Padlock too expensive as well - In Serbia, business set up easier than closing

To open a company in Serbia is an easy task. It is a logical expectation that it is much more difficult to survive and be profitable but many owners find out that closing of the company is a nightmare the moment they enter the closing process.

Today, one can set up a company in Serbia for only RSD 100. This is the amount of minimal principal capital for a limited liability company. It is though essential to pay RSD 6.740 for additional expenses for registration fees at the Agency for Business Registries and after only a couple of days, work can start.

However, in bureaucratic sense, the problem emerges when someone wishes to close a company, entrepreneurs who experienced it told us that. A business can be shut down in four ways: liquidation (or forced liquidation), through bankruptcy, due to a decision or stop of the existence of an owner of foreign entity branch office or due to a status change which results in deletion of some of the participants from the Registry.

As for those who own property of higher value, trustees have interest in collecting their payment so these companies are mostly closed through bankruptcy procedure.

Any trustee can initiate bankruptcy proceedings. The initiation must also be registered at ABR with submission of four documents. The moment the bankruptcy proceedings ends, and this in Serbia lasts for longer than a year, it is possible to delete a company from the registry with required documentation.

Liquidation, governed by Act 524-548 of the Company Law on is "much faster" procedure.

Liquidation of a business can be carried out by a company with enough assets to settle its commitments (either in cash or equipment which can be sold in the liquidation period).

A company shall deliver an announcement to all known trustees on initiation of liquidation process and the add on initiation of liquidation shall be published on ABR internet page with a deadline of 90 days. A trustee can claim payment 30 days after the advertisement expires. Otherwise, these debts shall be precluded.

In one of the Belgrade-based accounting agencies we were told that this is the problem of a long-lasting closing- liquidation of a company. Practically, this means 90 plus 30 days as of the moment of entering the liquidation process till the end.

- Maybe one of the reasons why procedure of reconciliation with the Tax administration takes long is the fact that their book-keeping is two-three months late. When they ask for their debts, it is to be proved than that a business does not have debts and it usually takes long. We are not familiar with the facts why a lawgiver opted for such a long option - most experienced accountants with liquidation processes say.

They say things are different with entrepreneurs. An entrepreneur can shut down a company which make trustees damaged. The state in this case collects payment in personal property of an entrepreneur which is not feasible with businesses because these are limited liability entities.

Wait, wait and again wait

- The new law stipulates that obligatory period to settle debts or pay trustees is 90 days instead pf 60. Therefore, this automatically means that in that period it is necessary to pay for obligatory accounting agency services and potential additional expenses essential for operations of a legal entity (taxes, contributions, space, phone and similar) – an ex owner of a Belgrade-based marketing agency who needed a lot of time and patience to close the company says for our portal.

He explains that in that period, there is no payment of loans of founders or similar, nor invoices are issued. It is only possible to regulate current expenses and receive payments which, according to his experience, can be a burden to company owners.

- Money is trapped and there is nothing one can do with it - a collocutor of eKapija says and advises "colleagues" to be very patient, especially if they did not deal with accounting in details but were oriented towards their work, leaving administration issues to others.

Although he successfully ended the liquidation process in comparison to many who do not succeed, he says pessimistically: "May God help you if you are an entrepreneur in Serbia because entrepreneurship is considered heresy in this country!"

What is to be paid for removal from theregistry?

The Agency for Business Registry says for our portal that compensation for removal action of the entity is:

- Fee of RSD 2.500 for registration of business name change (if bankruptcy procedure is started then along with the name a part “in bankruptcy”must be added and if liquidation is initiated then “in the liquidation process”stands next to the business name and this name remains until a request for deletion is submitted).

- Compensation of RSD 2.500 for a business entity deletion registration (after bankruptcy and liquidation), with a compensation of RSD 700 for registration of an extraordinary financial report which a trustee in bankruptcy submits

Jelena Djelic