ARTICLE Co-ownership of share in Serbia

ARTICLE Co-ownership of share in Serbia

     Article 153 of the Law on Business Companies stipulates that a share in a company may belong to multiple persons. The law refers to those persons as share co-owners and specifies that share co-owners are considered as one single member of the company and are unlimitedly jointly and severally liable before the company for all obligations related to that share. Furthermore, they exercise their voting rights based on the share through a common proxy, henceforth they are obliged to inform the company on the proxy's identity.

 

Relationship between share co-owners


When defining share co-ownership, the provisions of the law do not distinguish between different ownership regimes, i.e. the law defines as “co-owners” both co-owners and joint owners. While not specifying any detail on the ownership regime between shareowners of a company, the law prescribes that share co-owners arrange their mutual relations regarding the co-ownership in a separate agreement. From the point of view of the law, the specific share ownership regime is not important since the owners are considered as one sole company member and their rights in the company are exercised through a common proxy whom they are obliged to appoint. When registering the company in the Business Entities Register, all share co-owners are enlisted as owners of their shares in the company, whereas the percentage belonging to each co-owner is not being specified.

The appointment of a common proxy and the submission of the Decision on Appointment of a Proxy to the company is necessary for exercising rights based on a share ownership. Without the appointment of a proxy, share co-owners do not have the opportunity to participate in the work of the assembly of a company. Article 153 paragraph 6 prescribes that, until the date of notification to the company on the appointment of a common proxy, the share of the co-owners is not counted for the purposes of voting and determining the quorum at the assembly session.
When It comes to resolving potential disagreements between share co-owners, the Law on Business Companies is vague. Interpreting the provisions of this article, especially paragraph 4 which stipulates that co-owners are considered to be one single member, we come to the conclusion that the legislator probably assessed that it is unnecessary to regulate the mutual relations between the co-owners. The law in actual fact left it to the co-owners to take charge of resolving their own relations if they wanted to exercise their rights as a member of the company. In the event of any disagreement between the share co-owners, e.g. the appointment of a common proxy or the voting for a specific decision in the assembly, the co-owners would deprive themselves of the opportunity to participate in the decision making.


Share joint ownership of spouses


The absence of legal regulations regarding the common property regimes creates a lot of conflicting positions among the guild when considering the question of joint ownership of spouses over a share in a company in case only one spouse has been registered as a member of the company.
The judicial practice has taken the position that the share capital of the spouses who are not named as business partners, does not give them any rights over the business company in question.


The Court of Appeals in Kragujevac - Judgment Gž 242/2016 – 9 December 2016:
 

The first-instance court finds that the pecuniary share capital of the defendant M. M. in the company PP "I" p.o. Ch., founded on 16 April 1990, was 5.000,00 RSD at the time, which was revalued on 31 December 1994 and was 4.000,00 RSD. The funds entered by M. M. as contributed share capital in the company "I" p.o. Ch. represent the joint property of the parties. Thence, the common property of the plaintiff and the defendant became the property of the company, and from the moment of its contribution to the company, the property rights of both the investor and his spouse ceased. By registering the incorporation of PP "I" p.o. in the Register of the Commercial Court, the legal effects of the Founding Act are taking place, in accordance with Art. 5 and 50 of the then valid Law on Enterprises, that is, the acquisition of legal subjectivity of the newly established enterprise, and then the acquisition of the ownership rights of that enterprise on the basis of the share capital entered by the defendant M. M. In addition, according to Art. 151 and Art. 152 of the Law on Business Companies ("Official Gazette of the RS", no. 36/11, 99/11 and 83/14) the contributions of the members of the company constitute the property of the company, and, in relation to the defendant M. as a founder-investor of joint property that had been entered into the company as share capital, the plaintiff can only have a obligation legal claim in the amount that corresponds to her contribution in acquiring the invested funds, which according to this court's opinion is 50%.

The second-instance court finds that the first-instance court made a correct decision when determining that the share capital of the plaintiff and the defendant M. entered into the company "I" p.o. amounted to 4.000,00 RSD on 4 January 1995, since this share capital was contributed at the time the parties were married. Namely, a spouse who is not a party in the Founding Agreement nor a participant in the Founding Decision cannot acquire neither decision-making nor property rights in the company. However, he/she can be the holder of the right of joint ownership over the property that his/her spouse contributed to the company as his/her contribution. The plaintiff cannot assert a property legal claim regarding this founding contribution, but she can assert an obligatory legal claim, as the first-instance court correctly found. Namely, the pecuniary contribution entered into the company from the joint property as one spouse’s share capital becomes the property of the company. For this reason, the obligation claim of one spouse is constituted towards the other spouse, who is an investor-member of the company, in the amount of the corresponding value of that property. Given that the shares of the parties over the course of the marriage are equal, and bearing in mind their contributions in the acquisitions made in the marriage, the defendant is obliged to pay the plaintiff the amount of 2.000,00 RSD, which represents half of the founding contribution in the company "I" p.o. Ch. [...]

 

The same position was taken by the Court of Appeal in Belgrade in the Judgment GŽ 5853/17 from 7 August 2019. The plaintiff filed a review petition against the judgment, and it was rejected by the Supreme Court in Judgement Rev 1549/2021, where it is stated that the plaintiff could not assert a property claim in relation to the property of the company, but could only assert an obligation claim against the ex-spouse, which would be in proportion to her participation in the acquisition of the assets that had been included in the property of the company.
The main issues that legal professionals have with regards to this interpretation of the judicial authorities primarily refer to these:

- There is a need for a unified legal order;
- The legal system cannot be constituted in a single regulation;
- The regulation must not be viewed through a narrow lens.

The objections are being made mostly bearing in mind the Family Law which considers the joint property of spouses, as well as articles 151 and 152 of the Law on Business Companies which prescribes that a member of the company acquires a share in the company in proportion to the value of their share in the total share capital of the company. Furthermore, a shareowner has the right to profits of the company. However, critics of this judicial practice ignore the fact that the status of a member of a company is acquired at the moment of registration in the Business Entities Register, and a person who is not entered on this Register as a member of the company cannot be considered as such. Otherwise, it would leave room for a company to have secret members.
Although the law remains vague in terms of the property regime between co-owners of a single share, the judicial practice took a consistent position that a share in a company is not to be considered marital property. When answering a question whether the spouse who is not registered in the Business Entities Register as a member of the company has property rights to the share in the acquisition of which he/she participated, or whether he/she has an obligation right towards the registered spouse in the amount of the contributed value, it is precisely the "controversial" Article 153 of the Law on Business Companies that offers the solution – there is an open possibility for both spouses to be registered in the Business Entities Register as members-owners of a single share, as well as to regulate their mutual relations by an agreement.

 

Authors:

Miloš Vučković, Senior & Managing Partner

Branka Dželajlija, Associate

 

*The information in this document does not represent legal advice and is provided for general informational purposes only.

**Partner, Senior Associate, Associate and/or Junior Associate refers to Independent Attorney at Law in cooperation with IVVK Lawyers.

28/06/2023

SHARE the NEWS on :

PREVIOUS

PREVIOUS

Corporate Bonds – an Investment Opportunity Created by Naftna Industrija Srbije

PREVIOUS

PREVIOUS

New Public Call for Incentives to Investors in Solar and Wind Power Plants

PREVIOUS

PREVIOUS

ACQUIRING THE ENERGY PERMIT

PREVIOUS

PREVIOUS

EU’S New AML Measures

PREVIOUS

PREVIOUS

Corporate Sustainability Due Diligence Directive: Navigating Trough the Turmoil

PREVIOUS

PREVIOUS

Jurisdiction for Issuing Construction Permits

PREVIOUS

PREVIOUS

EU Minimum Corporate Income Tax Directive: What to Know and What to Expect?

PREVIOUS

PREVIOUS

Marking Data Protection Day: A Reminder of How Important it Is to Protect Privacy

PREVIOUS

PREVIOUS

Drag Along and Tag Along in Domestic Legal System

PREVIOUS

PREVIOUS

AI Act - Challenges of Artificial Intelligence To the Global Market

PREVIOUS

PREVIOUS

Understanding NPLs: Scheme, Serbian Context & Notes of Economists

PREVIOUS

PREVIOUS

Insurance – Luxury or Necessity?

PREVIOUS

PREVIOUS

Claims Secured by a Mortgage and the Statute of Limitations

PREVIOUS

PREVIOUS

Alert: New Regulation Concerning Incentives in the Hotel Industry

PREVIOUS

PREVIOUS

Most Profitable Investments In The Republic Of Serbia

PREVIOUS

PREVIOUS

Annex to the Employment Contract for Transfer to Another Suitable Job (Due to the Needs of the Work Process and Organization)

PREVIOUS

PREVIOUS

Delayed justice is denied justice

PREVIOUS

PREVIOUS

Regulation of the Government of the Republic of Serbia on electricity delivery and supply conditions: Outlining the conditions for connection to the grid

PREVIOUS

PREVIOUS

Shareholders agreement – General overview and important clauses

PREVIOUS

PREVIOUS

Serbia drafting new Law on Information Security

PREVIOUS

PREVIOUS

IVVK Lawyers becomes part of the LexQuire family

PREVIOUS

PREVIOUS

Serbia looking for strategic partners for solar power plants

PREVIOUS

PREVIOUS

ARTICLE Benefits of employee stock ownership plan in Serbia

PREVIOUS

PREVIOUS

In 5 years 450 new RES power plants in Serbia

PREVIOUS

PREVIOUS

ARTICLE Co-ownership of share in Serbia

PREVIOUS

PREVIOUS

Serbia hosts Specialised Expo 2027

PREVIOUS

PREVIOUS

ARTICLE Uncovering legal challenges of AI

PREVIOUS

PREVIOUS

Energy related Memorandum of Understanding signed with UK

PREVIOUS

PREVIOUS

Serbia established quota for solar power auctions

PREVIOUS

PREVIOUS

ARTICLE The dark side of ESG

PREVIOUS

PREVIOUS

ARTICLE ESG principles and their impact on corporate world

PREVIOUS

PREVIOUS

Serbia focuses on energy, IT and biotech

PREVIOUS

PREVIOUS

Serbian Orthodox Church becomes solar prosumer

PREVIOUS

PREVIOUS

Notary Chamber of Serbia releases E-Notary app

PREVIOUS

PREVIOUS

ARTICLE CFD brokers hiding behind Terms and Conditions

PREVIOUS

PREVIOUS

Process of company founding in Serbia goes electronic

PREVIOUS

PREVIOUS

Upward trend of renewables confirmed in 2022

PREVIOUS

PREVIOUS

ARTICLE Obtaining hemp cultivation permit in Serbia

PREVIOUS

PREVIOUS

ARTICLE Legal aspects of cultivation, trade and use of cannabis in Serbia

PREVIOUS

PREVIOUS

Serbia's 2023 economic growth depends on IT sector

PREVIOUS

PREVIOUS

ARTICLE Legal considerations of seasonal work engagements in Serbia

PREVIOUS

PREVIOUS

IVVK Lawyers hosted lecture for foreign business people

PREVIOUS

PREVIOUS

ICT sector recorded 2 billion EUR surplus

PREVIOUS

PREVIOUS

Growth of creative industries sector in Serbia

PREVIOUS

PREVIOUS

Serbia large biomass energy potential

PREVIOUS

PREVIOUS

Rich gold deposit found in Serbia

PREVIOUS

PREVIOUS

Serbia among top 3 global raspberry producers

PREVIOUS

PREVIOUS

Serbian Chamber of Commerce present in Dubai

PREVIOUS

PREVIOUS

Establishment of Serbia-Qatar Business Council

PREVIOUS

PREVIOUS

Serbia's Securities Commission approved establishment of a new AIF

PREVIOUS

PREVIOUS

Serbia adopted Air Quality Protection Program 2022-2030

PREVIOUS

PREVIOUS

Danube region transnational cooperation program 2021-2027 approved

PREVIOUS

PREVIOUS

Rakija entered UNESCO-s Intangible Cultural Heritage of Humanity List

PREVIOUS

PREVIOUS

Possible electricity import from Azerbaijan

PREVIOUS

PREVIOUS

Serbia's unique solar energy storage solution

PREVIOUS

PREVIOUS

Serbia abundant in rare minerals

PREVIOUS

PREVIOUS

Luxury Real Estate Market in Montenegro

PREVIOUS

PREVIOUS

LexQuire meets IVVK Lawyers

PREVIOUS

PREVIOUS

ARTICLE Law on Agency Employment aimed at prevention of labor abuse

PREVIOUS

PREVIOUS

11 cities and municipalities signed a Memorandum of Understanding

PREVIOUS

PREVIOUS

Price increase of housing units in Montenegro by 40%

PREVIOUS

PREVIOUS

Foreign trade in goods increased by 35.1%

PREVIOUS

PREVIOUS

ARTICLE Tax Incentives to Employers Who Hire Newly Registered Residents of Serbia

PREVIOUS

PREVIOUS

Apartments as the leading segment of the real estate market

PREVIOUS

PREVIOUS

Businessmen optimistic about the third quarter of 2022

PREVIOUS

PREVIOUS

Inflation in Serbia amounted to 12.8% in July

PREVIOUS

PREVIOUS

Bank fees and commissions to remain stable in 2023

PREVIOUS

PREVIOUS

ARTICLE Law on Alternative Investment Funds

PREVIOUS

PREVIOUS

Montenegro introduces auctions for renewable energy sources

PREVIOUS

PREVIOUS

ARTICLE Legal framework for investments in energy facilities in Serbia

PREVIOUS

PREVIOUS

Hydro Power Plants as a possible energy solution for Serbia

PREVIOUS

PREVIOUS

ARTICLE Four-day working week in Serbia

PREVIOUS

PREVIOUS

Crops estimations for 2022 in Serbia

PREVIOUS

PREVIOUS

ARTICLE Innovation clusters as high-potential solution for SMEs

PREVIOUS

PREVIOUS

Customs-free importing quotas for Eurasian Economic Community 2023

PREVIOUS

PREVIOUS

IVVK JOB OPENING We are hiring Junior Associates

PREVIOUS

PREVIOUS

Startups Attract More Than USD 135 Million to Serbia in 2021

PREVIOUS

PREVIOUS

Construction Plan for a Wind Farm in Bor

PREVIOUS

PREVIOUS

IVVK Lawyers participated in Confindustria HR Forum

PREVIOUS

PREVIOUS

IVVK-UpSkill Workshop "Presentation on social and TV media"

PREVIOUS

PREVIOUS

Serbia and Azerbaijan up for cooperation in the energy field

PREVIOUS

PREVIOUS

Energy permits digitized starting November

PREVIOUS

PREVIOUS

Belgrade declared city with greatest economic potential in region

PREVIOUS

PREVIOUS

Digitalization of fiscalization and invoicing in Serbia

PREVIOUS

PREVIOUS

New Register of Investment Locations in Serbia

PREVIOUS

PREVIOUS

Paysend opens new European tech center in Serbia

PREVIOUS

PREVIOUS

Serbia allows free export of flour from 15 May

PREVIOUS

PREVIOUS

Serbia to announce auctions for renewable energy power plants

PREVIOUS

PREVIOUS

Energy most important for economic development

PREVIOUS

PREVIOUS

Action Plan for Implementation of Digitalisation Programme in Health System

PREVIOUS

PREVIOUS

Oracle Corporation opens regional centre in Serbia

NEXT

NEXT

Corporate Bonds – an Investment Opportunity Created by Naftna Industrija Srbije

NEXT

NEXT

New Public Call for Incentives to Investors in Solar and Wind Power Plants

NEXT

NEXT

ACQUIRING THE ENERGY PERMIT

NEXT

NEXT

EU’S New AML Measures

NEXT

NEXT

Corporate Sustainability Due Diligence Directive: Navigating Trough the Turmoil

NEXT

NEXT

Jurisdiction for Issuing Construction Permits

NEXT

NEXT

EU Minimum Corporate Income Tax Directive: What to Know and What to Expect?

NEXT

NEXT

Marking Data Protection Day: A Reminder of How Important it Is to Protect Privacy

NEXT

NEXT

Drag Along and Tag Along in Domestic Legal System

NEXT

NEXT

AI Act - Challenges of Artificial Intelligence To the Global Market

NEXT

NEXT

Understanding NPLs: Scheme, Serbian Context & Notes of Economists

NEXT

NEXT

Insurance – Luxury or Necessity?

NEXT

NEXT

Claims Secured by a Mortgage and the Statute of Limitations

NEXT

NEXT

Alert: New Regulation Concerning Incentives in the Hotel Industry

NEXT

NEXT

Most Profitable Investments In The Republic Of Serbia

NEXT

NEXT

Annex to the Employment Contract for Transfer to Another Suitable Job (Due to the Needs of the Work Process and Organization)

NEXT

NEXT

Delayed justice is denied justice

NEXT

NEXT

Regulation of the Government of the Republic of Serbia on electricity delivery and supply conditions: Outlining the conditions for connection to the grid

NEXT

NEXT

Shareholders agreement – General overview and important clauses

NEXT

NEXT

Serbia drafting new Law on Information Security

NEXT

NEXT

IVVK Lawyers becomes part of the LexQuire family

NEXT

NEXT

Serbia looking for strategic partners for solar power plants

NEXT

NEXT

ARTICLE Benefits of employee stock ownership plan in Serbia

NEXT

NEXT

In 5 years 450 new RES power plants in Serbia

NEXT

NEXT

ARTICLE Co-ownership of share in Serbia

NEXT

NEXT

Serbia hosts Specialised Expo 2027

NEXT

NEXT

ARTICLE Uncovering legal challenges of AI

NEXT

NEXT

Energy related Memorandum of Understanding signed with UK

NEXT

NEXT

Serbia established quota for solar power auctions

NEXT

NEXT

ARTICLE The dark side of ESG

NEXT

NEXT

ARTICLE ESG principles and their impact on corporate world

NEXT

NEXT

Serbia focuses on energy, IT and biotech

NEXT

NEXT

Serbian Orthodox Church becomes solar prosumer

NEXT

NEXT

Notary Chamber of Serbia releases E-Notary app

NEXT

NEXT

ARTICLE CFD brokers hiding behind Terms and Conditions

NEXT

NEXT

Process of company founding in Serbia goes electronic

NEXT

NEXT

Upward trend of renewables confirmed in 2022

NEXT

NEXT

ARTICLE Obtaining hemp cultivation permit in Serbia

NEXT

NEXT

ARTICLE Legal aspects of cultivation, trade and use of cannabis in Serbia

NEXT

NEXT

Serbia's 2023 economic growth depends on IT sector

NEXT

NEXT

ARTICLE Legal considerations of seasonal work engagements in Serbia

NEXT

NEXT

IVVK Lawyers hosted lecture for foreign business people

NEXT

NEXT

ICT sector recorded 2 billion EUR surplus

NEXT

NEXT

Growth of creative industries sector in Serbia

NEXT

NEXT

Serbia large biomass energy potential

NEXT

NEXT

Rich gold deposit found in Serbia

NEXT

NEXT

Serbia among top 3 global raspberry producers

NEXT

NEXT

Serbian Chamber of Commerce present in Dubai

NEXT

NEXT

Establishment of Serbia-Qatar Business Council

NEXT

NEXT

Serbia's Securities Commission approved establishment of a new AIF

NEXT

NEXT

Serbia adopted Air Quality Protection Program 2022-2030

NEXT

NEXT

Danube region transnational cooperation program 2021-2027 approved

NEXT

NEXT

Rakija entered UNESCO-s Intangible Cultural Heritage of Humanity List

NEXT

NEXT

Possible electricity import from Azerbaijan

NEXT

NEXT

Serbia's unique solar energy storage solution

NEXT

NEXT

Serbia abundant in rare minerals

NEXT

NEXT

Luxury Real Estate Market in Montenegro

NEXT

NEXT

LexQuire meets IVVK Lawyers

NEXT

NEXT

ARTICLE Law on Agency Employment aimed at prevention of labor abuse

NEXT

NEXT

11 cities and municipalities signed a Memorandum of Understanding

NEXT

NEXT

Price increase of housing units in Montenegro by 40%

NEXT

NEXT

Foreign trade in goods increased by 35.1%

NEXT

NEXT

ARTICLE Tax Incentives to Employers Who Hire Newly Registered Residents of Serbia

NEXT

NEXT

Apartments as the leading segment of the real estate market

NEXT

NEXT

Businessmen optimistic about the third quarter of 2022

NEXT

NEXT

Inflation in Serbia amounted to 12.8% in July

NEXT

NEXT

Bank fees and commissions to remain stable in 2023

NEXT

NEXT

ARTICLE Law on Alternative Investment Funds

NEXT

NEXT

Montenegro introduces auctions for renewable energy sources

NEXT

NEXT

ARTICLE Legal framework for investments in energy facilities in Serbia

NEXT

NEXT

Hydro Power Plants as a possible energy solution for Serbia

NEXT

NEXT

ARTICLE Four-day working week in Serbia

NEXT

NEXT

Crops estimations for 2022 in Serbia

NEXT

NEXT

ARTICLE Innovation clusters as high-potential solution for SMEs

NEXT

NEXT

Customs-free importing quotas for Eurasian Economic Community 2023

NEXT

NEXT

IVVK JOB OPENING We are hiring Junior Associates

NEXT

NEXT

Startups Attract More Than USD 135 Million to Serbia in 2021

NEXT

NEXT

Construction Plan for a Wind Farm in Bor

NEXT

NEXT

IVVK Lawyers participated in Confindustria HR Forum

NEXT

NEXT

IVVK-UpSkill Workshop "Presentation on social and TV media"

NEXT

NEXT

Serbia and Azerbaijan up for cooperation in the energy field

NEXT

NEXT

Energy permits digitized starting November

NEXT

NEXT

Belgrade declared city with greatest economic potential in region

NEXT

NEXT

Digitalization of fiscalization and invoicing in Serbia

NEXT

NEXT

New Register of Investment Locations in Serbia

NEXT

NEXT

Paysend opens new European tech center in Serbia

NEXT

NEXT

Serbia allows free export of flour from 15 May

NEXT

NEXT

Serbia to announce auctions for renewable energy power plants

NEXT

NEXT

Energy most important for economic development

NEXT

NEXT

Action Plan for Implementation of Digitalisation Programme in Health System

NEXT

NEXT

Oracle Corporation opens regional centre in Serbia