A founding act is the first and the most important document you need to have if you want to open a company in Serbia, in a form of an LLC.
A bank account, a registration to the Tax Administration, mandatory social insurance and all the other steps come after. A draft of a founding act is the first step when starting a company, i.e. an LLC.
How to start the process of company formation in Serbia
There have to be certain general legal acts when starting a company. One of them is the Founding Act and it represents a contract about the starting of a company.
A limited liability company in Serbia can be single-member or a multi-member, i.e. it could be started by one or more founders. When establishing a company in Serbia, the following documentation should be attached:
- A registration form of founding a legal entity for registration in the taxpayer registry
- A Founding Act of the company, with certified signatures of company members
- Proof of the identity of members of the company
- A decision on appointing a representative, unless determined by a legal act
- A bank confirmation about the payment of a deposit, if the deposit is paid to the LLC until the establishment
- A member’s agreement of the value estimate of the non-cash stake, if the stake enters the company until the establishment
- Proof of paying the registration fee for founding a company and proof of paying for registration and publishing of a Founding Act.
Main definition ofs a founding act
A founding act is a general legal act of a business company which is made during the establishing of a company, and is made by one or more founders of the said company. It regulates the management of a company as well as all the other issues of importance for business.
If an LLC is established by one person, it’s called a single-member company, and if it’s founded by two or more person, it’s called a multi-member company. Therefore, the Founding Act has two forms, which in fact depends on the number of founders.
The founding act is made as:
- A decision of founding a limited liability company – if a company is founded by one person (has one founder)
- A contract on founding a limited liability company – if a company is founded by multiple persons (multiple founders).
It’s important to emphasize that the founding act could exist in a written form or as an electronic document.
Content of the founding act
A founding act of a business company should contain:
- Information on company members,
- Business name and headquarters.
- The total amount of company capital,
- The amount of monetary stake, as well as a description of non-monetary stake for each member,
- Time of payment of monetary stake and entry of non-monetary stake,
- Every member’s share in the total company capital,
- Determining the company’s body and its function,
- Representation of the company,
- Duration and termination of LLC,
- Other items
How to prepare a founding act that is needed for establishing a company
We’ll describe the process of making a founding act in the following pages, but we recommend consulting with a bookkeeping agency for help in preparation.
1. Information about company members: Founders and company members could be individuals and legal entities. For individuals, basic data is included: full name, personal identity number and the address of residence (for every individual). For legal entities, business name, company registration number, tax identification number and company headquarters should be included.
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2. Business name and headquarter: The founding act of a company contains the business name and the headquarters. The following data is mandatory: name, legal form, address and location of the headquarters. Also, it must be written in Cyrillic or Latin. If a company has a short business name, it could also be included in the founding act. A short business name only includes the name and the label of the legal form.
3. Business activity: In accordance with the classification of the company activity, the company is required to submit its desired field of activity in the founding act. It contains four digits – the code and name of the activity.
4. The total amount of company capital: The founding act of a company must include a registered part of total capital, which is: total registered monetary amount and total registered non-monetary amount.
A minimal basic capital for a limited liability company is 100 dinars. The size of a member’s share in a company depends on the highness of his stake in the total capital.
5. Amount of monetary shareholding capital and non-monetary stake: For each founder, the amount, type and value of the stake are stated separately. If the money is given as a stake, the monetary amount is stated. If a non-cash stake is given, then a description, type of stake and its value are stated.
6. Time of payment of monetary stake or contributing a stake to the basic capital: If a stake is not paid, it has to be paid to the company account at least until the defined date. Deadline is the same for the non-stated non-monetary stake. The legal deadline for payment or stake entry is five years.
7. The share of the members: In the founding act, the share of every member is displayed in percentages.
8. Company’s body and their jurisdiction: Every founding act of an LLC, no matter if it’s a single-member or multi-member limited liability company, needs to have management bodies stated. It’s desirable to state their jurisdictions, too.
9. Legal representative: Another piece of information that should be included in the document is the name of the legal representative. It is the entity responsible and representing the company. It’s named as a CEO in the founding act and his name, surname, address and personal identification number are stated.
10. Duration and termination of an LLC: The founding Act should contain information about the period of the founding of a company, whether it’s indefinite or a defined period. Also, the manner in which the company ceases to exist and deletes itself from the Business Registry must also be stated.
11. Other topics: It’s recommended that the founding act contains additional elements for regulating issues important for the establishment of a company as well as for business, issues related to shares transfer, purchase rights and other. Also, the company’s Founding Act can contain total expenses for the establishment of a company, special benefits, business conditions, signing issues and more.
Verification of the founding act
The company's founding act becomes effective only when it’s signed by the founder and certified by the seal of the person authorized to verify the signatures, manuscripts and transcripts (at the notary). All founders have to sign the founding act and thereby give their consent to its contents, and then verify it with the notary.
In the case of an electronic document, a personal signature may replace a qualified electronic signature. The notary should also verify the signature verification form for the legal representative (OP form), which is submitted to the bank for opening a business account.
CHANGES OF THE FOUNDING ACT
The founding act of LLC may be changed by a decision of the general meeting of shareholders, and members must vote on the decision on the change. In other words, the company's founding act can be changed only by voting and if the majority of the voters agree with it.
Another thing is very important, and that is that all changes to the founding act must be registered with the Business Registers Agency. After each change, the clarified text of the founding act is drawn up and then sent to the business register to record the change.
NULLITY OF THE FOUNDING ACT
The founding act may be void in the following cases:
- has no form described by law
- the activity of LLC stated in the founding act is contrary to the compulsory regulations or public order,
- the act does not contain obligatory elements and regulations on the business name of the company, the stakes of members, then the amount of the base capital and the main activity,
- all signatories at the time when the founding act was concluded were legally or commercially incompetent,
- only the appropriate court has the authority to determine the nullity of the founding act, and if it is established, then the company ceases to exist. But, if the reason for nullity is removed, the founding act will be convalidated, and the legal entity continues to exist.