No capital decrease in case of overcapitalization for limited liability companies

The provisions of the Serbian Company Law regarding capital decrease had been ambiguous, allowing for different interpretations regarding the possibility of capital decrease in overcapitalized limited liability companies. These provisions had triggered many questions and dilemmas, whose answers and solutions are yet to shed light on numerous cases pending before the Administrative Court of Serbia.

The official interpretation of the Agency for Commercial Registers was that shares in a limited liability company, as such, have no nominal value and therefore those companies cannot carry out a capital decrease by reducing the nominal value of their shares. Although the previous Company Law did not provide for such an exception to capital decrease, the Agency upheld its position in numerous cases. The amendments to the Serbian Company Law raised high expectations of solving this issue and enabling overcapitalized limited liability companies to decrease capital.

Indeed, the Amendments to the Companies Act (Official Gazette of the Republic of Serbia, no. 44/2018), applicable as of 1 October 2018, have for the first time explicitly set down the grounds for the capital decrease and the respective procedures for limited liability companies, including the protection of creditors.

Surprisingly, however, the new amendments embraced the firmly conservative position and laid down explicit rules prohibiting capital decrease in overcapitalized limited liability companies by reducing the nominal value of shares.

Author: Katarina Djuric, Attorney-at-Law, TSG Tomic Sindjelic Groza Law Office

TSG Advokati Beograd

Upravni sud Srbije

Agencija za privredne registre Beograd

TSG Tomic Sindjelic Groza Law Office

Katarina Djuric

Company Law

Administrative Court of Serbia

Business Registers Agency

limited liability company

LLC

capital decrease in limited liability companies

shares in a limited liability company

capital in a limited liability company