Law on Management of Companies Owned by the Republic of Serbia

The law foresees transformation of enterprises owned by the Republic of Serbia into corporations (hereinafter: corporations), i.e. joint-stock companies or companies with limited liability, by the end of 2025.

The novelty prescribed by the Law is management through centralized ownership. This type of management will be carried out through the ministry responsible for economic affairs, except in the field of energy, where it will be carried out through the Ministry of Energy (for the production and supply of electricity), i.e. through the Republic Commission for Energy Networks (for carrying out the activities of electricity transmission and transportation of natural gas). This type of management does not imply that the ministries or the Republic Commission for Energy Networks, directly perform management functions. They do so through monitoring and improvement of corporate management in corporations, as well as adoption of emergency measures in case of business disruptions in these corporations.

Management through centralized ownership is carried out in accordance with the goals stated in the Law, which are the preservation of national and strategic interests; market preservation and consumer protection; reduction of social stratification of the society; sustainable environmental management and sustainable use of natural resources of the Republic of Serbia; and improvement of economic, industrial and social development.

In order to implement the Law, the Government of Serbia adopted the following legislation:

1. The Decree on the criteria for qualification of the legal form of a corporation, which prescribes the criteria on the basis of which an enterprise qualifies for a change of legal form. Enterprises that meet two of the three requirements: that they have more than 250 permanent employees, that their business income exceeds 40 million euros in the previous year, or that they perform technically and organizationally complex activities, are transferred to joint stock companies (JSC). Other enterprises will take the form of a limited liability company (LLC). Enterprises are obliged to submit an initiative for the change of legal form, with a proposal for a new legal form, to the competent ministry within 30 days from the date the Regulation comes into force;

2. The Decree on determining the list of corporations and minor corporations which includes a list of enterprises wholly or partially owned by the state that expect a change in legal form. The enterprises on this list are primarily categorized based on the Law’s classification depending on the size Republic of Serbia’s share in the enterprise into corporations and corporations in minority ownership of the Republic of Serbia.

The Decree itself further classifies corporations from the list into corporations of national and strategic interest and corporations of special interest.

Corporations and corporations in the minority ownership of the Republic of Serbia that are already categorized based on the classification prescribed by the Law, then on fall under one of the categories from the Decree, and thus create the division into three final categories. The Law or the Decree do not clarify the exact significance of these classifications.

The first category includes corporations in majority ownership of the Republic of Serbia that achieve strategic goals in the field of security and defense; manages strategic infrastructure and related real estate in the fields of energy, traffic, water management, electronic communications, media, data processing and/or storage, and others; as well as corporations that perform activities of general interest, including energy, and provide mandatory services in the public interest. Some of the companies in this category are: "Elektorprivreda Srbija", "Elektromreža Srbija", "Putevi Srbija", "Srbijagas", "Transnafta", "Corridors Srbija", "Pošte Srbija", "Srbijašume", "Srbija Cargo", and "Serbia Train".

The second category includes corporations of special interest in majority ownership of the Republic of Serbia, whose goal is to realize dividends from strategic investments that are mainly carried out in activities where the market has proven to be inefficient. Corporations of special interest are focused on achieving goals useful for society, such as reducing social inequality, industrial development, economic diversification, social development, realizing dividends from strategic investments, intervention in inefficient markets and supporting innovation. Examples of capital companies of special interest in the majority ownership of the Republic of Serbia are "Uvac Reserve", "Lepenski Vir tourist area manager", "Ložionica Beograd", "Autotransport Kostolac", "PRIM. Kostolac", and "Rio Kostolac".

The third category includes corporations in the minority ownership of the Republic of Serbia that are of special interest to the state, such as "Naftna industrija Srbije", "FCA Srbija Kragujevac", "BW Kula Beograd", "BW Galerija Beograd" and "Belgrade na Vodi";

3. The Decree on additional criteria for appointment and the procedure for appointing managment bodies of corporations, as well as the procedure for conducting a public tender for directors, which aims to increase the professionalization of management; and

Decision on the code of corporate management of corporations, which represents a collection of professional business conduct and good principles, the application of which strengthens corporate and ownership responsibility in corporations.

By Marko Mrdja, Senior Associate, and Jana Stanojevic, Associate, JPM & Partners