A joint stock company is a company whose share capital is divided in stocks held by one or more stockholders who are not liable for the company’s obligations, except based on piercing the corporate veil in the cases prescribed by Article 18 of the Companies Act as well as in the case of deletion of the join stock company from the register in the case of the compulsory liqvidation the controlling stockholder of a joint stock company shall be liable without limits for the company’s obligations, even after the company is deleted from the register.
A joint stock company is held liable for its obligations with all of its assets.
Memorandum of Association and Articles of Association
The shareholders establishing the joint-stock company sign the memorandum of association and the first articles of association. Memorandum of association and articles of association are drafted in writing and registered in accordance with the Registration Act.
A memorandum of association is the constitution of a joint stock company, taking the form of a decision on incorporation if the company is incorporated by a single person, or an agreement of association if it is incorporated by several persons. On the occasion of company incorporation, the signatures on the memorandum of association are certified in keeping with the act which regulates signature certification, provided that the certification of signatures, in case of an electronic document, is replaced by the qualified electronic signature of the members of the company, unless that is contrary to the regulations governing the transfer of title in immovables.
A joint stock company’s memorandum of association is not amended.
The articles of association are the principal general act of a joint stock company due to their effect as a subordinate legal act binding on the persons to whom they apply, regardless of their will. The articles of association regulate the relations within the joint stock company entirely independently of the memorandum of association and do not have to be consistent with the memorandum of association, either when the first articles are adopted or subsequently. The articles of association, and amendments and supplements thereof, are adopted by the general meeting by a simple majority of votes of all stockholders with voting rights, unless a larger majority is provided in the articles of association.
The first articles of association are adopted by the stockholders who are incorporating the company.
Contents of Memorandum of Association
According to the Companies Act, a memorandum of association contains:
- Data on stockholders who are founding the company, namely:
a) For a national natural person – personal name, gender and unique identification number of citizens, as well as data on the domicile of stockholders;
b) For a foreigner – personal name, gender, passport number and country of issue, i.e. registration number for a foreigner, i.e. foreigner’s identity card number and country of issue, as well as data on the domicile of stockholders;
c) For a national legal person – business name, address of the seat and registration number;
d) For a foreign legal person – business name, address of the seat, number under which that legal person is kept in the foreign registry and the country in which that person is registered. - Business name and seat of the company;
- Predominant activity of the company;
- Total amount of cash contribution, i.e. pecuniary value and description of the in-kind contribution of each stockholder incorporating the company, deadline for payment, i.e. entry of contribution;
- Particulars about the stocks subscribed by each stockholder incorporating the company, in particular: number of stocks, their type and class, their par value, i.e. regarding stocks without par value, part of the share capital for which they were issued.
Contents of Articles of Association
The Companies Act prescribes the minimum mandatory content of the articles of association of a joint stock company. In addition to the prescribed content, the articles of association may regulate other matters as well, provided that this is not contrary to mandatory legal provisions.
According to the Companies Act, the articles of association of a joint stock company contain, in particular:
- Business name and seat of a company;
- Predominant business activity of the company;
- Particulars on the amounts of subscribed and paid share capital, and particulars on the number and total nominal value of authorised stocks, if they exist;
- Essential elements of each type and class of issued stocks pursuant to the law governing the capital market, and in the case of stocks without nominal value, also the amount of the part of the share capital for which they were issued, i.e. accounting value, including possible liabilities, restrictions and privileges attached to each class of stocks;
- Types and classes of stocks;
- Special conditions governing transfer of stocks, if any;
- Procedure for convening the general meeting;
- Determination of company bodies and their competences, the number of their members, closer regulation of the method of appointment and recall of these members, as well as the methods of decision-making in those bodies;
- Other matters as prescribed by this or special law to be included in the articles of association of a joint stock company.
The first articles of association, in addition to the previously mentioned elements, may contain a provision on the appointment of directors, i.e. members of the supervisory board.
The company shall amend its articles of association at least once a year to harmonise the following data, if those data were changed in the preceding year, namely:
- Particulars on the amounts of subscribed and paid share capital, and particulars on the number and total nominal value of authorised stocks, if they exist;
- Essential elements of each type and class of issued stocks pursuant to the law governing the capital market, and in the case of stocks without nominal value, also the amount of the part of the share capital for which they were issued, i.e. accounting value, including possible liabilities, restrictions and privileges attached to each class of stocks.
Contributions to the joint stock company
Contributions to the joint stock company may be pecuniary or in kind, and are expressed in dinars.
The subscribed stocks that are paid in cash in accordance with the memorandum of association are paid up before the registration of the company’s incorporation in favour of a temporary account opened with a merchant bank in the Republic of Serbia.
Before the registration of the company, the stockholders incorporating the company shall pay, i.e. enter the contributions that represent at least 25% of the share capital, where the paid amount of the pecuniary part of the share capital shall not be lower than the amount of the minimum share capital amounting to 3,000,000.00 dinars, unless a special act prescribes a higher amount.
The stocks and share capital of the joint stock company
The stocks issued by the company are issued in their dematerialised form and read in the name of a stockholder, and the provisions of those regulations governing the capital market are applied to the registration of the issue of stocks, their legal holders, transfer of stocks, transfer of rights deriving from stocks, limitation of rights deriving from stocks and entry of third-party stock rights into the Central Registry.
A joint stock company may issue the following types of stocks: common and preferred stocks. Within every type of stock, the stocks carrying the same rights make one class of stocks. All common stocks shall always make one class of stocks.
A company may issue stocks with or without par value.
If the company issues stocks with par value, all stocks of the same class shall have the same par value, and if it issues stock without par value, all the company’s stocks shall be without par value. Par value of a stock is the value determined as such by a resolution on the issue of stocks. All stocks of the same class have the same par value.
Par value of one stock may not be lower than RSD 100.00.
The par value of preferred stocks of a company may not be lower than the par value of common stocks of that company. The total par value of issued and authorised preferred stocks may not exceed 50% of the total company’s share capital.
Stocks are freely transferable, unless the company’s articles of association restrict the transfer of stocks with the pre-emptive purchase right of other stockholders, or with prior approval of the company.
Transfer of stocks in companies that are not public joint stock companies is done by means of an agreement concluded in writing and certified in accordance with the law governing the verification of signatures.
Transfer of stocks in public joint stock companies is done in accordance with the law governing the capital market.
A joint stock company shall have a minimum share capital amounting to 3,000,000.00 dinars, unless a special act prescribes a higher amount.
Relationship between the Joint Stock Company and Stockholders
All stockholders are treated equally under the same circumstances.
Right to a Dividend
A shareholder is entitled to a portion of the profit (dividend) which the general meeting of the joint stock company determines for distribution.
Payment of dividends to stockholders may be approved by a resolution on profit distribution passed at an ordinary session of the general meeting, whereby the amount of the dividend and the time limit for dividend payment are established (resolution on payment of dividend), which may not be longer than 6 months from the day of passing of the resolution on payment of dividend.
A dividend may be paid in cash or in company stocks, pursuant to the resolution on payment of dividends.
Unless otherwise provided for in the articles of association, a company may pay a temporary dividend (interim dividend) at any time between ordinary sessions of the general meeting, if:
- The reports on the company’s business and its financial results produced for that purpose clearly indicate that the company has achieved profit in the period for which the interim dividend is paid and that the available cash assets of the company are sufficient for payment of that interim dividend;
- The amount of interim dividend that is being paid is not higher than the total profit made after the end of the previous business year for which the financial reports were made, increased by retained earnings and the amounts of reserves that may be used for those purposes, and decreased by determined losses and the amount that has to be contributed to reserves, pursuant to law or articles of association.
Joint Stock Company Bodies
The management of the joint stock company may be organised through a one-tier or two-tier management system.
In the case of a one-tier management system, the joint stock company’s bodies are:
- General meeting;
- One or several directors, i.e. a board of directors.
In the case of a two-tier management system, the joint stock company bodies are:
- General meeting;
- Supervisory board;
- One or several executive directors, i.e. the executive board.
In a single-member joint stock company, the function of the general meeting is executed by the sole stockholder of the company.
In the case of a single-member joint stock company, where the only member of the company is a legal person, the articles of association may determine the body of that member of the company which exercises the function of the general meeting on its behalf, and, in the absence of such a provision, it is considered to be the legal representative of that member.
The company’s articles of association stipulate whether the joint stock company has a one-tier or two-tier management system. Any change in the type of management organisation is made by way of an amendment to the articles of association.
Read more:
Relationship between the joint-stock company and stockholders »
Types and clases of stocks which issue company »
Contract on control and management »
