditor’s opinion, if no more than six months have elapsed from the end of the business year until the day of rendering of the decision of the general meeting on the status change, or
• Semi-annual financial statements with the auditor’s opinion, if more than six months have elapsed from the end of the business year until the day of rendering of the decision of the general meeting on the status change.

The financial statements may be based on the latest annual financial statements, if those statements were subject to audit, taking into account, based on the bookkeeping records, the changes that have occurred since the day on which the latest annual financial statements were prepared, including the more significant changes to the value of assets, without undergoing a special inventory of reserves and fixed assets.

Exceptionally, the financial statements are not needed if all the members of the company involved in a status change agree that these reports should not be prepared.

Auditor’s Report on Status Change Spin-Off by Incorporation

At the request of the company participating in status change, the competent court shall appoint an auditor, in a non-contentious proceeding, to audit the division plan, and such auditor compiles a report on the status change spin-off by incorporation. The auditor shall compile the report on the status change spin-off by incorporation and submit it to all the companies participating in the status change within the deadline determined by the court, which may not be longer than two months from the day of his appointment.

The auditor compiles the report on the status change spin-off by incorporation, in writing which shall contain an opinion on whether the ratio at which the shares, i.e. stocks are exchanged is fair and appropriate, as well as an explanation.

In a company which is not a public joint stock company, the auditor’s report on the status change spin-off by incorporation is not needed if all the members of each company involved in the status change agree that this report should not be prepared.

Report on the Status change of the Board of Directors, i.e. the Executive Board

The board of directors, i.e. the executive board if the company has a two-tier management system, of the company conducting a status change compiles a detailed written report which contains in particular:

• Goals wished to be achieved by way of status change, with the analysis of expected economic effects on the companies participating in the status change;
• Explanation of the legal consequences of the adoption of the division plan;
• Explanation of the ratio at which stocks or shares are exchanged;
• Data on the amendments to the division plan, if such amendments have been made based on the report of the auditor on the audit of status change;
• Data on significant changes to the assets and liabilities of the companies participating in status change which occurred after the date on which financial statements were prepared.

The report on the status change of the board of directors, i.e. the executive board if the company has a two-tier management system, is not required for the company participating in the status change if all the members of that company agree that such a report should not be made.

Draft Resolution of the General Meeting

By adopting the general meeting resolution on the spin-off by incorporation, the division plan is approved.

If the company continues to exist after the status change is completed, the board of directors, i.e. the supervisory board if the company has a two-tier management system, prepares a proposal of a decision of the general meeting on amendments to the memorandum of association, i.e. articles of association in case of a joint stock company.

If a new company is incorporated as a result of the status change, the board of directors, i.e. the supervisory board if the company has a two-tier management system, prepares a proposal of that company’s memorandum of association, and if such company is a joint stock company, also a proposal of that company’s articles of association.

Procedure for the Status Change – Spin-Off by Incorporation

The transferring company is obliged to publish the draft division plan on its own website, if it has one, and to submit it to the Serbian Business Registers Agency for publication on the Agency’s website no later than 60 days before the date of the general meeting at which the resolution on the status change will be adopted. Together with the draft division plan, the company must also publish a notice to its members stating the time and place where they can inspect the documents and acts required for the implementation of the status change (i.e. draft division plan, financial statements, auditor’s report, report of the board of directors, and draft general meeting resolution). This notice does not need to be published if the company sends individual notifications to each member, except in the case of a public joint-stock company, which is always required to publish the notice.

The publication of the draft plan is essential because it creates an irrefutable presumption that the company’s creditors have been informed about the status change.

In addition to publishing the draft division plan online, and in accordance with Article 497 of the Companies Act, the company is also required to send a written notice to any known creditor whose claims amount to at least 2,000,000 RSD (or the equivalent in any currency based on the middle exchange rate of the National Bank of Serbia on the date of publication). This notice must include the elements of the draft division plan and be sent no later than 30 days before the general meeting where the resolution on the status change is to be adopted.

A creditor of the transferring company who believes that the status change involving their debtor will jeopardise the settlement of a claim that arose before the registration of the status change may, within 30 days from the date of publication of the notice on the status change, request adequate protection in accordance with Article 509 of the Companies Act.

Decision on the Status Change – Spin-Off by Incorporation

By decision on the status change spin off by incorporation the general meeting approves the division plan adopted by the board of directors, i.e. supervisory board, if the company has a two-tier management system.

The general meeting shall, concurrently with rendering the decision on the status change spin off by incorporation:

1. Adopt the amendments of the memorandum of association, i.e. articles of association in case of a joint stock company;
2. Adopt the memorandum of association of a company which is created in the status change, as well as the articles of association of that company, if it is a joint stock company;
3. Adopt a resolution on the share capital decrease.

In case of a joint stock company, the decision on the company’s status change is passed by a three-quarter majority of votes of the stockholders present, unless a higher majority is prescribed by the articles of association

If, as a result of the status change, certain members of the transferring company are becoming the members of the recipient company, unlimited jointly and severally liable for its obligations (in cases where a general partnership or limited partnership is formed), the decision on status change spin-off by incorporation may be rendered only with their consent.

The division plan enters into force when approved by the decision of the general meeting of the company which carries out the status change i.e. the transferring company, unless that plan envisages that it enters into force at a later date.

Memorandum of association of a company created by a status change, as well as its articles of association, if it is a joint stock company, shall enter into force simultaneously with the entry into force of the devision plan.

Registration of the Status Change – Spin-Off by Incorporation

Upon the registration of the spin-off by incorporation with the Serbian Business Registers Agency, the following legal effects occur, in accordance with Article 505 of the Companies Act:

• Assets and liabilities of the transferring company pass to the recipient company, in accordance with the division plan (an exception applies to assets and rights whose transfer is subject to registration in public records or to obtaining specific consents or approvals; the transfer of such assets to the recipient company is effected upon such registration, based on the status change agreement or the division plan, or upon obtaining the relevant consents or approvals);
• Recipient company becomes jointly and severally liable with the transferring company for its obligations that were not transferred to the recipient company, but only up to the amount of difference between the value of assets of the transferring company which were transferred to it and liabilities of the transferring company assumed by it, unless a different agreement is reached with a certain creditor;
• Members of the transferring company become members of the recipient company by way of exchanging their shares, i.e. stocks for the shares, i.e. stocks of the recipient company, in accordance with the division plan;
• Shares, i.e. stocks of the transferring company, which were exchanged for the shares, i.e. stocks of the recipient company, are cancelled;
• Rights of third parties that represent an encumbrance on the shares, i.e. stocks of the transferring company which are exchanged for the shares, i.e. stocks of the recipient company, pass to the shares, i.e. stocks which a member of the transferring company acquires in the recipient company, as well as to the claim for pecuniary compensation such a member is entitled to, in addition to or instead of the exchange for those stocks, i.e. shares in compliance with the Companies Act;
• Employees of the transferring company who are assigned to the recipient company under the division plan, continue to work in that company in compliance with employment regulations;
• Other effects in accordance with the law.

The directors, i.e. members of the supervisory board, if the company has a two-tier management system, of a company participating in a status change are jointly and severally liable to the members, i.e. stockholders of that company for the damage caused intentionally or by gross negligence during the preparation and implementation of the status change. An action for the compensation damages may be filed within a term of three years from the day of publishing of the registration of the status change in accordance with the registration act.

The directors, i.e. members of the supervisory board, if the company has a two-tier management system are not liable for the damages if a controlled company is acquired by its sole member.

Read more:
Company’s legal form change »
Reduction of share capital of the limited liability company »
Protection of interests during implementation of status change »