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Beneficial Ownership In Serbia

In 2021, Business Registers Agency in Serbia decided to start with misdemeanor procedures in cases where companies did not register their beneficial owners. The motions to institute the misdemeanor proceedings were submitted in more than 1900 cases.

Because of these new trends in Serbian Corporate Law, in this article, we are going to explain the most important facts about Serbian Law on the Central Register of Ultimate Beneficial Owners.

Purpose of Adopting The Law On Ultimate Benefical Ownership in Serbia

   To improve the existing system of detecting and preventing money laundering and terrorist financing, as well as to harmonize domestic legislation with EU and other international standards in this area, the National Assembly of the Republic of Serbia adopted the Law on Central Register of Ultimate Beneficial Owners (hereinafter: the Law), which prescribes an obligation to companies and other registered legal entities (hereinafter: “Registered Entities”), to disclose their beneficial owners, and to register them in the Central Register of beneficial owners of legal entities and other entities registered in the Republic of Serbia (hereinafter: “Central Register”). 

Central Register of Beneficial Owners and Obligation to Register

Existing Registered Entities mentioned above are obliged to determine the beneficial owners of the Registered Entity, as well as to keep the data and documents based on which the beneficial owner was determined. The Registered Entity is also obliged to make these data and documents available to the National Bank of Serbia, and other competent state bodies, at their request (for example, Ministry of Finance-Tax Administration, Administration for the prevention of money laundering, The Market Inspection, etc.)

Central Register is a central, public, and unique electronic database of natural persons who were determined as the beneficial (actual, real) owners of the Registered Entities, maintained by the Business Registers Agency of the Republic of Serbia. Registered Entities shall determine their beneficial owners and provide the Agency with supporting documentation, as well as to enter and record these data and documents in the Central Register via the Agency.

Pursuant to the Law, the grounds for beneficial owner registration in the Central Register are:

• Foundation of the Registered Entity;
• Change of the ownership structure and members of the governing body of the Registered Entity, as well as other changes based on which the fulfillment of conditions for acquiring the status of the beneficial owner of the Registered Entity can be assessed.

The authorized person of the Registered Entity is obliged to record the data in the Central Records, no later than 15 days from the day of the occurrence of the grounds for registration.

Simultaneously with the registration, the data shall be published on the website of the Business Register Agency, while the data on the beneficial owner of the Registered Entity begin to produce legal effect towards third parties on the day following the day of publication of these data.

Which Legal Entities Must Register The Beneficial Owners In The Central Register?

 The Law applies to the following legal entities and other entities registered in the Republic of Serbia:

• Companies, with an exception regarding the public joint-stock companies;
• Cooperatives;
• Branches of the foreign companies;
• Business associations and associations, except for political parties, trade unions, sports organizations and associations, churches and religious communities;
• Foundations and endowments;
• Institutions;
• Representative offices of the foreign companies, associations, foundations, and endowments.

The Law does not apply to companies and institutions of which the Republic of Serbia, its autonomous province, or a unit of local self-government is the only member or founder.

The Law Defines The Beneficial Owner As:

• a natural person, who directly or indirectly holds 25% or more of shares, stocks, voting rights, or other rights, based on which he participates in the management of the Registered Entity, ie participates in capital of the Registered Entity with 25% or more stake;
• a natural person who directly or indirectly has a predominant influence on the conduct of business operations and decision-making;
• a natural person, who indirectly provides or secures funds for the Registered Entity, and therefore significantly influences the decision-making process of the governing body of the Registered Entity when deciding on financing and operations;
• a natural person who is the founder, trustee, protector, beneficiary if he is designated, as well as a person having a dominant position in the management of the trust, ie in another person of foreign law;
• a natural person registered to represent cooperatives, associations, foundations, endowments, and institutions if the authorized person for representation has not registered another natural person as the beneficial owner.

If it is not possible to determine the natural person who is the beneficial owner as prescribed in items 1-4, the beneficial owner of the Registered Entity is the natural person who is registered for representation, who is registered as a member of the body of that entity.

It is important to point out that the owner (prevailing shareholder, founder, etc.) of the Legal Entities cited above can be another legal person, of domestic or foreign nationality. That, however, doesn’t preclude the Law from the application.

This means that, for instance, if a company from Turkey had founded a company in Serbia, the Register shall contain the data on the specific name and surname of the person who is the owner of that Turkish company.

Criminal And Misdemeanor Liability

The Law stipulates a criminal offense for persons who, in order to conceal the beneficial owner:

1. Do not enter data on the beneficial owner,
2. Enter false information on the beneficial owner,
3. Change or delete true information on the beneficial owner.

The newly introduced crime is punishable by a sentence of a minimum of three months up to five years in prison.

Furthermore, The Law prescribes misdemeanor liability for the Registered Entity and the liable person within it, if the Entity does not record the data on the beneficial owner within the prescribed period and if it does not keep the appropriate data and documents based on which it had registered the beneficial owner. Fines of a minimum amount of 500.000,00 up to 2.000,000,00 dinars are prescribed for the above-mentioned violations for the Registered Entities, and from 50.000,00 dinars up to 150.000,00 dinars for the liable persons within them.

CONCLUSION

According to the data from the Business Registers Agency from February 2020, a total of 147,598 persons under obligation according to the Law, is slightly more than 83% of those referred to in the Law, fulfilled their obligation to register beneficial owners. The obligation was fulfilled by 85% of companies, about 83% of endowments, foundations, and institutions, as well as 77% of associations.

It should be bear in mind that almost all procedures before the Serbian Business Agency are of a strictly formal character. As a part of the procedure, the only way to be registered is via the electronic signature of the company’s director, which is given by authorized entities in Serbia.

Therefore, we strongly recommend for persons referred to in the Law to consult legal experts in the application procedure. We also have the access to the Register of Beneficial Owners so we can search if your company owners are properly registered.