Serbia collection profile

The level of transparency in the Republic of Serbia can be considered as adequate, as financial information is both reliable and accessible through official authorities and specialized providers. 

Corporate entities are required to file their annual financial reports from the preceding year with the Commercial Register (in Serbian: Agencija za privredne registre) within three months of the current business year. 

Liability for business debts is determined by legal structures, which can be described as follows:

• Sole trader (in Serbian: Preduzetnik) : Legally capable private individual who conducts an activity to gain profit and who has been registered as such with Commercial Register. It is commonly relied upon for small scale operations because it is based on the personal qualities of the sole trader who personally owns the business assets. As a result, it is fully liable for the business obligations and debts
• General partnership (in Serbian: Ortačko društvo) : A company of two or more partners who have unlimited joint and several liability with all their assets for the company's liabilities. If the partnership agreement or another contract between partners includes a provision on limiting the liability of partners towards third parties, such a provision has no legal effect. 
• Limited partnership (in Serbian: Komanditno društvo) : A company of at least two members, at least one of whom has unlimited joint and several liability for the liabilities of the company (general partner), and at least one of whom has limited liability up to the amount of his unpaid or not entered contribution (limited partner).
• Limited liability company (in Serbian: Društvo sa ograničenom odgovornošću : The most popular business structure in the Republic of Serbia, as it may be set up by one or more shareholders (private individuals and/or legal entities), which are liable for the company’s obligations up to their share capital in the company. The minimum capital requirement for establishing the company is 100 Serbian dinars (approx. EUR 0.85).
• Joint stock company (in Serbian : akcionarsko društvo) : A company whose share capital is divided in stocks held by one or more stockholders (private individuals and/ or legal entities) who are not liable for the company's debts. A joint stock company is held liable for its obligations with all of its assets.
• Branch Office (in Serbian: Ogranak) : A separate organizational unit of a domestic/ foreign company, through which the company may performs its business activities. Branch office does not have the capacity of a legal person, so the company is liable, without limits, for the debts towards third parties resulting from the operations of its branch.
• Representative office of a foreign company (in Serbian: Predstavništvo stranog privrednog društva) : A separate organizational unit which may perform advance and preparatory actions aimed at concluding a legal transaction of that company. Representative office does not have the capacity of a legal entity and a foreign company is liable for the obligations towards third parties resulting from the operation of its representative office.

Republic of Serbia has a judicial system composed of courts of general and special jurisdiction. 

Courts of general jurisdiction are:

1. Basic courts - established for the territory of a town or one or several municipalities. Adjudicate as the first instance court in criminal and civil proceedings prescribed by the law.
2. High courts - established for the territory of one or several Basic courts. High courts adjudicate as a first instance courts in criminal and civil proceedings prescribed by the law. Represent the higher court to Basic courts and decide on the appeals against decisions brought by Basic courts.
3. Appellate courts - established for the territory of several High courts. Appellate courts decide on appeals against the decisions of High courts, decide on conflicts of jurisdiction between lower instance courts under their territorial jurisdiction and adjudicate in other criminal and civil proceedings prescribed by the law.
4. Supreme Court of Cassation – the highest instance court in the Republic of Serbia which is a higher instance court to the Commercial Appellate Court, the High Minor Offences Court, the Administrative Court, and the Appellate Court.

Courts of special jurisdiction are: 

1. Commercial courts - established for the territory of one or several towns or several municipalities. Adjudicate as the first instance courts in disputes between commercial entities, conduct bankruptcy and reorganization proceedings over companies and perform other tasks prescribed by the law.
2. Commercial Appellate Court - established for the territory of the Republic of Serbia which decide on appeals against decisions of Commercial courts.
3. Minor offences courts - adjudicate in the first instance in minor offence cases unless under the competence of an administrative authority, decide on appeals against decisions passed by administrative authorities in minor offences proceedings, and perform other tasks set forth by law.
4. High Minor Offences Court - established for the territory of the Republic of Serbia which decide on appeals against decisions of minor offences courts, on conflicts and transfer of territorial jurisdiction of minor offences courts higher court to the Minor offences court. 
5. Administrative Court - established for the territory of the Republic of Serbia which adjudicate in administrative disputes.

The costs of debt collection are determined in proportion to the value of the case. Higher claim amounts generally lead to higher collection costs, as fees and expenses are calculated on a sliding scale. This ensures that the costs correspond to the financial significance and complexity of each case. 

Should the creditor succeed with a dispute, the most debt collection costs may be recovered from the debtor.

Owners of the property in the Republic of Serbia may seek protection through civil courts in cases such as recovery of property from unlawful possession, protection from unlawful interference without loss of possession, recovery of damages for harm caused by unlawful use or disturbance of peaceful use of goods.

One of the most important mechanisms of ownership protection in the Republic in Serbia is the ownership retention clause. Namely, Serbian laws allow the parties to stipulate, under the sales agreement, that the seller will retain ownership over traded goods until the buyer completely pays the price. This allows the seller to repossess the goods if the buyer fail to pay the price.

The most dominant method for both businesses and individuals is bank transfers. International transfers are processed through SWIFT.

According to the Serbian legislation, all business entities must carry out their financial transactions through bank transactions.

Since Serbian courts have limited time-efficiency, amicable settlements are considered as alternatives to enforcement/ litigation. Before initiating legal action against a debtor, creditors often assess debtors’ assets in order to verify whether they are still active and whether recovery prospects are favourable. 

Creditors usually start with out-of-court collection (sending notices or negotiating repayment). Settlement agreements are also common to avoid court costs and delays.

If no out-of-court agreement is reached, creditors may initiate enforcement proceedings or litigation (depending on facts of the case and available documents).

The most frequently used procedure for debt collection is initiating enforcement proceedings by filing of a motion for enforcement (in Serbian: predlog za izvršenje) to a public enforcement officer, based on invoice, bill of exchange or other credible document prescribed by the law.  Public enforcement officers carry out compulsory collection of debt by seizing funds from debtor’s bank accounts or selling their movable/ immovable property in creditor’s favor.

If the creditor does not have sufficient documentation to initiate enforcement proceedings or should the debtor succeed with its appeal in the enforcement proceedings, the creditor must pursue debt recovery through regular litigation. After obtaining a court judgment, the creditor can initiate a new enforcement based on the judgment, at which point the debtor’s opportunities to appeal or avoid collection are significantly reduced.

In case the debtor is insolvent, creditors may file for bankruptcy. Once bankruptcy proceedings is initiated, creditors must file their claim, where the level of collection will depend on scope of debtor’s property and value of total claims.

The required documents vary depending on the type of debt collection proceedings. 

Typically, they include: original invoices, open balance sheet, proof on delivery of goods, relevant correspondence between the parties, signed order documents, general terms and conditions under which the transaction was concluded. 

According to Serbian law, the most of commercial claims must be sued within three years from the first day following the day the creditor was entitled to request fulfilment of the obligation. 

It is important to notice that Republic of Serbia is a member of the United Nations Convention on Contracts for the International Sale of Goods (CISG) under which four years statutory limitation is introduced

Under Serbian law, creditors may be granted preliminary measures to protect their receivables until a final and enforceable judgment is issued.

The request for interim or preliminary measure should indicate the type of interim or preliminary measure and its duration, as well as the means and the object by which it shall be executed.

As with interim measures securing monetary claims, when regulating interim measures for non-monetary claims, the court is authorised to order any kind of measure which achieves the purpose of securing the non-monetary claim. In that regard, the law provides a general non-exhaustive list of possible measures that could be ordered by the court. However, this list does not set limitations on the court’s authority to order the measure most convenient to secure the claim. The list includes: banning the disposal or encumbrance of the movable assets to which the claim relates, and seizing such assets and entrusting their safekeeping to the applicant or a third party or ordering that they are deposited with the court; banning the disposal or encumbrance of real estate property, with the registration of such a ban with the public register; banning the respondent from taking actions that could cause damage to the applicant and banning the alteration of the assets that are the subject of the claim; banning the respondent’s debtors from handing over any of the assets that are the subject of the claim to the respondent; ordering the Central Registry of Securities to register the prohibition of the respondent (i) on disposing of or encumbering shares, and/or (ii) on using or disposing of its right to vote arising out of shares; ordering the respondent to take actions necessary to preserve the movable assets or real estate property and to prevent their physical change, damage or destruction; or ordering temporary regulation of a disputed relationship in order to prevent violence or infliction of irreparable damage. 

The duration of an interim measure is determined by the court’s decision and it depends upon the circumstances of each particular case. A request for an interim measure in civil proceedings can be filed before or while the case on the substantive matter is pending, or even after the end of the civil proceedings but before the final ruling has been enforced.

Any ruling on the merits in enforcement or litigation may be subject to appeal.

A judgment becomes enforceable as soon as it becomes final (i.e. when regular legal remedies-appeals are no longer available). If the debtor fails to comply with the court decision, the creditor apply for enforcement of the judgement to the public enforcement officer (in Serbian: Javni izvršitelj) who will conduct compulsory collection of receivables determined by the judgement.

The average duration of litigation proceedings in the Republic of Serbia depends on the complexity of the case. First-instance proceedings typically last up to 12 months, with second-instance proceedings requiring an additional 6 to 12 months. 

Average enforcement proceedings take approximately 9 to 12 months.

The costs of debt collection are determined in proportion to the value of the case. Higher claim amounts generally lead to higher collection costs, as fees and expenses are calculated on a sliding scale. This ensures that the costs correspond to the financial significance and complexity of each case. 

Serbia recognizes domestic arbitration as one of the main used ADR methods to settle business disputes. Arbitration is often viewed as being more efficient than ordinary lawsuits because it offers expeditious confidential proceedings together with a binding award on the merits.

Serbian laws allows that the parties to a contract with an international element may, by mutual agreement, choose the law applicable to this contract, and select the court that will have jurisdiction over disputes.

Under certain conditions, the final decision issued by the foreign competent authority (court/ arbitration) may be recognized in Serbia, allowing its enforcement in Serbia against the debtor.

Serbian legislation does not recognize out-of-court insolvency proceedings.

Serbian legislation recognizes possibility of restructuring of debt throughout reorganization proceedings.

Reorganization is designed to help financially distressed companies restructure their debts and operations in order to avoid bankruptcy and preserve the business.

It is applicable to companies facing financial difficulties but still having prospects for recovery.

It can be initiated by the debtor, creditors, or occasionally the court. It requires submission of a reorganization plan detailing how debts will be restructured and operations stabilized.

Serbian legislation recognizes winding-up of solvent companies in a form of mandatory and voluntary liquidation of the company (as opposed to bankruptcy which is conducted over insolvent companies).

The voluntary liquidation may be conducted by company’s shareholders, while the compulsory liquidation can be conducted by competent authorities when the company or its shareholders does not meet statutory duties regarding the company which are stipulated by the law.

According to the Serbian legislation, creditor claims are satisfied according to a statutory hierarchy set out in the law. This rule aims to ensure fair treatment among different types of creditors.
Secured creditors (e.g., those holding mortgages, pledges, or liens) are generally paid first with the proceeds of the secured asset.
Unsecured creditors receive payment after secured claims have been satisfied.
Under bankruptcy proceedings, claims are prioritized as follows:

1. Costs of insolvency proceedings
2. Employees’ claims,
3. Unsettled public revenues, 
4. Other creditors.

Legal transactions and other actions entered into or taken before the opening of the bankruptcy proceedings that are interfering with equal settlement of bankruptcy creditors or damaging the creditors, as well as transactions and actions putting some creditors in a more favourable position over the others may be contested by the bankruptcy administrator. 

Insolvency proceedings can last over ten years before final closure of the case, depending on its complexity. If the debtor has available funds, the bankruptcy administrator may authorize partial or full repayment of creditors through course of proceedings i.e. before final closing of the case.