Business entities join business associations because, in this way, companies and entrepreneurs, especially micro, small and medium enterprises, can strengthen their position on the market, coordinate activities, reduce costs, master new knowledge and experience (know-how), improve products and services, acquire missing complementary advantages, promote their brands and business, and thus increase their competitiveness and innovation, which leads to market expansion and, ultimately, higher profits.
At the macro level, all this helps increase employment, entrepreneurship and self-employment, more balanced regional development, strengthening of the economic sector, export growth and economic progress.
Business associations are divided into two types:
- business associations with legal status effect (business associations in the status sense) and
- business associations without status-legal effect (business associations in the contractual sense).
Article 578 of the Law on Business Companies regulates business associations with status-legal effect, stipulating that a business association is a legal person established by two or more companies or sole traders to achieve common goals.
A business association may not engage in activity to gain profit but to achieve common goals.
Therefore, a business association is a non-profit organization, i.e. an organization of business entities, which does not have a profit target function, i.e. does not make a profit (gain, profit), unlike its members, but can make an excess of income over expenses.
The legal form of a business association is designated in the business name as: “business association” or “b.a.” or “ba”.
Business association acquires the capacity of a legal person by registration following the registration act.
A business association may not change its legal form into a form of a company.
Regulations governing the status of associations apply mutatis mutandis to the issues related to business associations that the Companies Act did not regulate.
Forms of business associations
Business, administrative and judicial practice know different forms of status and contractual business associations: cluster, consortium, joint venture, pool, business union, business system, non-profit grouping of economic interests, syndicated companies (syndicate of companies), business conglomerate, professional (professional) association, etc.
Various special laws recognize and/or regulate particular forms of sectoral business associations, such as, e.g. association of banks from the Law on Banks (“Official Gazette of RS”, no. 107/2005, 91/2010 and 14/2015) and association of insurance companies from the Law on Insurance (“Official Gazette of RS”, no. 139/2014 and 44/2021).
Clusters and consortiums, as forms of business associations, are discussed in more detail in this text.
A cluster is a business association with the status-legal effect that represents a geographical concentration of mutually business-related business entities that, most often, are engaged in the same or related activity (often including suppliers and subcontractors) and institutions, i.e. organizations that provide various types of business support, such as educational and scientific-research institutions, public agencies, i.e. development agencies, associations, local self-government units or legal entities of which they are founders.
The cluster members have legal entity status and are connected by common interests in procurement, sales, service provision, workforce, technological knowledge transfer and other resources.
Business association in a cluster achieves different results:
- establishment and development of business network and infrastructure
- education of cluster members
- establishment of business cooperation in different areas of cluster activity
- lobbying, that is, interest representation and dialogue between the economic sector, the educational, research and scientific community and the public sector
- facilitating the process of introducing, encouraging and developing innovative activities and new technologies
- formation of new business entities
- the creation of regional identity
- connection with related clusters in the region
- reduction of regulatory and administrative burden
- internationalization of business (conquering foreign markets).
Business entities and institutions can join together in various forms of clusters, such as:
- sector cluster
- horizontal cluster i
- vertical cluster.
A consortium represents a form of contractual business association of economic entities to achieve a specific business-economic goal, which does not have legal subjectivity. This association ensures the joint performance of the consortium members towards a third party. This business association is, as a rule, of a temporary nature; it is created based on a consortium agreement (an unnamed agreement) and lasts only as long as there is a need for the joint appearance of the associated business entities towards third parties.
Consortium regulation in Serbia is based on autonomous and contractual law and business practice.
A consortium is often formed before getting a job to perform together, which increases the chances that the job will be awarded to that association of companies. Although the consortium agreement can foresee and regulate the bodies and bodies of the consortium (quasi-status effect of the contract), its members are independent of each other regarding their status, capital and corporate governance.
In the consortium, one of the members (“pilot-company”, leading company) is appointed, who acts in the name and on behalf of the consortium (the role of general representative) during negotiations and the conclusion of the deal, as well as during its execution.
The consortium agreement regulates the rights and obligations of the “pilot company”, mutual rights and obligations, and the consortium members’ responsibility for fulfilling commitments, whereby their unlimited joint and several liabilities are contracted. These obligations apply to the mutual relations of the consortium members but also to third parties, who can request the fulfilment of the duty only from the member who has an established obligation to fulfil the contractual obligation.
The joint and unlimited liability of the members provides a very high level of security to the client and is a significant competitive advantage for obtaining work at public tenders.
Consortia are most often formed when it comes to investment (as a rule, infrastructure) projects of more excellent value (e.g. construction of oil pipelines, bridges, highways, dams, factories, hydro-power plants, heating plants, other significant public works, etc.), and in in the case of the Republic of Serbia and the privatization of companies with social capital.
The relationship between business associations and other economic associations
The Law on Chambers of Commerce (“Official Gazette of the RS”, no. 112/2015) stipulates that chambers of commerce are interest-based, business-professional and non-profit organizations of economic entities linked by a standard business interest to harmonize and represent the interests of members and encouraging economic activities.
Members of the Serbian Chamber of Commerce, under the Law on Chambers of Commerce, are all business entities that perform registered business activities on the territory of the Republic of Serbia.
Legal entities become members of the Serbian Chamber of Commerce by registering in the Register of Business Entities per a particular law regulating the registration procedure.
Natural persons are members of the Serbian Chamber of Commerce through general associations of entrepreneurs. General associations of entrepreneurs are collective members of the Serbian Chamber of Commerce.
Members of general entrepreneurs associations are entrepreneurs, as business-capable natural persons who perform activities intending to generate income, registered following the law.
General associations of entrepreneurs are established for the areas of regional chambers of commerce and chambers of commerce of the capital city or the area of one or more municipalities and one or more economic activities following the founding act.
Cooperatives are collective members of the Serbian Chamber of Commerce through cooperative associations.
Collective members of the Serbian Chamber of Commerce can be associations and societies, organizations that carry out activities in the fields of health, social, veterans’ and disability protection, social care for children and other areas, such as social security, education, science, culture, physical culture, as well as contractual chambers of commerce and organizations whose activities improve the work and operations of economic entities or are in the areas established by law.
To jointly improve work and business, harmonize special and everyday interests, and propose measures to improve the economic environment and business conditions, the Serbian Chamber of Commerce members are organized into branch associations, according to the predominant activity they perform, following the Statute.
By comparing the characteristics of business associations, chambers of commerce, general associations of entrepreneurs and cooperative unions, it is established that there are various intertwinings and ordinary, but also exceptional, elements between these business institutions. In this respect, chambers of commerce, general associations of entrepreneurs and cooperative unions can be seen as particular forms of business association with specific goals and activities, and the Law on Chambers of Commerce and laws regulating cooperatives as special laws concerning the Law on Business Companies.
The relationship between the business association and competition protection
Business associations abuse a monopoly or dominant position on the market, i.e. significantly restricting, disrupting or preventing competition, is prohibited and is governed by the law and by-laws regulating the protection of competition. Restrictive agreements and concentrations of market participants are treated in this way, which means horizontal, vertical, and conglomerate agreements and concentrations, including illegal formal and/or informal associations (written basis or concerted action without a written basis) known in the form of trusts, cartels and oligopoly, which practically divides the market, excludes individual market participants from it or imposes unfair conditions on them and artificially creates supply and demand relations, prices and other conditions and relations in the market, which significantly prevents, limits or distorts competition.
In our law, the issue of restrictive agreements, illegal concentrations and state intervention aimed at their control is regulated by the Law on Protection of Competition (“Official Gazette of the RS”, no. 51/2009 and 95/2013) with accompanying by-laws.