What is a holding company?
A holding company is a legal entity, usually established as a joint stock company (JSC) or a limited liability company (LLC), whose primary purpose is not to engage directly in economic activities, but to own and manage shares or stakes in other operating companies (so-called subsidiaries). The holding structure enables centralized strategic management, resource optimization, and risk reduction.
According to the Law on Commercial Companies of the Republic of Serbia (“Official Gazette of RS”, no. 36/2011, 99/2011, 83/2014, 5/2015, 44/2018, 95/2018, 91/2019, and 109/2021), a holding company is defined as a parent company that holds a controlling interest or shares in subsidiaries, thereby exercising a dominant influence over their operations.
Legal framework for establishing a holding company in Serbia
The establishment of a holding company in Serbia follows the same rules as other commercial companies, with specific features related to its purpose and structure. The main steps include:
- Choosing the legal form: A holding company is usually incorporated as an LLC or JSC, depending on business goals and founders’ needs. An LLC is easier to manage, while a JSC provides greater flexibility in attracting investors.
2.Articles of incorporation and statute: The incorporation act must clearly define the holding’s activities, including the management of shares/stakes in subsidiaries. The statute regulates internal organization, management bodies, and operational rules.
3.Minimum capital:
-LLC: Minimum capital of RSD 100, unless a higher amount is specified by the statute.
-JSC: Minimum capital of RSD 3,000,000 for a closed joint stock company.
4.Registration: The holding must be registered with the Business Registers Agency (APR). Required documentation includes articles of incorporation, statute, proof of capital payment, and information on founders.
5.Management: A holding company has management bodies (assembly, board of directors, and/or director) that make strategic decisions and coordinate the activities of subsidiaries.
Advantages of a holding structure
Establishing a holding company provides numerous legal and commercial benefits, including:
Centralized management: Aligns strategies and policies of subsidiaries, increasing operational efficiency.
Tax optimization: Under Serbian corporate income tax law, a holding structure may offer tax benefits, such as exemptions from capital gains or dividend taxes, if the parent company holds at least 10% of shares in subsidiaries for a certain period.
Risk reduction: The assets and activities of subsidiaries are legally separated, protecting the holding from losses in individual segments.
Access to financing: The holding structure facilitates attracting investors and obtaining financing, as consolidated financial statements demonstrate stronger financial stability.
Operational flexibility: The holding can diversify its activities through subsidiaries engaged in different sectors.
Obligations and challenges
Holding companies must operate in compliance with the Law on Commercial Companies and other relevant regulations. Key obligations include:
Consolidated financial statements: If the holding and subsidiaries meet the criteria for large companies, they must submit consolidated reports to the APR.
Conflict of interest: Management must prevent conflicts between the parent company and subsidiaries.
Controls and supervision: Tax authorities and other bodies may review compliance, particularly regarding transfer pricing and tax benefits.
Contact us!
If you are considering establishing a holding company or require support in managing an existing structure, contact us at info@nikoliclegal.rs.
Our law firm offers full legal support in the area of holding companies, including:
–Consulting: Analyzing business goals and proposing the optimal holding structure.
–Establishment: Drafting incorporation documents, registration with the APR, and ensuring compliance with legal requirements.
–Management: Legal assistance with contracts, tax matters, and regulatory compliance.
–Restructuring: Support in mergers, acquisitions, or share transfers within subsidiaries.