Concept of a Status change:
A company in a status change – the transferring company reorganizes itself to the effect that it transfers assets and obligations to another company – the recipient company, while its members acquire shares, i.e. stocks in that company.
The essence of the status change is manifested in the following two important elements:
- transfer of assets and obligations – without the transfer of assets and obligations from one company to another status change does not exist. This is achieved by universal or singular succession.
- proportional conversion of stocks and shares – All members of the transferring company acquire shares, i.e. stocks in the recipient company pro rata to their shares, i.e. stocks in the transferring company, unless:
– each member of the transferring company agrees that the status change establishes a different ratio for such conversion of shares, i.e. stocks, or
– a member of the transferring company who dissented from the decision on status change exercises his right to payment instead of the acquisition of shares, i.e. stocks in the recipient company, whereas the buy-back price of his stocks is determined by the decision on status change.
In addition to the previously mentioned opportunities a cash payment may also be made to a member of the transferring company on the basis of a status change, but to total amount of such payments to all members of the transferring company may not exceed 10% of the total par value of the shares, i.e. stocks acquired by the members of the transferring company, and if such stocks have no par value, 10% of the total book value of those stocks.
If a status change implies incorporation of a new company, the incorporation of such new company is governed by the provisions of this Act that relate to incorporation of a company in the relevant legal form, unless the provisions of this Act governing status changes stipulate otherwise.
If the status change implies acquisition of a public joint stock company by a company which is not a public joint stock company, or if it merges with it to form a new company which is not a public joint stock company, that company must fulfill the conditions for termination of the status of a public company that are prescribed by the Law on the Capital Market.
Status changes may not be carried out in contravention of the provisions of the Law on Protection of Competition.
A concentration of undertakings as a result of the status change must be allowed. According to the provisions of Article 19 paragraph 1 of the Law on Protection of Competition concentrations of undertakings are allowed except if they would significally limit, violate or prevent competition in the market of the Republic of Serbia as a whole or in a relevant part thereof, in particulary as a result of the creation or strengthening existing dominant position.
Participants in a Status Change
Status change may involve one or several companies of the same or different legal form.
Status change may not involve a company which is in liquidation or bankruptcy, unless the status change is conducted as a measure of reorganization in accordance with the bankruptcy act.
Types of Status Changes
The Law on Business Companies provides four types of status changes as follows:
- Acquisition
- Merger
- Division and
- Spin-off.
Acquisition
One or more companies may be acquired by another company by transferring all assets and obligations to that company, whereby the acquired company dissolves without undergoing liquidation procedure.
Two are the main features of this status change:
- The recipient company is the universal successor of the companies that have acquired – The Corporate Profit Tax Law provide an exception to the universal legal succession in the case of acquisiton and that when it comes to tax incentives.
- The company i.e. the transferring companies cease to exist. The company i.e. the companies which cease to exist after this statutory change shall be deleted from the Business Entities Register.
Merger
Two or more companies may merge by forming a new company and by transferring all assets and obligations to that company, whereby the merging companies dissolve without undergoing liquidation procedure.
The recipient company is a universal successor of companies which are merged.
The exceptions are tax incentives. According to the provisions of the Corporate Profit Tax Law tax incentives can not be the subject of succession in case of status changes.
Division
A company may divide by simultaneously transferring all of its assets and obligations to:
- Two or more newly-incorporated companies (the division by incorporation) or
- Two or more existing companies (the division by acquisition) or
- One or more newly-incorporated companies and one or more existing companies (the mixed division).
The company divider dissolves upon the completed status change without undergoing liquidation procedure.
The division is singular legal succession. So the recipient companies get exactly certain portion of the assets and obligations of the company divider, all in accordance with the division plan (Article 492 of the Law on Business Companies).
Spin-off
A company may divide itself by transferring a part of its assets and obligations to:
- One or more newly-incorporated companies (spin-off by incorporation) or
- One or more existing companies (spin-off by acquisition) or
- One or more newly-incorporated companies and one or more existing companies (mixed spin-off).
The transferring company continues to exist upon the completion of status change.
Spin-off is also a singular legal succession. So the recipient companies get exactly certain portion of the assets and obligations of the company divider, all in accordance with the divisional balance sheet (Article 491 of the Law on Business Companies).
Read more:
Change of the company’s legal form and status changes »
Change in Share Capital »
Documentation Required for the Establishment of Company »
