According to the provisions of the Companies Act contributions to the company may be pecuniary or in kind, and are expressed in dinars.
If a pecuniary contribution is paid in a foreign currency in accordance with the law governing foreign currency operations, the dinar counter value of the contribution is calculated using the National Bank of Serbia middle exchange rate on the day of contribution payment.
In kind contributions may be given in tangibles or intangibles, unless otherwise specified by the Companies Act for certain types of companies.
The company’s share (registered) capital is the pecuniary value of the company’s members’ subscribed contributions to the company, which is registered in accordance with the registration act.
Obligation to Pay, or Enter the Contribution
Persons who have, under the memorandum of association or otherwise, taken on the responsibility of paying, or entering a certain contribution to the company, are liable to the company for fulfillment of that obligation and are obliged to compensate damage caused to the company by failing or being late to carry out that duty. Pursuant to the obligation taken to pay or enter the contribution the persons acquire a share in the company, or the company’s stocks.
Contributions that are paid or entered into the company become the company’s property.
Upon company incorporation or increase in share capital, pecuniary and in kind contribution must be paid, i.e. entered into within the time limit stipulated in the memorandum of association, i.e. resolution on capital increase, provided that such time limit is calculated as of the day of registration of the memorandum of association, i.e. resolution on capital increase, and may not exceed:
- In case of increase of capital of a joint stock company that is a public company following a successful public offer of shares, with publishing of a prospectus, in terms of the law governing the capital market (hereinafter: a public joint-stock company), by pecuniary contribution through a public offer – immediately after the expiry of the time limit for subscribing shares, in accordance with the law governing capital market, and two years in other cases
- Five years for other companies, unless in case when shares are issued in a public offer procedure in terms of the law governing capital market whereby a joint stock company becomes a public joint stock company, when the contribution must be paid immediately after the expiry of the time limit for subscribing shares.
A company may not release the members of a company of the obligation to pay up, i.e. enter the contribution to the company, except in the procedure of reduction of capital with the application of provisions of Article 147a i.e. Article 319 of the Companies Act regarding the protection of creditors.
Notwithstanding, a resolution of general partners, limited partners, i.e. general meeting, may replace the obligation of the member of a compnay with another obligation, with his consent, and in particular:
- The obligation to pay the pecuniary contribution to the company with the obligation to enter an in kind contribution of the same value, except in the case of public offer of shares with publishing of prospectus
- Obligation to enter an in kind contribution into the company with the obligation to pay the pecuniary contribution of the same value
- Obligation to enter a non-pecuniary contribution into the company with the obligation to enter another non-pecuniary contribution of the same value.
The mentioned resolution is adopted as follows:
- In case of a general or limited partnership unanimously by general i.e. limited partners, unless otherwise provided by the memorandum of association
- In case of a limited liability company by a two-thirds majority of the votes of all members of the company, unless the memorandum of association determines a larger majority
- In case of a joint stock company by a three-fourths majority of the votes of the present shareholders, unless the articles of association determine a larger majority.
Consequences of Failing to Pay, or Enter the Contribution
The memorandum of association, i.e. the articles of association in case of a joint stock company, may stipulate an obligation to pay liquidated damages for untimely performance, or failure to perform the obligation of hte member of a company to enter into the company in kind contribution.
In case a shareholder fails to perform his obligation to pay or to enter a certain contribution to the company, a company may invite him in writing to perform that obligation in an additional term which may not be shorter than 30 days from the day of dispatch of such invitation. As an exception, a public joint stock company shall issue the mentioned invitation within a term of 90 days from the day of the expiry of the time limit for the performance of obligation by a company member to pay or to enter a certain contribution to the company, unless a shorter time limit was prescribed by the memorandum of association, i.e. articles of association.
In the invitation the company is obliged to warn that member about the consequences of failing to execute his duty in that additional time limit. The company shall publish the invitation on the business entities register’s internet page within a term of three days from the day of forwarding the invitation, for the duration which at least equals the duration of the term of 30 days from the day of dispatch of such invitation.
If multiple company members have failed to perform their obligation to pay or to enter a certain contribution to the company, the invitation is served to them simultaneously, whereby determining the same additional term for performance of the obligation.
If the company member omits to perform his obligation, even in the additional term, the company may pass a decision to expel such member from the company,i.e. in case of a joint stock company, a decision to withdraw and annul without compensation the shares of that shareholder which have not been paid, i.e. for which no in kind contribution has been entered into the company. A public joint stock company is obliged to make the mentioned decision.
Liability in Case of Transfer of Shares or Stocks
In case of a transfer of shares, or stocks, the transferor and acquirer are jointly and severally liable to the company for obligations of the transferor with regard to the contribution which occurred until the time of that transfer, in keeping with the provisions of the Companies Act for each individual form of a company.
The rights of the company are exercised by an action filed to the competent court, which, apart from the company, may also be filed by the company members who own or represent at least 5% of the company’s share capital.
Establishing the Value of a in Kind Contribution
The value of an in kind contribution is established:
- By the sole member of the company or by mutual agreement of all the company’s members
- By means of appraisal, pursuant to Art. 51 to 58 of the Companies Act.
In public joint stock companies, the value of in kind contribution is established exclusively by means of an appraisal pursuant to Art. 51 to 58 of the Companies Act.
Appraisal of in Kind Contribution
In kind contributions to the company are appraised by a certified expert witness, auditor or other qualified person authorized by a competent state authority of the Republic of Serbia to appraise the values of certain tangibles and intangibles. The appraisal may also be performed by a company that meets the conditions prescribed by law to appraise the value of tangibles and intangibles subject to appraisal.
The appraisal of the value of a in kind contribution may not be older than one year from the day the in kind contribution was entered into the company.
Appraisal of the value of a in kind contribuion is registered and published in keeping with the registration act.
Refuting the Mutually Agreed Value of in Kind Contribution
If the value of the in kind contribution was determined by agreement of the company memberst, and the company is unable to settle its liabilities in its regular course of business, a company’s creditor is entitled to demand that the competent court establishes in non-contentious proceedings the value of the in kind contribution at the time such contribution was entered.
Motion to the competent court may not be filed after the expiry of the term of five years as of the day the in kind contribution was entered into the company.
If the court, in the non-contentious proceeding establishes that the value of the in kind contribution was smaller than the one established by agreement, the court shall instruct the company member who entered such in kind contribution to pay to the company the difference up to the value of this contribution established by agreement and to bear the costs of court procedure from paragraph 1 above jointly and severally with the company.
The company member, who entered the in kind contribution the value of which was established by agreement, bears the burden of proving the value of this in kind contribution.
Ban on Contribution Refund
Paid or entered contributions may neither be refunded to the company’s members shareholders, nor may any interest be paid to them for what they have invested into the company.
Payment of price when acquiring own shares, or stocks, as well as other payments to company members done in accordance with this Act, are not considered to be refund of the contribution to the company members.