As of the beginning of 2011 some intensive activity of the part of the Serbian legislator resulted in the adoption of a set of new laws that either directly or indirectly are of relevance to the financial market. Of most importance are the following laws that have been adopted: (i) the Law on Capital Market Operations, (ii) the Law on Amendments to the Law on Foreign Exchange Operations, (iii) the Law on the Protection of Financial Service Customers, (iv) the Law on Enforcement and Security, (v) the Law on Amendments to the Law on Payment Transactions, (vi) the Law on Amendments and Supplements of the Law on Penalty Interest Rates and (vii) the Law on Voluntary Financial Restructuring. While a part of accompanying secondary legislation for these laws has been already enacted, the remaining piece of secondary legislation required for their implementation is currently in drafting phase and it is expected to be adopted by the end of 2011/beginning of 2012. In addition, the Serbian legislator adopted a new Company Law in May 2011, which lawwill become applicable from 1 February 2012 and is addressed separately in our corporate newsletter.

The abovementioned regulations, to the greatest extent, result from the harmonization of local legislation with that of the European Union ("EU") directives and the strategic determination of Serbia to accede to the EU and World Trade Organization. The same trend has influenced legislative changes in the remaining countries in the region addressed herein.

Capital Market Operations

The Law on Capital Market Operations (Official Gazette of the Republic of Serbia, no. 31/11, "LCMO") completely replaced the Law on Market of Securities and Other Financial Instruments (Official Gazette of the Republic of Serbia, no. 47/06, "LMS") whereas its entry into force has been postponed until 17 November 2011. The LCMO substantially changed the Serbian capital market regime after five years of the LMS's application. It predominantly relies on the EU legislation model, as well as international standards such as the standards of the International Organization of Securities Commissions (IOSCO).

  • Harmonization with the European Union regulations. The LCMO has embedded the EU regulations, that is, it is based on the following European Union directives:
  • The Markets and Financial Instruments Directive 204/39/EC (MiFID);
  • Directive 2004/109/EC of the European Parliament and of the Council of 15 December 2004 on the harmonization of transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market and amending Directive 2001/34/EC (the Transparency Directive);
  • Directive 2003/6/EC of the European Parliament and of the Council of 28 January 2003 on insider dealing and market manipulation (Market Abuse Directive);
  • The Prospectus Directive 2003/71/EC; and
  • The Investor Compensation Scheme Directive 97/9/EC.

Secondary legislation. The LCMO provides for the enactment of 19 by-laws by 17 May 2012 meaning that after this period the effects of the LCMO's adoption may be properly observed. Nevertheless, the most important changes provided for under the LCMO may be determined now and are as follows:

  • Substantially new definitions for principal terms such as financial instruments, investment companies, investment services etc.;
  • New regime for public offerings, market entry and exclusion as well as market listings;
  • Capital market reorganization, which now, following the EU model, consist of a regulated market and a multilateral commercial platform, with possibilities for over the counter trading;
  • A redefinition of the conditions for the performance of licensed activities i.e. regulated activities;
  • A change regarding institutional competencies i.e. concerning the competencies of both the Securities Commission and the Central Depository and Clearing House, as well as the introduction of new institutions such as the Investor Protection Fund;
  • Stricter reporting obligations for public companies; and
  • A different definition of penalty provisions, including prohibited acts.

Until the enactment of the new secondary legislation, it is planned that the existing secondary legislation adopted in accordance with the LMS will be correspondingly applied. Having in mind the legal basis for the enactment of the LCMO, it should be expected that current practice will be modified further in accordance with the practice of the EU capital markets, whereas the challenge of effecting the rightful application of numerous new institutes shall rest upon all of the market participants, and particularly, upon the regulatory authorities. This will be specifically relevant for joint stock companies which will need to adjust to both LCMO and new Law on Companies that will become applicable as of February 2012.

Amendments to the Law on Foreign Exchange Operations

A step forward in the liberalisation of foreign exchange market in Serbia has been accomplished by the enactment of the Law on Amendments to the Law on Foreign Exchange Operations (Official Gazette of the Republic of Serbia, no. 31/2011; "F/X Law Amendments"). Certain restrictions that impeded foreign business operations have been removed or clarified by F/X Law Amendments. Nevertheless, the foreign exchange regime remains subject to detailed regulation and the classification of business operations either as permitted or unpermitted which in practice requires careful transaction structuring when Serbian residents are involved in order to adjust to the permitted business operations' modalities.

The 180 day restriction for effecting transfer of funds into Serbia under foreign trade operations does not apply anymore. Provisions pertaining to the obligations of residents to effectuate the transfer of funds into Serbia from export of goods and services abroad, that is, to import goods and services into Serbia that have been paid for in advance, ceased to be applicable in accordance with F/X Law Amendments. Under newly established regime, all export/import operations of goods and services under which the contracted time between import/export is in excess of one year are regarded as commercial credits and are therefore subject to registration with the National Bank of Serbia ("NBS") jointly with other foreign trade operations.

More Detailed Regulation of Cross Border Set-Off. The F/X Law Amendments finally confirmed that a set-off between residents and non-residents in foreign trade of goods and services is allowed. In practice, this shall be achievable upon the enactment of corresponding secondary legislation. The F/X Law Amendments provide for the possibility of setting off the claims arising from foreign credit operations, foreign trade and direct investments as well as real estate investments, in accordance with the conditions to be prescribed by the Government of the Republic of Serbia, upon the proposal of the NBS. Additionally, it would be necessary, in each particular case, to procure the approval of the Ministry of Finance confirming the fulfilment of the relevant conditions, issued on the basis of debt status confirmation provided by the NBS. Relevant secondary legislation is expected in November 2011.

Extension of the grounds for foreign currency payments in Serbia. The grounds for payments made in foreign currency in Serbia are extended and include, inter alia, (i) programs and projects financed from development aid provided by the EU, (ii) donation for humanitarian, scientific and cultural purposes, (iii) banking guarantees, provided that such a guarantee is a condition for the execution of the principal operation which may be conducted in foreign currency in Serbia, (iv) the payment of allowances for business trips abroad (that can be effectuated in foreign currency), and (v) the payment of salary to employees in diplomatic and consular representative offices, organizations within the UN and within international financial institutions in Serbia etc.

Reporting on tax haven operations. The Government of the Republic of Serbia has been granted by the F/X Law Amendments the authority to enact secondary legislation regulating the reporting by residents on operations with non residents seated in any country or territory that adopts a privileged tax system, or with which no proper information is shared or in which information concerning business or assets is protected by strict confidentiality rules. It is foreseen that the Government of the Republic of Serbia shall enact a national list of respective countries or territories based on the relevant lists of the international organizations.

Regulation of the Guarantee Operations. After years of having a legislative gap, cross border guarantee / surety operations have finally been regulated. Under the new regime, domestic banks are allowed to issue guarantees, bill of exchange security and other types of suretyship with regard to operations between residents and non-residents. Domestic banks can also acquire guarantees provided by foreign banks in relation to such operations. Additionally, a domestic bank may procure guarantees provided by foreign banks as well as guarantees, assurances and other types of security for claims that non-residents have against residents. Moreover, it is provided that the resident – legal entity may provide suretyship in favour of a non-resident with regard to the import of goods and services of other resident as well as to non-residents that perform investment operations in Serbia. Also, a resident – legal entity may obtain a guarantee and suretyship from a non-resident in relation to the export of goods and services and with regard to the performance of investment operations, as well as in relation to operations between such residents and other resident - legal entities in Serbia.

The regulation of syndicated lending and subordinated loans that have been provided to a foreign entity branch office. Amongst other things, it is stipulated that domestic banks may participate in syndicated credit/loans provided by a group of foreign creditors to a resident provided that the participation of the domestic bank is not lower than 10%. However, for financing import of goods and services, the participation of the bank can be less than 10%.. Also, domestic banks may participate where a syndicated credit/loan is granted to a non-resident, provided that the payment security instruments are provided by a non-resident. As an exception to general restrictive regime, purchase and sale of claims between consortium members is allowed.

Crediting from abroad into the RSD has been enabled. In the wider context of the "dinarisation" policy of the NBS, the possibility for international financial organizations and development banks or financial institutions founded by foreign countries to grant credit in dinars to residents has now been provided.

Other changes. The F/X Law Amendments introduce a few other changes such as: (i) the introduction of a unified public registry for the foreign currency accounts of local companies held with the NBS; (ii) money transfer services with regard to international payment operations are now regulated for the first time; (iii) the obligation of transferring revenue realized abroad into Serbia on the basis of conducting investment operations abroad is no longer applicable; (iv) the competencies of the Foreign Exchange Inspectorate have been extended etc.

Entry into force and application. F/X Law Amendments have entered into force and became applicable as of 17 May 2011 except for several provisions (mainly pertaining to exchange operations and certain misdemeanours) whose application has been postponed until the 31 December 2011 i.e. 1 January 2012. Secondary legislation for the execution of the F/X Law should be enacted within 6 months as of its entry into force i.e. by 17 November 2011 (subject to few exceptions which will be implemented until 31 December 2011). Until the enactment of new secondary legislation, the existing by-laws shall remain applicable, to the extent that they are not contrary to the F/X Law.

The Protection of Financial Services Customers

For purpose of the fulfilment of international undertakings and the harmonization of legislation in the field of the protection of financial services consumers, with the Consumer Credit Directive 2008/48/EC and the Payment Service Directive 2007/64/EC, for the first time in Serbia, the Law on the Protection of Financial Service Customers (Official Gazette of the Republic of Serbia, no. 36/11;"PFSC") has been enacted.

The PFSC has entirely incorporated the Consumer Credit Directive 2008/48/EC into Serbian legislation, and in addition, new consumer rights have been established to coincide with the domestic market's particularities. Unlike the aforementioned Directive, the PFSC encompasses all of the banking products and services, and not only consumer loans.

Application – financial services customers. The PFSC regulates the rights of financial service customers with regard to services provided by the banks, leasing providers and merchants, as well as conditions and the manner of the realization and the protection of such rights. The financial service customer is a natural person, and the PFSC excludes its application to that of legal or natural persons that perform commercial activities.

Rights of financial service customers. The principal rights of financial service customers are (i) the right to equality in relation to a financial service provider, (ii) the right to protection from discrimination, (iii) the right to be informed, (iv) the right to the concreteness and definability of contractual commitments, and (v) the right to the protection of one's rights and interests.

Change of essential contractual terms. As one of the most important changes, the PFSC introduces rule according to which the bank (or leasing provider) that intends to amend (change) any essential contractual term is obliged to procure prior consent from the customer. In case the customer does not consent to such change, financial service provider cannot unilaterally amend essential contractual terms or rescind the agreement. As concerns other contractual terms (non essential), the customer has to be timely and in prescribed contractual manner informed on change of such terms of the concluded agreement.

Assignment of receivables arising out of credit agreement. The bank may assign receivables arising out of a credit agreement solely to the other bank. In the case of assignment, the customer retains all of the previously agreed contractual rights. The bank, to which the receivables have been assigned, cannot place the customer in a less favourable position compared to position that such customer would have had in the case that such an assignment had not taken place in the first place. Furthermore, the customer cannot be exposed to additional costs. Naturally, the bank is obliged to inform the customer upon the assignment of receivables.

The NBS's competencies. The prescribed monetary penalties that the NBS can impose in the event of a breach of PFSC provisions range from RSD 500,000 (approx. EUR 5,000) to RSD 2,000,000 (approx. EUR 20,000).

Entry into force and application. PFSC has entered into force on 4 June 2011 and shall be applicable as of 5 December 2011, except for the provisions of Article 38 paragraph 5 which shall become applicable as of 1 January 2012 (customer liability up to RSD 15,000.00 (approx. EUR 150) in case of unauthorized use of payment card). The deadline for the enactment of this secondary legislation was 4 September 2011. The financial service providers are obliged to harmonize their general acts with the PFSC and the secondary legislation within three months as of the enactment of the relevant regulations.

Interest rates. Under another important rule, financial service providers will not be allowed from now on to increase interest rate on the basis of undeterminable contractual factors. The same applies during the intermediate period i.e. as of PFSC's entry into force until the beginning of its application (i.e. as of 4 June 2011 until the 5 December 2011). Additionally, the finance service providers are bound to decrease all interest rates in the existing agreements to the amount applied at the date of signing of initial agreement (to the extent such interest rate was not sufficiently determined).

Adjustment. Until the commencement of the application of PFSC on the 5 December 2011 the financial service providers are obliged to adjust all of the respective agreements in order to comply with the rules on the determinability of contractual obligations and the prescribed amount of variable interest rates. In order to avoid the misuse of the process of adjusting contractual provisions the legislator has foreseen (Article 54 paragraph 4 PFSC) that the financial service providers are not allowed to charge additional fees for contractual adjustment services to their consumers, nor are such providers entitled to ask for additional documentation to be provided either. Concerning the amount of requested adjustments it is evident that the adjustment process shall require adequate time and recourse on behalf of the respective financial service providers.

Enforcement and Security

As of the 17 September 2011 enforcement and security is regulated by the new Law on the Enforcement and Security (Official Gazette of the republic of Serbia, no. 31/11, "LES"). The purpose of the LES enactment has been to cure deficiencies of the currently applicable Law on Enforcement Proceedings (Official Gazette of the Republic of Serbia, no. 125/04) which brought about a situation whereby following the finality of a judgment a new ambiguous and protracted enforcement proceedings had to be initiated sometimes lasting longer that initial litigation proceedings.

Professional Bailiffs. The professional bailiff i.e. the "bailiff" (as defined by the LES) is a new profession in Serbian legal system with corresponding public competencies. In the enforcement request, creditors are obliged to decide, that is, to indicate whether the enforcement shall be carried on by court or by professional bailiffs. Enforcement by court enforcers is exclusively provided in the area of family matters and employee's return to work.

The fundamental characteristics that are required of the bailiffs in the system established by the LES are as follows:

  • Bachelor law degree;
  • Relevant working experience;
  • Passing a specialized exam, licensed by the Ministry of Justice of the Republic of Serbia;
  • It's own funds and equipment, and liability with its own entire assets;
  • Acting individually within the legal framework and the competencies granted by the creditor;
  • Charging for provided services in accordance with specified tariff;
  • Paid by the debtor that carries on the enforcement costs;
  • Obligation to be insured against professional risks.

The exact number of bailiffs shall be determined by the secondary legislation whereby each bailiff should be designated for 25,000 habitants, The total number of the bailiffs may be increased if required so. Bailiffs may establish a private partnership in accordance with the law.

Court Injunction Registry. Apublic registry has been established for court injunctions that have been rendered before, or upon the finalization of the court proceedings, that prohibit the disposal and encumbering of movable and immovable assets or the proprietary rights attached to the immovable assets ("Court Injunction Registry"). The Court Injunction Registry is a unified, central electronic data base where data entered into the registry in accordance with the LES will be kept. Currently, the Court Injunction Registry is in the preparatory phase. It is available at the official web page of the Business Registers Agency:

Delivery. The LES introduces a simpler and more efficient system of delivery to the enforcement debtor and other participants party to the enforcement proceedings comparing to what was in place before. Namely, in the case that delivery is not possible within five days as of sending the notice to the relevant address of recipient; the delivery is performed by placing the notice on the court announcement table on the next day upon the expiry of prescribed delivery deadline. It is deemed that the delivery has taken place upon the expiry of five days following the placement of the notice on the court announcement table. Therefore, there are no repeated attempts of delivery as was the case before. By this the enforcement procedure is expected to be significantly accelerated and possibility for misuse and postponement will be reduced.

As an exception to the aforementioned, in the case of the delivery of the decision on the enforcement rendered on the basis of the authentic document, redelivery shall be attempted upon 15 days as of expiry of initial delivery deadline. In the case that redelivery was not successful, the delivery is performed by placement at the court announcement table.

A foreign invoice as an authentic document. The LES has broadened the meaning of an authentic document on which basis the enforcement may be granted against the debtor' assets by providing that an invoice issued by a foreign person, abroad, may be qualified as authentic document and the enforcement of such a document may be granted in Serbia. This means that foreign creditors may appear directly in the enforcement proceedings i.e. without comencing litigation proceedings and proceedings for the issuance of a payment order respectively, as was the case before. By this, foreign creditors are provided with equatable treatment as domestic ones and enforcement of their claims is accelerated.

Entry into force and application. The LES entered into force on 17 May 2011 whereas its provisions are to be applicable 4 months following its entry into force, that is, as of 17 September 2011. Certain provisions on the enforcers are the exception to this date and these are applicable as of one year following its entry into force, that is, as of 17 May 2012. The secondary legislation required for the LES implementation should be enacted within 90 days i.e. 6 months as of the LES entering into force.

The enforcement and security proceedings in which the execution of enforcement comenced prior to the application of LES shall be ended in accordance with the earlier Law on Enforcement Proceedings. The enforcement and security proceedings in which an appeal was lodged against the decision on the granting the enforcement or security, shall be assigned to the competent court for the deciding upon granting the enforcement or security, in accordance with the LES.

Payment transactions

Amendments of the Law on Payment Transactions (Official Gazette of the Republic of Serbia, no. 31/2011, "LPT Amendments") were adopted in order to solve problems arising in practice, which relate, inter alia, to debtor-creditor relations and certain anomalies associated with the forced payment procedure.

Submission of information in payment transactions. One of the changes concerns the way banks are informed of status and other changes of legal entities and entrepreneurs. Namely, in accordance with the LPT Amendments, the obligation of legal entities and entrepreneurs to inform the bank within 3 days on the performed status change has finally been abandoned. Banks are obliged to obtain information on the status and other changes from the Business Registers Agency each day, electronically.

Registry of bills of exchange and authorizations. The most important change is related to the manner of forced collection on the basis of bills of exchange and collection authorizations ("authorizations"). In accordance with the LPT Amendments, the registry of bills of exchange and authorizations, run by the NBS, has been introduced, and it is prescribed that, with certain exceptions, a forced collection (performed by the NBS) will be possible only if the bills of exchange and authorizations were registered in the registry.

The registry for bills of exchange and authorizations is managed electronically, and information will be available on the NBS website. A request for the registration of bill of exchange or authorization is submitted to the bank by the debtor, and the bank then issues a confirmation regarding the registered bills of exchange and authorizations. The date and time that the information inscribed in the registry is announced on the NBS website is deemed to be the date and time of the registration of bills of exchange and authorizations, and the bank shall be liable for the correctness and accuracy of the information.

In accordance with the LPT Amendments, the NBS has adopted a Decision on the Detailed Terms, Contents and Manner of Keeping the Register of Bills of Exchange and Mandates (Official Gazette of the Republic of Serbia, no. 31/2011, "Decision") which will become effective on 1 February 2012. The Decision, inter alia, stipulates that bills of exchange issued by 31 May 2004 as well as authorizations issued before 1 April 2010 will not be registered and may be enforced by way of a forced collection. Likewise, bills of exchange/authorizations that are due for payment within 120 days from the Decision becoming effective will not be registered. The mandatory registration of bills of exchange/authorizations, as a precondition for forced collection, applies to bills of exchange/authorizations that are issued at the latest within 120 days of the Decision becoming effective and which are due for payment after the expiry of this deadline (120 days), i.e. from 30 May 2012.

Forced collection from the accounts of the debtor. Ranks of priority for forced collection have remained unchanged and collection on the basis of due securities, bills of exchange and authorizations (third rank of priority) is enforced according to the time that the forced collection order was received (regardless of the day of issuing the document). Changes are reflected in the manner of the carrying out the forced collection and relate to the following:

  • First, grounds for a forced collection of a first and second rank of priority are disclosed directly to the NBS, which immediately orders all banks to block all RSD and foreign currency accounts of the debtor, not to open new accounts for the debtor and to disclose promptly to the NBS information on the balance on the existing accounts of the debtor;
  • Secondly, the NBS informs the bank where the debtor has the highest balance on an open RSD account, by way of an order, that the forced collection order shall be enforced from that account, and that if that account does not have sufficient funds such orders will be issued to other banks where the debtor has opened RSD accounts. In the event that RSD accounts do not have funds, enforcement is ordered from other accounts;
  • Finally, assets exempted from the enforcement procedure are those assets excluded from enforcement by law, act of the Government, an NBS regulation, a court decision or a decision of the tax or customs authority. Apart from these, assets that have been determined as being set aside for a payment on the basis of a letter of credit and deposited as security for a loan are also exempted from such enforcement.
  • It is expected that the abovementioned changes will contribute to the better and faster collection of obligations due, as well as leading to a better overview of the financial standing of potential business partners.

Penalty interest rate

The Parliament of the Republic of Serbia has adopted the Law on Amendments to the Law on Penalty Interest Rate (Official Gazette of the Republic of Serbia, no. 31/11, "LPIR Amendments") which has been applicable since 17 May 2011.

Introduction of the new parameter for calculation of the penalty interest rate. LPIR Amendments have changed one of the parameters for the calculation of penalty interest rate. Namely, penalty interest rate is no longer calculated on the basis of the "monthly retail price growth rate ", as was the case until the adoption of the LPIR Amendments Now it is calculated on the basis of the "monthly consumer prices growth rate". Since the LPIR Amendments became effective, the penalty interest rate, consists of the following two parameters:

  • The monthly consumer prices growth rate; and
  • A fixed monthly 0.5% rate.

The LPIR Amendments prescribe that in the transitory period from 1 January to 16 May 2011, the penalty interest rate was set at 1.2305% (monthly), as determined on the basis of "monthly retail price growth rate" (the earlier parameter) for December 2010. However since 17 May 2011, the "monthly consumer prices growth rate" is exclusively used for the determination of penalty interest rate.

In months where "monthly consumer prices growth rate " is greater than 10% or more of the NBS reference rate, the arithmetical median of the NBS reference rate and the "monthly consumer prices growth rate" shall be used for the calculation of the penalty interest rate, instead of the "monthly retail price growth rate", which was the case earlier prior to the introduction of the said amendments.

The publication of relevant information. In accordance with Article 5a of the LPIR Amendments, the Statistical Office of Serbia publishes on its web page ( information on the monthly growth of consumer prices in the Republic of Serbia. Likewise, the NBS publishes on its web page information on the reference rate ( The interest rate for the relevant period shall be calculated on the basis of the information that has been published.

Penalty interest rate. An overview of the penalty interest rate for 2011 is found in the table below:

Month of the 2011

Penalty interest rate

January – May (until 16.05)


May (from 17.05)


June - July - August


Based on the information from the table, one could see that, by using the new method of calculation, the penalty interest rate has decreased from the period preceding the LPIR Amendments coming into effect. This is for the benefit of debtors that are late in the fulfilment of their monetary obligations because in this way the rate of the increase in their debt has been slowed down. On the other side, creditors will be interested following the change in the monthly consumer prices growth rate, the increase of which would result in the penalty interest rate to be increased as well.

Maintenance of financial stability

Decision on Temporary Measures for Preserving Financial Stability in the Republic of Serbia. In mid-April 2011, the NBS amended the Decision on Temporary Measures for Preserving Financial Stability in the Republic of Serbia (Official Gazette of the Republic of Serbia, nos. 116/2008, 12/2009, 43/2009, 104/2009, 111/2009 and 25/2011, "Decision on Temporary Measures"), whose effects have been shown to be controversial in practice. Namely, sections related to the conditions for the purchase of financial derivatives and securities abroad, certain types of investments carried out by insurance companies, as well as mandatory reserves for the providers of finance lease, have been removed. The Decision on Temporary Measures has been downsized to only a few paragraphs related to the classification of claims and the capital adequacy of banks. As certain business operations of the entities that have been regulated by the Decision on Temporary Measures (primarily the purchase of financial derivatives abroad) are not yet regulated in detail by other regulations, this move of the NBS could be interpreted as being a return to the way things were before the introduction of temporary measures, at least until new secondary legislation has been enacted or until the NBS issues official opinions on these matters.

Decision on Measures for the Safeguarding and Strengthening of the Stability of the Financial System. The Decision on Measures for the Safeguarding and the Strengthening of the Stability of the Financial System (Official Gazette of the Republic of Serbia, no. 34/2011) has been applicable since 30 June 2011. The intention behind this decision is to decrease the risk factor arising from the high percentage of loans approved in foreign currency or with a foreign currency clause, and the decision is passed within the "dinarization" strategy that has been tirelessly promoted by the NBS after the appointment of the new Governor. The decision, inter alia, states that foreign currency clauses in loans that have been approved for individuals can only be used if the obligation is denominated in Euros. Certain other condition for the approval of loans to individuals, such as the mandatory participation for certain types of loans, the covering of the loan amount by the value of collateral have also been put into place. The decision has effectively marked the end of the era for loans indexed in Swiss franc on the Serbian market, or at least where it comes to loans that have been made to individuals.

Besides these two regulations, NBS has also adopted a number of decisions related to banking operations, within the implementation of the Basel II standard.

Voluntary financial restructuring

The Law on Voluntary Financial Restructuring (Official Gazette of the Republic of Serbia, no. 36/11), was drafted in response to the problems that the Serbian economy is facing It has been applied since 1 September 2011, and introduces a number of changes in different areas. Financial restructuring under this law concerns companies that are experiencing financial difficulties (illiquidity, threatened illiquidity or over-indebtedness), that are entering into a financial restructuring process (including a moratorium) with at least two foreign or domestic banks as creditors.

The law is very short, and the following provisions are of special importance:

  • Content of the financial restructuring agreement: the law stipulates a number of measures that could be implemented by this agreement (i.e. changes of tenor and interest rates, debt write-off, debt for equity swap, the conclusion of loan agreements or securities issue etc.), and the agreement has to be mandatorily registered with the Business Registers Agency;
  • Pledge: collaterals established in order to secure a receivable that is undergoing restructuring continue to exist, and the law explicitly prescribes that the cadastre and pledge registry have to amend information regarding registered collateral in such instances;
  • Dispute resolution: the Serbian Chamber of Commerce acts as an institutional mediator between debtors and creditors whose mutual interests are subject to restructuring.

Bearing in mind the existing experience of financial restructuring in Serbia, especially regarding security interests, it is certain that the practical application of this law will be followed by certain controversies.

The deadline for the adoption of bylaws has since expired, but only the Chamber of Commerce has adopted the requisite rulebook on institutional mediation. The Minister of Economy and Regional Development still has to prescribe in detail the content of the moratorium agreement.

Redefined insolvency criteria (a permanent inability to pay and over indebtedness, as well as the failure to comply with a reorganization plan that has been adopted, or the participation in a fraudulent and/or illegal plan) and principles regarding the insolvency proceedings;

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.