From aspect of company law and from aspect of labor law

The establishment of Ltd from labour relation

The establishment of Ltd from labour relation can be analyzed from aspect of company law and from aspect of labor law.

The establishment of Ltd from labour relation from aspect of company law

From the aspect of company law the existence of the labour relation with the founder is not relevant to the establishment of Ltd. The establishment of Ltd will be registered by the Serbian Business Registers Agency if the founder, who is a natural person, deliver to the Serbian Business Registers Agency photocopy of identity card, if he/she is the domestic citizen or a photocopy of the passport, if he/she is a foreigner, while at the same time on the establishment of Ltd shall not affect the existence of the status of the labour relation with the founder.

Establishment of Ltd from labour relation from aspect of labor law

From the aspect of labour law for the establishment of Ltd it is important to pay attention to the following two questions:

  1. First, the so-called, prohibition of competition, which if it is agreed may disturb the natural person to establish Ltd from labour relation.
  2. Secondly, it is about the payment of contributions for compulsory pension, disability and health insurance of the person who is employed and appears as the founder of Ltd.

Prohibition to competition at Labour law

Labor law in Articles 161 and 162 provides for the possibility that the employer and the employee may agree in the employment contract conditions for the prohibition to competition.

Prohibition to competition is the inability to perform certain jobs by employee, which are also provided by the labor contract, on his own behalf and his own account, as well as on behalf and for the account of another legal entities or natural persons, without the consent of the employer.

These are jobs by whose performance the employee may acquire special knowledge, by which acquire a wide range of business partners or by whose performance he is coming to the knowledge that represent business information or secret.

Should the employee violate the prohibition to competition, the employer shall be entitled to claim damages from the employee (Article 161, paragraph 4 . of the Labour law).

Competition clause, if it is stipulated, applies for the duration of labour relation. However, in case of termination of employment of the employee prohibition to competition may be valid for longer than two years after the termination of labour relation of an employee, if so provided in the contract.

The employer is obliged at the same time to pay a fee to employee whose amount is agreed in other words amount which they are stipulating. The sense of financial compensation in this case represents a sort of damages which employee real suffering, because he can not to apply the acquired knowledge within a certain time limit.

Based on the foregoing, the prohibition to competition clause is an obstacle for the establishment Ltd, which have as their object of the business just the activities covered by the present clause.

Employee would breach its obligation assumed by the labor contract by the establishment of such a limited liability company, and on this basis he was obliged to pay damages to the employer.

The stipulated prohibition to competition clause won’t be obstacle to a natural person who is employed to register the establishment of Ltd if the company which he/she is establishing don’t have for the object of their business activities covered by contractual clause.

Law on compulsory social insurance contributions in Article 6, paragraph 1, point 15 stipulates that the founder or a member of the company is insured person – a natural person working in a company whose founder or a member is, regardless of whether is employed by the company.

The work, in addition to employment, includes the representation of the company based on entry in the register of the competent organ, as well as performing executive powers and duties of management in accordance with the law governing the status of companies.

Law on compulsory social insurance contributions in Article 7 paragraph 1 items. 1 and 7 provides that contribution payer for pension and disability insurance is natural person – employee, as well as the founder or member of company. The provisions of Article 12, paragraph 1 of the Law on compulsory social insurance contributions stipulates that when the insured person secure income on multiple diferent basis (employment, self-employment, contracts, etc.) contribution for the compulsory pension and disability insurance shall be calculated and paid on all these grounds, to the amount of the highest annual base of contributions.

The establishment of Ltd from labour relation

The contribution base for founders or members of the company, according to the provisions of Article 23 of Law on compulsory social insurance contributions is at least the lowest monthly basis. The lowest monthly contribution base is the amount of 35% of the average monthly salary in Republic paid in the previous quarter for which data are published by the republic authority responsible for statistics, unless this law provides otherwise. The amount of the lowest monthly base is determined and published by the Minister responsible for finance and it will be applicable from the first day of the following month after the publication of this amount.

Exceptionally contribution base for the founders and members of the company employed by companies whose founders and members are, shall be salary, respectively salary compensation or earnings in accordance with the law governing labour relations, general act and the labour contract or decision of the competent authority.

In the case when the basis on which contributions are calculated and paid higher than the highest monthly contribution base, calculation and payment of contributions shall be performed to the highest monthly contribution base, in accordance with the provisions of Article 41, paragraph 1 of the Law on compulsory social insurance.

The maximum annual contribution base, in accordance with Article 43 paragraph 1 of Law on compulsory social insurance contributions shall be five times the average annual salary in Republic paid in the year for which the contributions are calculated and paid.

Taking into account these legal provisions, when insured person secure income on multiple basis (employment, self-employment, contracts, etc.), contributions for compulsory pension and disability insurance shall be calculated and paid on all these grounds, up to the maximum annual contribution base. In the case of the founder of the company that it does not work in terms of Article 6, paragraph 1, item 15 of the Law on compulsory social insurance contributions, and not realized no fee (contractual fee) for their work, then it will not be liable to pay contributions for compulsory pension and disability insurance on that basis.

Conclusion

Taking into account the above it can be concluded that from aspect of company law, the rule is that the existence of the labour relation with the founder isn’t relevant for the establishment of Ltd.

However, from the aspect of labor law, it is necessary to check whether the employment contract is no prohibition to competition, and if there is no or if the subject of operations of a limited liability company does not correspond with the terms of the respective prohibition to competition clause, then it will not impede the establishment of Ltd.

When it comes to payment of contributions for compulsory social insurance, if the founder, who has status of the employee, in any way involved in the newly formed company, there will be the obligation to pay contributions based on membership status.

Read more:
The Legal Framework for the Company Foundation »
Establishment of a Company, Branch and Representative Offices »
Entering and changing data of the company »

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