Procedure for Entry of Real Estate Ownership in the Share Capital of the Limited Liability Company

The founders of a limited liability company can make a monetary or non-monetary contribution to the company, and these contributions are expressed in RSD. During the incorporation of a limited liability company, the contribution does not have to be paid or entered, but must only be registered, and in the Memorandum of Association must be specified in what period the shareholder of the company will pay or enter the contribution. The deadline for payment cannot be longer than five years and is counted from the date of registration of the Memorandum of Association.

Shareholders who, by the articles of incorporation, have undertaken the obligation to pay or enter a certain contribution into the company, are accountable to the company for the performance of that obligation and are obliged to compensate the company for damages caused by failure or delay in the performance of that obligation.

If a shareholder fails to fulfill his obligation to contribute to the share capital of the company, the company may request in writing from that shareholder to fulfill this obligation within a subsequent period that cannot be shorter than 30 days from the day of sending request.

As for non-monetary contributions, they can be included in the share capital of the limited liability company in terms of items and rights. The value of the non-monetary contribution is determined by the agreement of all shareholders of the company or through the evaluation of an expert who is authorized by the competent state body to evaluate certain items and rights (authorized court expert, auditor or other authorized expert).

The Memorandum of Association can also provide for a means of security in the form of the obligation to pay a contractual penalty in case of untimely execution, i.e. non-execution of the obligation to enter a non – monetary contribution into the company’s share capital.

A special situation is when the founder’s non – monetary contribution consists of ownership rights to real estate, with the fact that, in addition to property rights, other real estate rights such as servitude or other, can be entered as a contribution, but each of that right must not be time-limited. In that situation, the Memorandum of Association (with the Decision of the Serbian Business Registers Agency on the incorporation of the company) represents the legal basis for the transfer of property rights to real estate, and that document must be in the form of a notarized (solemnized) document.

However, when registering the property rights in the Real Estate Cadastre, complications and problems of an administrative nature may occur. According to the Law on the Procedure for Registration in the Cadastre of Real Estate and Land Registry, a document is a contract, decision or other act, i.e. a document based on which data is entered or data changes are made in the cadastre. The document for registration in the Real Estate Cadastre, according to the Law on State Survey and Cadastre, must, among other things, contain the identity number of the person in whose favour the registration is requested.

The notary public is, in accordance with the law, obliged to submit the notarial document, i.e. the Memorandum of Association, to the Real Estate Cadastre within 24 hours from the moment of drawing up, confirming, or authentication of Memorandum of Association.

Since the Serbian Business Registers Agency has a deadline of 5 working days form the date of submission of the registration application for incorporation together with the Memorandum of Association, to decide whether to register the incorporation of a limited liability company, we encounter inconsistency of regulations that can cause certain complications.

This is due to the fact that at the moment when the notary public forwards the request for the registration of property rights to the Real Estate Cadastre with the Memorandum of Association in the form of a notary solemnized document, the limited liability company has not yet been established and contributions to the company have not been registered in the company’s capital (for which a Decision of the Serbian Business Registers Agency on establishment of the company), and it did not receive a registration number and therefore still does not exist in legal transactions. In order to register a right in the real estate cadastre, a legal entity as a holder should have a business name, registered address and registration number, i.e. registration number in the register or records if it does not have a registration number.

As the limited liability company does not have a registration number when the request for registration with the Real Estate Cadastre is due, this entails a possible legal consequence that is reflected in the impossibility of registering ownership rights to real estate in favour of the company, and there is a possibility that the Real Estate Cadastre rejects the request for registration and collects the relevant fees.

In that case, a new request for the registration of real estate by the company could be submitted, and after the incorporation of the company in the Serbian Business Registers Agency with the attachment of a certified Memorandum of Association and the Decision of the Serbian Business Registers Agency on incorporation of the company. Also, if the Real Estate Cadastre does not make a decision on the request for registration submitted by the public notary by the time of incorporation of the company, the request for registration could possibly be supplemented by attaching the Decision of the Serbian Business Registers Agency on incorporation of the company, and in that case the cadastre could consider that decision as the Memorandum of Association as one document for registration (although it can be rejected due to the lack of legal subjectivity, i.e. the company at the time of submission).

As an alternative solution, it is possible to first incorporate a company and then increase the non-monetary capital by the value of the real estate, which would represent the shareholder`s non-monetary contribution. In that case, the company will have a registration number at the time of submitting the request for registration in the Real Estate Cadastre, but even in that case there is a low probability that the request will be rejected. This is because the notary public must submit a Decision/Amendment to the founding act certified in the form of a notary public confirmation (solemnized) document for registration within 24 hours of certification, and before supplementing the request with the Decision on registration of capital increase of the Serbian Business Registers Agency on registration of capital increase (which would subsequently be obtained and submitted for registration to the Real Estate Cadastre).

For more information about this topic, you may contact Milosevic Law Firm.

Advokatska kancelarija Milošević

Milosevic Law Firm

procedure for entry of real estate ownership

limited liability companies

monetary contribution

non monetary contribution

Law on the Procedure for Registration in the Cadastre of Real Estate and Land Registry

Law on State Survey and Cadastre