CEU eTD Collection Hungary 9. Nadorutca 1051 Budapest, University Central European PROFESSOR: Peter Behrens, Dr. habil. COURSE:Corporations LL.M. SHORTTHESIS - Comparative Analysis of Serbia, Germany, United Kingdom - CONCEPT OF SINGLE MEMBER COMPANIESIN CONCEPT OFSINGLEMEMBER THE LIGHT OF EU HARMONIZATION THE LIGHTOFEU by Beretka Katinka © Central © Central European University March 29,2010 CEU eTD Collection CHAPTER CHAPTER CHAPTER CHAPTER CHAPTER INTRODUCTION...... 1 ABSTRACT...... 1.2 Reasons for reform...... 6 1.1 The way from the Proposal to the ...... 5 enactment 2.4 Conclusion...... 19 ...... 15 2.3 United Kingdom 2.2 Germany...... 12 ...... 9 2.1 Serbia 3.5 Conclusion...... 29 ...... 28 3.4 United Kingdom 3.3 Germany...... 24 ...... 23 3.2 Serbia 3.1 General overview...... 20 5.1. General overview...... 39 ...... 36 4.4 United Kingdom 4.3 Germany...... 34 ...... 32 4.2 Serbia 4.1 General overview...... 31 2.2.2 Stock Corporation – Aktiengesellschaft (AG)...... 14 ...... 12 (GmbH) 2.2.1 3.3.2 AG...... 27 3.3.1 GmbH...... 25 3.1.2 Parent/subsidiary ...... 21 relationship in general 4.3.3 ...... 35 Pre-incorporation 4.3.2 AG...... 35 4.3.1 GmbH...... 34 Private Limited Liability Company mit– Gesellschaftbeschränkter Haftung 2 3 4 5 1 - – – – – GENERAL EBRHP...... 20 MEMBERSHIP PUBLICITY...... 31 GENERAL THE TWELFTH OVERVIEW MEETING...... 39 TABLE COMPANY OF OF RELEVANT LAW CONTENTS i IETV ...... 5 DIRECTIVE AS...... 9 LAWS III CEU eTD Collection ILORPY...... 67 BIBLIOGRAPHY APPENDIX...... 62 CONCLUSION...... 58 CHAPTER CHAPTER CHAPTER 8.5 Conclusion...... 57 ...... 56 8.4 United Kingdom 8.3. Germany...... 55 ...... 54 8.2 Serbia 8.1 General overview...... 54 7.1 General overview...... 52 ...... 50 6.4 United Kingdom 6.3 Germany...... 47 ...... 46 6.2 Serbia 6.1 General overview...... 45 . ntdKndm...... 43 5.4 United Kingdom 5.3 Germany...... 41 ...... 40 5.2 Serbia 6.3.2 AG...... 49 6.3.1 GmbH...... 47 5.3.2 AG...... 42 5.3.1 GmbH...... 41 8 7 – – – 6 ENTERPRENEUR PUBLIC CONTRACTS LIMITED BETWEEN WITH LIABILITY LIMITED SOLE ii OPNE ...... 52 COMPANIES MEMBER LIABILITY...... 54 AND OPN ...... 45 COMPANY CEU eTD Collection concerning inconsequence andincompleteness inconsequence concerning rulings.of relevant the especially soon very its acts change to for Serbia is it necessary upthat shows It than Serbia. tradition Germanyon that) and the United Kingdomhave developed more complex legislation havenotlegal along UKdid the (moreover thepaper’stopic concerning starting point Directive’s literally the all hadandprovisions even though jurisdictions three thesame the accepted has countries examined the of none that demonstrates paper The companies. one-man of context meeting, stockcorporations publicity requirements, and specific form of entrepreneurships in general member/shareholder, single of personality to respect lawswith mentioned countries’ above the evaluating step by step articles Directive’s the follows comparison The analyzedmember one-man corporations. with tworespectto totheother closer states EU Directive in order to find Company law with Law national Twelfth the theircompany harmonized have countries out what reform proposalsSerbia, Germany and the United Kingdom. The aimof is research tocomparethe how these are necessary (if jurisdictions, in three any) companies single-member of concept on focuses thesis forThe Serbia to be ABSTRACT iii CEU eTD Collection limited limited companies, 2 1989, O.J.(L 395) 1 by one shareholder from the very beginning of from ongoingby its beginning orthe company existence shareholder one of can very the can beside of features basic main the characteristics It betypes. either corporation founded corporations or/andlimited but public of subtype private liability havingcompanies special by manyBut, it mereis factthat thinkso an not the people individual atypical form of arenecessarily faced legislators because of with of nature unusual company. single-member different the discrepancies several solving guidelines give is to Directive Law Company management self-employment and promote in a harmonized legal framework". incorporation improving thus the protection parties,facilitatethird of to succession,improve to number enterprises of small improve of the greatest access was"to measures common such introducing for reason defined the Commission Asthe of newa directive. enactment companies in made ofthe Commission 1988the forCommunity aproposal European membernon-harmonized states’ in practice regulation of singlethe memberlimited liability In order to try to find its articles orderof the serves asthebasisfor the order of paper’schapters. the the best solution to the structure Following Directive’s Serbia. member, the non-EU with incomparison regulations a currently unresolvedidentify similaritiesKingdom, and single-member differences in to company the the problems related andtheUnited are member Germany example, taken as states Two particular provisions. to the companies Directive 89/667/EEC of 21 December1989on single-member limited-liability private Law Company Council Twelfth the analyzeof the application ofthepaperisto The purpose Twelfth Council Company Law Directive onsingle-member private limited-liability companies 89/667/EEC, Comission Proposal for a Twelfth Council Directive on Company law concerning single-member private 1 in three legal systems; especially the states’ discretional power concerning power discretional states’ the especially systems; legal inthree at 17, COM (1988), 101 final (May 18, 1988). INTRODUCTION 1 2 The Twelfth CEU eTD Collection (COMPANY LAW: LAW onCORPORATIONS inSERBIA and EU) 59-60 (3rd ed. 2007) 3 businessmenanymore. limitin Because to self-riskprefer doing atthe businessalone and Today strong division of obligations.legal personality of the company the by frauds singlememberassets to of company’sthe remaining the only the entity and its components and of abuses defenses against liability.his question limit secondopportunity the raises The is not contested sole shareholder’s unlimited liabilitybecause ofprotection of company’sthe to creditors or accept the to either possibilities weretwo company. There of forthe the duties member sole All membersingle problems of recognition companiesconcernedliability of seizure of of the in hands.concentrated shareholder’s one a company not automatically when dissolve during doingbusiness shares had tobe demanded that of certainty creditors regimes in side,On capitalist other the the only founder. be wanted (andwas)the to state wherethe societies nationalized of existence the allowing in was modern approach this of justification In closed economies market. of requirements the As in other fields of law development of this part of company law was affected by can only be the person one shareholder. This division should be considerednotpartnerships.companies and single-member wearetalkingtalking about enterprises about to justify thatit people, replacewas unimaginable them by only to when person. However, weare one even without two of minimum a a presence contract assumed necessarily which agreement an of conclusion required in ordinary sense company only by one person was strongly prohibited. Under conditions when formation illustrated; startingthe is point the duringperiod the legal history when formation of a be the evolution of In ordertounderstandwhy should hasemerged concept this Directive the tooneperson. aggregated are shares all that results the with occasions different to due single-member become See MIRKO VASILJEVI û , KOMPANIJSKO PRAVO: PRAVO PRIVREDNIH DRUŠTAVA SRBIJE i EU i KOMPANIJSKO PRAVO:PRAVOPRIVREDNIH DRUŠTAVA SRBIJE , 3 2 CEU eTD Collection 4 Usually personal assets hide motives. identity and real entity his a‘veil’ to company the as corporate the using are mixed with the assets disregarding asan entrepreneur soleshareholderthe acts means that doctrine. This ‘alter ego’ of the company or in this machinations socalled underthe for different company the thelegalpersonality abuse of way he tries to high hostility traditional single-memberthe is to degree of companies) opportunity the toward of the main (and reason feature Thecommon particularities. have their cases both However, (subsidiaries). subsidiary independent otherwise, the, over control obtain easily can shareholder only the being company bylaws the parent preparing or acts certain approving of board directors, of process the equivalentof regarding the subsidiary as uncontrolled." not the is ‘independent’ corporation an a subsidiary "Butrecognizinginas the centre. company moreparent with the create subsidiaries to prefer associations of Larger companies’. Another practical applicability subtype corporation of this isfoundfield inthe of ‘group the solethe incapacity of shareholder. single-member during its existence, other hardships may occur, as double taxation or financial If companybecomes care the incorporation procedure. formalistic andon amounts) totake the including thefounding capital aswe (what know varies between very high and very low costs pay registration the to has alone individual the meansit that side other the Yes, on differentlegal –suretyship, acts assumptionguaranty of – or debt over theobligations.to take take can they though even shareholders, the involving without assets its of all with liable is It company. the on duties the over’ who‘throw traders sole quasi - refers to concept The first more andmore popular. years companythe overthe last andits havebecome single-member companies shareholders) of legal personality of separation (especially a corporation of enjoy preferences to same time Thompson & Thompson, Thompson The Parent / Subsidiary Relationship 3 , http://www.t-tlaw.com/cor-01.htm 4 Having voting rights in the election in the rights voting Having CEU eTD Collection needs reform in light of the investigated regimes and if so, how. law Serbian the whether least not but last and fields in same and way same in the Directive in defined andDirective,use their whetherGermany, UK the powers Serbia discretionary from the profited have really enterprises medium seized and small- answer whether is to thesis the and defects way these the of of recovery market Serbian the on business expand the In order to figure out obstacles. the defects with whatestablishmentandmanaging of companiesthe in shouldSerbia the be encouragingfactors and not investors need of legal conditions accession) the EU toincrease Serbia’s after to is required number be faced every time (whose investors foreign attract liability. To their concerning andasole shareholder trader they betweenasole differences the ispure non-understanding about, basicproblem the deeperthan is it what know not do still businessmen many Although question. every covers perfectly company lawin accordance with but the itmeanEU standards); it unfortunately doesn’t that harmonized Thiswith concept the is Directive,not in future. its because (near) of the potential EU accession carefully a new one in Serbia tooAlthough having status ‘thirdstate’ Serbianthe legislation is being worth very dealt with and (asthe nationalone of as entity.one act outsiders regulationthe requirements of this indistinguishablecorporationsforparent/subsidiary being the wheretherelationship two topic has the on applicable beenis also This activity. his of toincompatibility or limitations develop personal avoid the national 4 CEU eTD Collection 7 Company Law Directive 86., explanatory memorandum 4[hereinafterWooldridge] quoted by Vanessa Edwards, Directive’s legal basis, did not (and could not) serve the creditors’ best interest. The interest. best serve creditors’ not) the could not(and basis, legal did Directive’s interpretation" bold somewhat a . basedupon . draft Wooldridge "the According to member states. by respected the itSavinghas that nine articlesonly thebasic weredebates there standardsabout be needto isis longit case. buta one Directive the not the list wecanassumethat in memberthe securing limiting states or/and use case the lightit.sanctioning, of of In of this of spreadsthediscretion thegroupsof companies, its concerning existence, formation, during in of allows case of companies everyone.single-member the concept It to acceptable makesolution auniform tryingto theproblems summarizes Directive the The recital of companies”. single-member tradition of little in with a new[of countries application category] the encourage “will that legislation wide such create EC same to andatthe attitude dominated toward one-man companieswas a intheCommunity.big toavoid It task this we can not.But winding or general upasanecessary concludeconsequence intolerance that whether into transformation of company single-member one should during its existence have being againstestablishmentof they one-man companies were even in divided question member infull;still by others the allowed formation notnatural but bylegal But,not persons. sole with of companies away concept the threw ECcountries the of Some Directive. the adaptation of the ourtopic before had concerning national very rules Member states different 1.1 The wayfrom the Proposal tothe enactment 6 2102/91 of 15 Feb. 1992, at 55, O.J. (C 38) (1992) 5 Treaty establishing the European Economic Community, March 25, 1957, 298 U.N.T.S. 26. Frank Wooldridge, Scope of Community legislation on single- memberprivate limited companies, EUR. PARL. QUEST. No: CHAPTER 5 The Draft Twelfth Directive on Single-Member Companies , 19(7) Company Lawyer211, 212 (1998) 1 – THE 6 of the article 54(3)(g) of the EC Treaty TWELFTH 5 COMPANY available at available LAW 2010 WL [hereinafter Edwards] (1989) European Business Law DIRECTIVE The EU Twelfth 7 that, being the being that, CEU eTD Collection 8 unfortunately even today her standunchallenged. words but objectives harmonization of in light lawregulations company national existing to and related more lessprovisions beneficial summarizedits Vanessa Edwards Ten years ago debates. for basis the areas servingas certain are there application passedhave years three only because answer in adequate give to possibility no the was there Although Directive’sCommission how it evaluated the overall success of the Community's objectives in this area.existence from askedthe was question force awritten cameinto Directive the Few yearsafter we can conclude1.2 Reasons forreform that even andtraders traditional simplifying companies and not complicatingits functioning. after sole between form twentybe acompromised should companies single-member that explanation years of acts byimposinglotbureaucratic of a steps.These provisions avoided by were the its limitmore being ableto such instrument legal a stronger of creation the required The Proposal the investors false in every possible way. abuseplay legal to it form and same to this opportunities extended -unfortunately- the time individual entrepreneurs tolimitliabilitytheir legal under personality a company of at the encourage was to harmonization the Although aim the of stake. with creditors’ the conflict can easily position that company-members’ protect the safeguards areto recommended Supra note 5, at 55 5, note to be much areunlikely betweenthe lawsof member states divergences the erodedcompany from forming a single-member company, the by thecompanies individualwhich may an form prohibitand to a directive. single-member of number the torestrict states member and limitedpermits with companies liability, orsoletraders However,single-member public or private permits directive the since itbeen achieved in any by real sense directivethe isalso doubtful: will atWhether the overriding harmonization aim of least can be said have to 6 8 CEU eTD Collection 11 10 9 development in market" internal development the framework for business best the of status entrepreneurs the company,represents which to by approved Councilon the "Promoting individual 3 November 1986. the accessof SMEs, for Programme Action Community with the started was partof alargerproject It in countries whatknow those did not conceptof the single-member companies. especially Community, the throughout competitiveness their with together (SME) enterprises When the Directive was enacted the aim was to promote small- and medium-seized and assembling a well-trained, experienced and motivated labour force." labour motivated and experienced a well-trained, assembling and labourmanufacturing relations good systems, use the unnecessary sophisticated of expense, and downtime waste, avoid to management "careful by achievable efficiency their and firms) theirflexibility changes decide in peoplehave responding large quickly to to than (fewer of because business associations formsof They preferable are very SMEs. the to Directive d’tre all has theDirective is questionthese provisions whether without member. another It resolutions,in andduty entry the becomesof whenan shareregister ongoing company single- eliminating the obligations of in of andrecord contracts the writing generalmeeting- level minimal should bereducedon Formal thequestion. regulate enough requirements to are states member laws of national is included issue no cross-border where issaidthat It market. of the developments react on current the into order for reformation areproposals there existbut today not do basic problems someof harmonization the Due to necessity legallink adequate background without larger to small the to corporation one. difficulties in marketing,selling, researchorless credibility can be avoided by creation of Edwards, CLIFF PRATTEN, THE COMPETITIVENESS OF SMALL FIRMS68 (1991) COMPETITIVENESS THE CLIFFPRATTEN, Commission Proposal Commission because in light of these it is seemed not to be necessary If reformers the is it inlight of not because to be necessary these anymore. seemed liability trading for an individual. for trading liability ensure that allmemberprovide some form states for limited-of supra note6,at 212 , supra note 2, at 3 10 provides good explanation for the connection of the 9 7 11 Handicaps as raison CEU eTD Collection 12 itstime original because preserve otherwise only the objectives it. repeal remains to option same the at and extent maximum to procedures internal the simplify to order in deeply very would loose approximately half itsof content. The has‘EC legislator’ reviewto its scope long rule nine-article justunder a simplification aegis partthe of important every excluded Regulation European Commission, , http://www.berr.gov.uk/files/file41189.doc Consultation on the Simplification of EU Company Law and Accounting and Audit 8 12 CEU eTD Collection corporate legislature of country. of the legislature corporate Companies directivebe to imposed.main Thefor corporations legalsource is Act on Business the Directive.limited liability companies under the same legalregime asin Twelfth the LawCompany It does not and public both private one-man of conception the has accepted legislation The Serbian mention any2.1 Serbia limitations by mainanalyzed according step totheir step elements. or sanctionssingle-member companies’ treatmentin general in the relevant laws these definitionswhat are aretimefor basis one-man togetan companies’ determination. In order elementary about picture allowed same atthe being basic company-rules regimes’ mentioned above the presents This chapter under the tobebigwhat initslaw case with Directive in to changethe seemed the step. accordance leastbutnot was required such companies UnitedLastthe didthat and it Kingdom notpermit adoption. Directive’s the before legislation friendly company one-man had that Denmark) Germany was one of the rare member states (together with Belgium, Netherlands, France andmember companies had long in tradition totallystate-ownedthe Serbian economy. innovativeany inAswithout post-communistsingle- thesignificant other regulations. states but Law Directive Company the Twelfth implemented has as country Serbia a non-EU legal from comparative perspective. interesting background legal-political regime makes with studiously more problem the different legal system justifiesalready a deeper analysis of question;this butadding continental another a continental and Anglo-Saxon an of companies member single on rules between Comparison 13 Zakon o privrednim društvima [Act onBusiness Companies] (Serbian OfficialGazette, No 125/2004 ) CHAPTER 13 , and as such it has special impact on the application of other laws concerning of impact application , andthe has special on assuchitother 2 - GENERAL OVERVIEW 9 OF RELEVANT LAWS CEU eTD Collection the establishing act is establishingthe separately act regulated. form the of is that it topic strange the Lawregarding of the character trifling the Considering founder. individual the legal actof as the unilateral samemoreno but atthe wills time) is (there is onestablishment acontract what not act individual legal of has character decision The companies. one-man the to one second the shareholders, more with companies the to first refers one The and decision. forms: agreement statutory have two of Articles association isany more). an act obligatory not company-statute the where case of public companies legal is serves basis inact that (it especially foras important company’s very the functioning of importance general have legal of company the besideestablishment Articlesassociation of corporate veil’). corporate abuse legalthe personality hisof company limiting hisliability in artificial way (‘using the easily can shareholder only the thispossibility; choose rather acompany of establishment the So,manypersonal assets). financetimes individualentrepreneurs whohaveenoughcapital to liable for the duties concerning thebusiness he is engaged in with all hisof assets(including is he sametime atthe market, onthe subjects economic the of one he isalso because activity) business, of place firm, (e.g. corporations with haslatter characteristics some common the From outside single-member company is very similar toanindividual entrepreneur. Although 14 of association "Corporation legalperson is liability too. companies, forms Beingof corporations. it general covers single-member private limited public and legal and definition on article in the reflected are corporations of elements major five The Id . Article 2(1) a) b) establishment byfounding act legal personality legal for for the purpose ofconductingactivities what is established by legalestablished what and/ornatural is persons (article 7(1)) 10 with theaimofgaining profit by articles by ." 14 CEU eTD Collection simultaneous incorporation andfounders third persons, too if (so,there even is only one founder, another‘outsider’ isneeded); 15 Corporations befounded underthis Lawareto gain to profit areneeded. shareholders thesuccessiveof shares; for public companies establishment minimumtwofounding closed is theone-man specificity only The person. a natural as conditions same the under company standing.legal in the equality their emphasize ‘or/and’ formulation Itthe case every In founders). means there is arethe natural persons legal and acompany (so together even theycanestablish or persons, no restriction; possibility legalby person.Founders canbeeitherestablishment ornatural of only one a company and liability particular ontheprivate provisions we companies publiclimited can consider can be the soleAlthough corporations generaldefinition the foundersof aboutthe at the talks the inplural, founder of another wouldbe the only shareholder butVoivodina would have foundingthe andmanaging rights. state for The them. transformation model of acceptable mostbe the seems to what future state capital of 100% will befounded as single member liability limited companies in the with -on territory -nowprofessional agencies the of agricultural Voivodina social companies The pristine agencies. professional agricultural the changes of status the about Voivodina of Province Autonomous the of Council Executive the of proposal the mentioning is worth It interest). public in (especially fields in special engaged are if they be respected to requirements statutory division among them concerning the type of but activity the therearefurther no is There boundaries). legal (in commercial be should activity the way in some that means they ifdeal with production, itrefers to provision sale or/and of services on market.the Soit In case of d) c) public company public public canbe what founded company onlysimultaneously offeringwithout the activity andaimof establishment togain profit founders successive establishment successive includes only founders. 15 there is initial public offering of shares what are to be subscribed by the 11 , no matter what kind of kind whatnomatter activity of , CEU eTD Collection (Cambridge University Press 2009) 17 September1965 (BGBl. I S. 1089), last amended by ofstatute July31. 2009 (BGBl.I S. 2509) § 1 16 purpose "… says section first the GmbH Although Limited Acton the Liability Companies formation by artificial as well as by natural persons was allowed only from 1980. situation an when ongoing companybecame singlemember hadlong been before,permitted the Although unknown. not was (GmbH) company liability limited one-man of concept legislation for the German LawDirective Twelfth of Company the Even before enactment (GmbH) 2.2.1 2.2 Germany companies in of process the privatization using themodern forms of companies. It is an interesting example how Serbia solved the problem of reorganization of the social appropriate for founder. the appropriate business purpose). In case ofnon-profitmakingactivity form other than bemightGmbH and‘merchant’ to relevantprovisions subject of the Commercial Code (itshows its primarily is be undersection to considered 13.) However, GmbHcompany’ (being‘commercial purpose." acommercial pursue not does it if even liability, limited having undertaking a commercial has significant advantages: "[a] GmbH enjoys a separate legal personality and is deemed beto primary makeengagesintent in e.g. charitableto without activities aone-man profit, GmbH accordance with this provision what is quite differentits from the Serbian object.Act. So, if somebody In ItGermany there is no ‘ultrameans vires’ doctrine; the GmbH can be formed without limitationsthat on it can deal with either profit- or non-profit-making activities in MADS ANDENAS & FRANK WOOLDRIDGR, EUROPEAN COMPARATIVE COMPANY LAW116 & COMPARATIVE MADSANDENAS EUROPEAN FRANK WOOLDRIDGR, Gesetz betreffend die Gesellschaften mit beschränkterHaftung [Act onLimited Liability Companies] of 6. Private LimitedLiability Company–Gesellschaft mitbeschränkter Haftung a) purpose of establishment byoneormore persons 17 companies with limitedliabilitymaybe anylawful formed for ". 12 16 does not contain an overall definition on CEU eTD Collection 19 (2d ed. 2009) 18 As the recital of the Twelfth Company LawEnglish Directive ‘articles of association’ can coversays: both situations on translation successfully.of in case However, agreement). an not (and decision a sign should shareholder incorporation: avoid to possible terminological misunderstandings in future only the the of articles of forms two Law the into entering by well reacted legislators Serbian the question are no two or more shareholders who can express their will agreeto in a contract form. In this company agreement me like term exact The German now. translation; of problem faced with the he/she is analysis acomparative writes somebody When Although this element isincluded into anothersection itis worth mentioning in this part. c) articles of association (section 2,3) tothe iscorresponding total share capital issued)" case, inby share an amount only one (in shareholder that only subscribed to one may be total share capital "[t]he Inthis case one. even to shareholders of number eventual the The general term ‘persons’ includes both natural and legal persons with opportunity limitto b) founders the situation amount. outstanding for the provide security to wasrequired he/she when within and disposal of the company; the at contribution full place and the kind minimum capital) the three yearsfifty atleast of percent (or ofthecashcontribution pay hadone-quarter founder to The sole upon registration contributions. of cash payment secure to special rules made cases AG and GmbH of one-man and inboth hasimproved theoccasion Germany of the companyhaving singlemembers, particularly toensure thatthesubscribed capitalispaid…. all sharesdownrules to covertherisks thatsingle-member maycompanies presentas a consequence of were Act on Limited Liability Company, KLAUS J. MÜLLER, THE GMBH – A GUIDE TO THE GERMAN LIMITED LIABILITY COMPANY 16 which term be whichterm applicablecannot single-member incaseof GmbH; there supra note 16,§7 (2),sentence 3.[It is abolished by ‘Momig’] 13 18 . Gesellschaftsvertrag … Member States arefree States Member 19 The other casecovered Theother meansliterally tolay CEU eTD Collection 31, 2009, BGBl. I S. 2509 § 3 24 expressly Act Corporations commercial defines the nature acts.TheStock separate into two isdivided companies on legislation The German 2.2.2 Stock Corporation –Aktiengesellschaft (AG) portion of sharethe another groupprior to tosuch status change. is solution limitedPossible a totransfer bethe person would andthe general partner. both 23 GERMANY 23-15 (Bernd Rüster ed. 1983) 22 21 and conversion after entity the of shareholders are conversion the to prior entity converting the of shareholders the is tobe converted into a GmbH& Co. KG. Because "a conversion is only permissible if all of canis be This structure ownedonlyby company andthe person iftheGmbH problematic one to the partnership) holds "usually a share inthe GmbH inportion to hisholding intheKG." limitation)without limitedliable and each partner (being amount his uptothe of contribution GmbH & Co. KG is a limited Conversion from aGmbH toa GmbH & partnershipCo. KG where not(if heelect does to pay in GmbHin full anyway)." capital the is the capital share the of onlyamount outstanding the for security generalfurnish shareholder such that required partner (liable Today "[i]n the event aboveinthe mentioned given provision the dissolution resulted company.the time of that the company is formed by a single shareholder, it is not longer 20 third person). to shares the transfer or payment for the give guarantee contributions infull unification threewithin months from the either shareholdingof the (or companythe itself). thepay onlyremaininghad Then shareholder to cash outstanding the and one between shareholder shareswereshared the member (or inhandsof one concentrated Aktiengesetz[Stock CorporationAct] of September6. 1965, BGBl.I S. 1089, last amended by ofStatute July MÜLLER, Christian TylerCampbell, MÜLLER, Id. §19 (4) supra supra note 18, at 11 note 18, at 159 at 18, note vice versa Chapter 23: The Limited Liability Company, " 23 , itthat can result 14 in case of one-man GmbH the same 21 24 of this type of company what can in BUSINESS TRANSACTIONS in BUSINESS TRANSACTIONS 20 Non-compliance with 22 CEU eTD Collection COMPANY LAWYER, 27-30(2001) 27 26 25 isitcompletely erabut not Directive’s the before werestrange companies single-member that In mentioned Kingdom beginningofthis the I chapter United one as jurisdictionsthe of to 2.3 UnitedKingdom rules. strict mandatory Directive’s andoutstripping the enterprises small promoting Community in the tendencies legislation current the well very reflects It of shouldGmbH managingdirectors belimited. power orthe functioning company’s during the ensure interest respectof public to increased usethisbusinessmenbut newtype to minimumthe of beorganization) capital would should it board retained supervisory inflexibility be (even scaring can though cause AG of function control E.g. characteristics. positive their combining AG and GmbH between with basic features of an AG. This, so called ‘small’ AG would serve as an intermediate form companies medium seized and small- for form appropriate create to endeavors still are there Although the German implementationnot expected for contributions in kind). is (it contribution cash unpaid of payment the for guarantee of to is required theshareholder single Directive has covered The amendments. the GmbHbefore at were as they same arethe requirements The security stock corporations, formedfrom assingle-member very the beginning of its existence. too, companyits subsequent formation to haslong beenrecognized; and after 1994it be can As in case of GmbH in Germany"One ormorepersons one-manassociation. AG what was of establish articles the to responsible are also They more persons. by oneor befounded established from an ongoing company’s articlesofassociations Frank Wooldridge Id. Id . § 2 § 36(2) , Asimplified legal regime for small and medium-sized German public companies who subscribetosharesagainstcontributions shall establishthe available at (the "articles")." 26 2010 WL 15 25 27 , 22(1) CEU eTD Collection unlimited ones. is company privatewherethe must shareholders pay Unlimited always the division andon private public thereis companies, classification a further limitedon and small explained by In business UK beside factthat the are usually established asprivate). limited formsprivate weresuitable tobe companies can organized (it assingle-member be required" was previously concerning private companies limited by shares or by guarantee companies or byshares limited concerning private Private Limited Regulations Private Companies) Member by arelatively (Single The Companies of simpleadoption procedure approach: constituted strong incentive to pass the Directive. UK has chosen for the implementation within marketEC creation internal first of the sight at unnecessary was Although change the members. two with functions furthers it oneshareholder have only to seems practically company the beneficial owner and only he, the trustee is identified in the register of shareholders. Although for the The latter wouldshares ontrust of hold a nomineeshareholder. appointment the publicDisclosure his/her due be obligation of by personal data to record avoidedcan save privacy/anonymity. his/her evenwould like to when today; shareholder the especially 30 the company in the end of its existence stays without assets to pay the debts. without share capital orshareholders. The guarantors have to pay ‘post-investments’ from their personal assets if unpaid contributions; but ‘ 29 28 because of being familiar companies one-man a new concerning Directive enter neednoside of to UK on There was with the regulation. company single-member regime the play without out assolution to served life. It every inday companies the activities any his nameasamemberwithout lentonly who shareholder ‘non-effective’ another Inpracticetrue. many small businesses weremanagedbyone person, eventhough was there JANET M. DINE, EUROPEAN PRACTICE LIBRARY – EC COMPANY LAW 7-5 (1992) The Companies (Single MemberPrivate Limited Companies) Regulations, 1992 No. 1699 ‘Limited by shares’ ‘Limited means the same as in the continental law when the shareholders are liable to the extent of extent the to liable are shareholders the when law continental inthe as same the means limited by guarantee’ 30 . As we see before. Asin enactment wesee newAct 2006 the Companies only concept of nominee shareholders ofnominee concept is specific used primarily for non-profit organizations even organizations non-profit for primarily used specific is 28 itchanged theCompanies 1985 Act inonly parts 16 29 "to read ‘one’ where ‘two’ . This concept works . Thisconcept CEU eTD Collection Section Section 31). with (in accordance objects’ the restrict specifically articles company’s a anymore ‘unless section-formulation is the traditional doctrine of ultra vires. Today itis not mandatory such of theexplanation Probably can be). be what of instead cannot (what way negative in determined is activity the that solution interesting is an It be unlawful. cannot what The paragraph on The paragraph company. one-man ostensible an from advantage gain to use a nomineeshareholder needto no anymoreis there legislation. Now 32 31 beformed either by isit allowed to Act) separately the within - regulated being-otherwise andpublic companies on part general Inthe too. companies, Companies Act2006has of application the extended onpublicsingle-member provisions a) founders previously. were examined that elements those tocover aretaken more sections here companies Because the provisions). transitional with the force (in into accordance came theRegulation after Companies Actliable for paymentof the of limited debts the a private became company freefrom their duty 2006 does covered neither this not norpubliclimitedtype liability individuals Those companies. whowere provideThe Regulation assets). corporate enough no are (if there assets tothe contribute to liability an overall their on limit no is there because liquidation of case in company the of debts definitionoutstanding on all types of Companies Act, 2006, c.46, § 7 Id . § 8 b) purpose of establishment method of forming company forming method of one or more persons. more or one company formation 31 17 The same formulation is used as in the German in the as used is formulation same The 32 includes also the purpose of includespurpose establishment alsothe (what is common for both private both for iscommon (what CEU eTD Collection 34 33 regard to any of the provisions of the articles relating without decisions may ‘thetake director director hasonly one when company the guarantee to directors’ decision-making’ companiesand byshares for limited both private Models ‘constitution’. In regular written of lack of case in company the of management internal govern to necessary but enactment course with possible modifications of relevant sections). The Model is neither rule of law nor otherwise regulating corporations with two or more persons - to one-man companies (of supplementaryThis 38. section the in with accordance interpreted be can Model articles whether the Actthe provisionin answered is It not companies. of one-man incase applies it how question It isaninteresting spreadsstatutes in UK isthere large flexibility in prescribing the company rules by its members. the applicationcontrary to the continentalof In articles. such musthave rules aUKcompany because isnecessary application Their default system whereof lawthe possibility extended in its scope. and otherof internal regulationsenactments and by limited andtheModel for publicguarantee been private companies; companies has is limited by – years models companies limited other havebeen tothisTwo private onefor both later added Model ofAssociation Articles companies for(section 20) but only private byshares. limited If thearticles2006providedabout agreement written wasno the Act Companies there down, where law English asbasisfortranslation. served the acts founding the of expressions different the concerning terminology-problems the see could We c) articles of association nature of of one-man nature companies. attention on special take not did the drafter that evince for publiccompanies Model articles member also acts as managing director (even though itis notnecessary). On the other side the only the cases in usually because those shareholder isasingle there when situation cover The Companies (Model Articles) Regulations 2008 No.3229 Id. § 7(1) schedule 1, § 7(1), schedule 2 33 "If (a)thecompanyhas fewer thantwo directors […] thentwo 18 34 . It can CEU eTD Collection 35 with member. one outsider at first sight wouldmember assume companies. that in Serbia statute Althougheventhere in the main definition on corporationsis does nonot pay any attentionany iton single- legislationdoes which Serbia concerns especially very carefully. That so enterprises single-member regulate later on enterprises should inthey that without but special article; similar has Germany nor Serbia, Neither law. company parts on types of corporations general wider or Act’s Companies in companies context of application particular the one-man the UK’s solution in section 38 is very inuseful preventto order eventual misunderstandings on The companies. theconceptof single-member on their becauseof engagement specificities foundingof actarenotsosignificant questionsit is but understand important to the light analysis of denomination In of exactly our activity or term the character ‘person’ covers. of interpretation are general rules not same.Sometimes the are formulations the even though states examined the to be called to help relevant definitions from ofsingle-memberThey perspective the in allowed companies. in are discovery of deliberate ofthe of major elements theattribute concerning bigsum differences no To are up, there meanings, e.g. what2.4 Conclusion the is these cases. for if 38 applicable section the problematic arenot all questions these However, is there only member. one […]" meeting general call a may or moremembers Supra note 33, § 28 schedule 3 19 35 which condition cannot be if fulfilled cannot which condition CEU eTD Collection 38 37 36 Limited Company as a Subsidiary containing if be changed theNinth Directive probably Groups on Conductof the aPublic was enacted. It is about memberwould 2that thearticle of paragraph second tothe arearefers interesting problem The more states’ discretion on the First Directive) provision this of Proposal the was denied being‘too much’. in in also (and partsof other formalities Directive the the contained becausebut of publicity company has only one member and to safeguard aretransferred" member whenshares company has only transparence and to one a fact that of the facilitate verification "tobe nominative to shares the required The Proposal companies on them). expand one-man notto about have provisions decided (if corporations countries particular companies under Twelfth the this today Directive groundisapplicable onlyon stock laws. national nullity company’s init Directive; First the inbut should be interpreted accordance with existence. its membership during decreasingthe after founded by ita solemember function or can only with one assingle-member person company Twelfth the be limited Law aprivate Accordingliability can company to Directive Company this topic. national approaches on pyramid with injurisdictions bethe together threeissues analyzed Thesewould member corporations). structures as one of the most includes parent/subsidiary the (of relationship in course contextthe of membershipquestionable insingle- problem areas ofIn this chapter the personality3.1 General overview of the sole shareholder/member is examined that necessarily Commission Proposal, s First Council Directive (Publicity Directive) 68/151/EEC, art. 11(2), 1968 O. J.(L 065) Directive, Law Company Twelfth 37 Because the member states are bound to accept single-member private single-member accept areboundto member states the Because upra note 2, at 5 CHAPTER 3– MEMBERSHIP supra note1, art. 2(1) 20 36 The latter case served ground for ground caseserved latter The 38 ; CEU eTD Collection http://halshs.archivesouvertes.fr/docs/00/16/78/40/PDF/paper_catel-duet_Milan.pdf 41 40 39 on Annual Accounts Directive Fourth the 27of article limits of respect are to legal person) (being member its sole and company one-man the both that requirement the with together companies single-member for capital minimum a fixing was states member the for alternative Another version. final problem getmentionedstill becausein aboveexists the restrictions place the not today did way; butpreclude had infraudulent Thesesharing this to companies’ the articles assets member unlimited liability could be avoided onlybyfinding more members oneyear.within unlimited liability increasing until orif membership the an becameongoing company single- alternative If two company the requirements. establishedit byonefounderwas would have single-member of another company. questions anatural when person isthesole memberof more companies legaland aperson is regulate Today lawsthe within matters. national to their membership are allowed they related the subsidiary’s independence the parent company should be the sole shareholder (as the shareholder (as be sole should the company parent the independence subsidiary’s the To control the management, finances and the overall performance preserving at the same time corporation." affiliate the of autonomy formal the on insists still law corporation classical integrated, completely subsidiary’s business. "Even when a subsidiary owned byanother corporation and is According todifferentpossibilities parentcompany can be engaged more orless inits 3.1.2 Parent/subsidiary relationship ingeneral particularly touching parent/subsidiary undercontrol relationship of one shareholder/member. adoptsanctionsDirective allows to thecountries orspecial provisions inthis question too ‘aggressively’ fields lawother of regulatingof companies. groups Thecurrent form the of because theyaffected out ruled were restrictions these influence of Germany under Especially Aurélie Catel Duet, The Governance of Corporate Groups, ofCorporate Governance The Duet, Catel Aurélie Fourth Council Directive onAnnual Accounts 78/660/EEC, Twelfth Company Directive, Law Company Twelfth 40 41 otherwise solethe memberbecomes unlimited liable for obligations. supra note1, art. 2(2) 39 The original draft conditioned the second situation to 21 art. 27,art. 1978 O.J. (L222) CEU eTD Collection http://ec.europa.eu/internal_market/company/docs/shareholders/study/final_report_en.pdf European Union 43 42 being artificial company." sole the person memberof another ‘chain of companies’. is sameas the not It exhaustive. financially though be even useful to aretreated such entities law from perspective company rules; it some competition can be with inconflict However, even from process end-user.the beginningwholethe provision) service to (or production the cover is only the to way This inmanufacturing. firms particularly other with connection necessary decrease each other)to to connected some extent to areas(but economic different companies in engaged more sometimes separate and form very business create also thisoften use corporations Multinational sphere. entire economic the of development would discourage this like companies single-member of creation on Restrictions self- working. its their into involvement extending subsidiaries the from directors elect can also but rights, information and as voting such role entity shareholder is legal its that plays cases person dominant In most the corporation. whole the of functioning the threat not does company parent the and subsidiary the between interests same the having that basis daily on decision-making in autonomy factual of level hashigh subsidiary at the sameplace, the located not they usually are them. Because between boundaries legal the and geographical with notwithstanding parts centre the separated the of coordination the retain to is aim The subsidiary). the of manager the and owner of of ownership and control can be obtained bychaining several companies." "This separation deviceisbasedontheideathat structures. practiceas pyramid andtheory both in is known This away’. ‘thrown was it end inthe prohibition its recommended Proposal recent study recentmanagedstudy byEUCommission between onthe"proportionality the ownership and External Study Commissioned by the European Commission, Commission Proposal, ‘Chain ofcompanies’ (May 2007) 7, supra note 2, at.5 includes "single member companies whose single member is an is member single whose companies member "single includes 22 Report on Proportionalitythe Principle in the 42 Although the Directive’s first Directive’s the Although 43 According to a CEU eTD Collection 45 is engaged only inismanagingmeans engaged only financing, law thesubsidiary under the Serbian (that besidesa business asits managingcontrolledstill entity, second dominant activity the one the which types, concern and holding are distinguishable from each other. The first one deals with narrowly corporations regulates affiliated Businesspart of Actthe Companies on Relevant more corporations; as we can see the way of acquisition of shares can be very different. wouldpunish be to unjust himby avoiding this forpossibility only being asole shareholderin member of a company does notit.acceptis of 95% to depend on somebody’s willbut shareholders of that part would likeor to sell their stock onunder the same conditionsa the owner‘prefabricated’ plan. It 44 ownership. getentitled to remainingthe from members, 5% discordantthe and thisway achieves full such When purposes. shares of an arebought95% of ongoing company shareholderisthe for member. depends his/heravailable assets be manyhow It only companieson can single In the Serbian Act on Business3.2 Serbia Companies there are no restrictionsDirective, but today itis leftfor that national laws to regulate this topic.a natural person groups will Ninth concerning bythe besolved Maybe asthe others corporate question this in andduties. rights of seclusion really see the cannot theoutsiders structure traceable corporate hard Because of company.inanother are shareholding only)their assets main (or companies’ Directive. Probably the drafters thought Twelfth the under its forbidding objected states member why the real the reason constitutes on the ‘abusivefact This pyramids’ agreements. shareholders and shares where rights voting multiple thewith together single-memberEU control" itis commonly most the used control enhancing inlarge mechanism companies of Act on Business Companies, Id. art. 448. art. 44 But it But works 45 It is important to mention because sometimes becoming single becoming sometimes because mention to important is It supra vice versa note 13,art. 447. , too. When remainingpublicly, too. the 5%wasnot offered 23 CEU eTD Collection 48 OfficialGazette 31/93) art. 12,13, 16 47 was Because Germany companies. moreone-man founderslegal of assingle refers to persons member/shareholder can have the same status in other companies. The question that is trickier being single person a natural howmany times is norestriction In there Germany 3.3 Germany only andparton that wholethe legal person remainsliquidation still under procedure. ownership gets vendee the part functional a ‘shopping’ by But subsidiary. the time same the part. Who buysthe parentcompany aslegal buys bankruptcy person in proceeding the that at functional its as subsidiary the of value the includes necessarily that be determined should will be destroyed. It is the same when a single-member parent company is liquidated. Its value liquidation in the chain, especially if it is ‘abusive pyramid’ because probably the whole chain of so on.The andin only shareholder another arise problem of will member’s one case Question of pyramids is not separatelyarticles Lawof of Obligations on principlesdealt on due diligence andhonesty. with; a single-member company can be the sole 46 areresponsible. its director(s) and company generalthe ongoodfaithprovisions fairand against dealing subsidiary the both parentthe Breaching latter willliable totally. for the be former of subsidiary the the solethe shareholder is company controlling the when especially and another and one of transactions the between partition traceable is noreal and there unit; as single economic act its subsidiary and company parent the When Companies). Business on Act the by accepted corporations of forms law the controlling entityno number speciallimitations on founding of members company’s but in unlike comparative (either are There concern. and holding both of holding tasks the have must corporation parent the companies or concern) should holdingis ‘pureholding’). primarily When companiesbe affiliated the are of organized as group legal person (in one of the Zakon o ste SRJ No amended last 29/78, No Gazette Official (SFRJ ofObligations] [Law odnosima o obligacionim Zakon Id . 32-34,art. 36, 37 þ aju [Bankruptcy Act] (Serbian OfficialGazette No 104/09) art. 135, 136 46 However, it should be interpreted together with together interpreted be should it However, 24 47 48 CEU eTD Collection 51 50 49 forms. other the besides mechanism enhancing control used often most the is structure pyramid According arecent to expert-study managed by European the inCommission Germany the in details member state. this in sametimethe regulated at and isallowed this area form that assume we can corporate of one initial leaders of on opinion limitations this the against the Twelfth Directive the dominated entity) correspond to the corporate structure of the GmbH anyway." GmbH of the structure corporate tothe correspond entity) dominated principle, no need to inis, removal); "there or appointmentso, decisions about (e.g. decisions instructions and enter into a dominationby is boundshareholder’s the director managing companiesliability the limited In private agreement since itsA GmbH ismorelikely beto dependent company in defacto groups inthan contractual ones. effects (instructionstatutory regulation. to the liability such of butone-man companies; on otherthe hand today even aregapsin there make in protection limitedinterests order too differentand creditors’ balance between the approximation of toward decisions incourt stepsreflected are certain there On one side 3.3.1 GmbH Directive. Twelfth of the creditors shouldcreditors applyin absence of statutory other solutions. resolution shareholder’s single the in with accordance if have acted compensation they even care) andtheir adequate in comparison with AG. Themanaging are directors liable for financialthe losses (duty of due managementstructure of GmbH differentby be the regulation can lack explained of particular Act on Limited Liability, MÜLLER, See supra 49 It evinces the admittances of chain of companies that was also one of the debated part note 43, at 48 supra note 18, at 172 at 18, note supra 51 because the general articles protecting minority shareholders and minority shareholders protecting the general because articles note16, §43 25 50 To sum up, To CEU eTD Collection http://www.germanlawjournal.com/index.php?pageID=11&artID=124 eventual liability of eventual corporation’s liability dominantthe of controlledthe directors/shareholders toward determine to is parent company of important between and act subsidiary Exact separation its existence". of its maintenance safeguarding of and basecapital to limited and iscompany takenbyitsof "the dependent protection against actions the sole shareholder is excluded articles AG Act relevant of application analogous that ruled BGH The principles. 56 53 subsidiary). company abused its powers (it was enough that it did notshow sufficient consideration for the 55 it. against claim direct have who subsidiary 54 52 case). inin(under standardscreated managementengaged previous subsidiary’s the the Video first, its subsidiary. The by losses for suffered company liability shareholder-parent single of cases important The Federal of Justice inCivilconcerning (BGH)hadthree Court Cases identifyingaimed at dependency entities amongrelationships corporate within the group." businessmanagement's doing,thus, seenfrom economic and perspectives. Courts, concrete as than the on architecture more corporate on the liability management's tobasethe tended liability law corporate entities, between these relationship andthedependency Konzern") AGActand definedunder enterprises’ form of group companies If a GmbH holds 100% of equity capital in another entity, they are presumed to be ‘affiliated "Focusing regularly on the on this situation). AGAct by provisions areapplicable which analogy control candetermine (a careful analysis PETRI MÄNTYSAARI, COMPARATIVE CORPORATE GOVERNANCE 387 387 (2005) GOVERNANCE COMPARATIVE CORPORATE PETRIMÄNTYSAARI, Zumbansen, Peer Stock Corporation Act, Incase of detrimental and lasting mismanagement the parent company is liable forthe creditors of the Stock Corporation Act, 54 case presumed the sole shareholder liability if it was ‘permanently liability and extensively’ if it‘permanently shareholder was the sole case presumed BGHin the 55 The last case, Thelast Liability Within Corporate Groups, TBB supra supra case reduced this liability situations case for only reduced this parent liability those the when note 24, § 302, § 303 note24, §18(1) company Bremer Vulkan ("das Unternehmen") and the 26 constitutes the major deviation from the basic the from deviation major the constitutes 3 GERMAN LAW JOURNAL 1 (2002), 52 based on existence of corporate group 56 available at Autokran ("den 53 CEU eTD Collection 60 TRANSACTIONS in GERMANY 24-154 (Bernd Rüstered. 1983) http://facta.junis.ni.ac.rs/eao/eao2005/eao2005-03.pdf UNIVERSITATIS (Series: Economics and Organization) 209 – 219 (2005), 59 shouldbe decidedonthe subsidiary’s general meeting). sale on behalf of the majority shareholder who holds minimum 95% of the share capital (but it 58 57 corporations). both arestock companies that the (requirementcompany parent into the equity capital An ongoing company can become wholly-owned subsidiary if itis with integrated 100% of its unable to significantly influence the management of the majority owned enterprise." though "[t]he owning enterprise rebutthiscan presumption ifonly itiscan prove thatit even its subsidiary actions affecting it) takes of directors managing (or solethe shareholder majorityitis that presumed sameownershipof meansatthe controlling time stronger rights: 17(2) Underparagraph (parent). enterprise the theaffiliate and (subsidiary) necessary contains It term. this of isexplanation exact no there though even enterprises’ be ‘affiliated seem to They company. parent its and subsidiary wholly-owned a between relation but shareholding subsidiary. company latter, the of parent is the former the enterprise another of shares of majority the holds enterprise an If public limited liability companies). define not be(paragraphs havecorporations the of necessarily form not 15-19) do (they to do liability iscompanies. This why the introductory the reason of provisions on companies group could seein groups’ legislation 3.3.1sometimes supplements corporate the in limited private Stock Corporation3.3.2 AG Act has significantespecially provision when on stock corporations be cannot called help. to influence on draftingone. Incase lackof statutory solution of arerequired problem this courts fulfill to gaps, the the Ninth Directive and as we Stock Corporation Act, Walter Oppenhoff & Thomas O. Verhoeven, & Thomas Oppenhoff Walter Stock Corporation Act, See Dragana Radenkovic Joci Radenkovic Dragana 60 As in the Serbian legislation there is also possibility of compulsory (forced) compulsory of possibility also is there legislation Serbian in the As supra supra note24, §319 note24, § 16 (1) ü , A single member company convenient or not for the founders 58 This definition remains even if there is no majority of majority no is there if even remains definition This Chapter 24: The Stock Corporation, 27 available at in BUSINESS 57 , 2(3) FACTA 59 CEU eTD Collection 62 63 61 is structure if mentioned or above otherwise; the statutes interpret if courts overstepped enough justifysubsidiary not veil’.to do corporate ‘piercing the it Exceptionally can be plc company." defendant the ratherthan group correspondingly the risk of enforcement legalthe of liability any) (andfuture activities in group (if the respectof particular of that liability)ensure that as to been so hasused structure corporate "becausethe just company controlling will fall on another member of subsidiary’sthe affairs totally alone courts do not ‘pierce the corporate veil’ against the defendant its canmanage company) (parent shareholder single the fact that the of Irrespective its policy subsidiary." corporate the andof dictated company controlled degree of control over asubstantial exerted company holding the be established where could "[A]n entity economic the affairs of the subsidiary as for single own actions)be treated today mustrelationship economicparent/subsidiary unit. company, to had thatevery beenaccepted inmember had group the its independence(concerning liability the extent that the holding groups.long Althoughespecially byspreadingits on strict for application corporate time it between company the and become its membershas in decisive law, UK the company After the deciding every covers form. owned subsidiaries. that other'swholly-owned subsidiaries or actingpersons onbehalfof thatother or its wholly- "wholly-ownedsubsidiary" ofanothercompanyifithasnomembers except thatotherand what wholly-owned subsidiary means thatis high of priority for our topic. " Besides definitions of companyparent and subsidiary 2006 determines CompaniesActthe 3.4 UnitedKingdom Corentin Kerhuel, Corentin Companies Act, Id. casefactsbeing that and as singleshareholderinfluencing through status this the at 5 supra Coursework " note 31, § 1159 (2) Salomon v. 61 It isknow It company talkingthat to important expression about this at 6, at http://www.box.net/shared/x994obb4f4 case the principle of separate legal personality 63 Itwasfirst in decided 28 Adams v Cape Industries v Cape Adams A company is a A companyis 62 CEU eTD Collection 67 66 under English law 65 group of itsto related is rules expectable a country less respect this competitive with are used structures by business; ininternational more engaged ‘stable’ corporations company- mentioned above the usually because in regulations their cause discrepancies We can conclude that the 3.5 Conclusion different levels of economic disposal")must it be developmenttrading company member(or of it). of time the after immediately ofand disposal, of thetime the with ending and examinedperiod ownership states twelve-month continuous requisite company's holding UK-incorporated the of start the substantial twelve-months inbeginningshareholding ("period asubsidiary throughout with conditionscertain limitations. to that holding A UK-incorporated besides company having 64 structure pyramid thatevenallows though member states EU the of The UKisone it because may some creditors." simply prejudice in the principle that say courts English the again and Time occur. subsidiaries providelimitedto for liability and indeedpriority of claims ifinsolvency were to theirwith theaffairs useof order companies) cannot individuals useof the through facts ofactual situation. haveno"Thereason why (or courts English companies seen been liable for their sum beTo it saidcannot up, parentits that the company managing have or acts never directors on detriment of betweenthe them. controlled companyparent is company bound by acts the of its agent/subsidiary ifonly is there express agreement but it always dependsmembers). its on (‘ abused Companies Act, Simon Bowmer, See See supra http://www.coddan.co.uk/s-94-incorporate-a-holding-company-in-the-uk.html mere façade mere note62 64 15(8)J.I.B.L. 193, 197 (2000) The last case is interesting with respect to requirements of agency law; the law; of agency requirements to respect with is interesting lastcase The supra To pierce ornot to pierce the corporate veil -why substantive consolidation is not an issue note 31, §1159 (1)(c) ’); or if the subsidiary acts as authorized agent of the parent company (or available at available 29 65 2010 WL 67 Salomon cannot be avoided be cannot 66 it CEU eTD Collection within EUthanthe existingthe legislations can provide. level interest on more coordinated LawDirectiveprotectingcreditors’ the Ninth Company Commoncompanies arebe by likely is elaborated. introduced policy to recommendedthe 30 CEU eTD Collection 69 68 containinformation being relevant accessible tothird inonly party company’s the own will not central registers the discrepancies: certain can cause choice suchvoluntary because itself.improve cross-bordertransactions To optional provisions of thisbe kind should reduced is orother in commercial keptby ‘book’ that company agencies supervised by courts a the The problematic therein). registered are companies the of each where forms other any or registers part central and commercial also includes is the register’ possibility‘companies’ term the Council Directive First of the (2) 3(1), article the together is applicable article the (because register into companies’ be the entered areto change to record identity both shareholder’shavingthe members membership- more factof and the such these data theoutsideact as to world toward continues if company theone-man abuses avoid potentional to insteadorder in hand, other the On Directive). the by explicitly covered not is (it shareholders of central more with asincaseof samecorporations the conditions under existence of company’s the registers the situation by incorporation of single member from shouldberegistered beginningvery the be its sharescome to person." because all heldbyasingle member company The Twelfth bind are authorized to company, the company." who of particulars persons the especially Directive the information concerning andother ascertain contents their to maybeable third parties mentions only of that in should bedisclosed order basiccompany the "the liability companies: documents the situation forprescribes bothpublic compulsory Council that limiteddisclosure Directive andprivate whenThe Twelfth shouldDirective’s togetherwithpublicity requirement beinterpreted First the "a company 4.1 General overview becomes a single- Twelfth Company Directive, Law Company Twelfth Supra note 37, atrecital 37, note CHAPTER 4 – PUBLICITY CHAPTER supra note 1, art. 3 31 69 It means that 68 CEU eTD Collection No 55/2004, last amended No 55/2004 ) 70 itisthough notmentioned literally). In ofincorporation case areinformationthere needed to (even intoscope this falling be achange to be can seemed oneperson of sharesinhand all mandatory registrations of establishment and winding up). The situation of concentration of status and in organizational position corporations’ structure, (beside the legaltransactions the Entities. Business of on Registration by Law the regulated are corporations concerning data of andpublication The main act on corporations does not contain article on publicity requirement. Registration debts. the assumes their liability but company incorporated canjoin,continues if the registration after too, Act the with accordance In assets. personal their of all with severally and jointly responsible about it into the Businesslegal atThe company separate becomes subject moment the data of entering relevant the Register. Before that moment4.2 Serbia the founders and other persons are in behavior Member States’ respect of duties. accounting of served control can by bebetter market strengthened internal interests of the this obligation single-member companies bewould favorablesmall not to businesses. of Instead emphasizing of nature bureaucratic too ideathat accept this with explanation didnot finalact butthe forms In the Commission’s publicitythe Draft was requirementexpanded and ontheletters order companies. case of single-member in this The in delete full becausebeingfactor was to complicating proposal requirement of a all. at law company EC of simplification for programme in the negotiated not was occasion this However, in records. of maintenance public states member between the ordination co- of level high a achieve to intention basic the undermines method alternative This register. Zakon o registraciji privrednih subjekata [Law on Registrationof Business Entities] (Serbian Official Gazette 70 This Law covers duty of record of certain changes affecting the 32 CEU eTD Collection 74 73 72 http://www.apr.gov.rs/Default.aspx?alias=www.apr.gov.rs/eng 71 Agency Serbian Registers the Business notifiedbe to in GmbH). thesituation as (similar Directive in the is required what action include exactly notthat does application,the for on persons handit and considered but other other the systems) competent one side because beingof exhaustive incovering the is questions in (what of time ambiguous itmightease tocontrol country’sthe fulfillmentof duties.the The Serbian issolution goodin but Act; same in the be to have not does law national the into Directive the of Implementation different). are amounts the (but company in the officer/person liable the and itself company the to both applies It fine. by sanctioned contravention economic constitutes frame time the with Non-compliance businessmen. by be respected should them of which answer nor difference, this for explanation neither is there Currently, date-question. the concern not did English) mentions only five days. Although Law was the amended in 2005 themodifications done within 15 daysfrom its occurrence, but second the one (on both languages, Serbian and web siteBusiness Registers Agency. of former requires The be ofchange thenotification to They can be faced with law) discrepancies between by task this authorized for changes orperson or/and forestablishment of registration founder the Business Registers by the authorized person founder, (the for registration application persons’ The competent Law and the officialChange in membership includes both access of new member and termination membership.of mentioned above register. the into be would entered changes the existence company’s Law on Registration of Business Entities, ofBusiness Registration on Law version), (English Page Home Agency Registers Business Id Id . art. 79. . art. 65. 72 must be compulsorily accompanied by amendments of the articles of association. supra note 70, art. 18. art. 70, note 33 71 ; if they were modified during the during modified were ; ifthey 74 73 CEU eTD Collection 76 customs on the pre-determined territory; anyway it is it onthecustoms todecide pre-determinedin taskof territory; anyway court of case legal or law ontime of civil the general provisions in with accordance interpreted can be in words law‘immediately’ abstract theterm As inother tochanges membership). limitation The mustregister beinformed ‘immediately every after change’ (including butnotwith isspecified in notformation Act. the company’s the to subsequent atoneshareholder concentrated are shares the fact that the enter to the requirement theshareholding; with together isregistered) person shareholder-legal shareholders’ remaining the notify should He paid. been have contributions the after registration for applies name, datehasitis who statusof in (but Thedirector managing employee more rare practice). directors of birth and or isone with there shareholder sole happen that it can membership of out company’s the place of residencelist of shareholders to the Commercial Register. (commercial shallIn case of of any submitshareholdingchange director new the the managing (revised) registerside of the control) but the basic inspection is done at notary. wherepresent in thisthe country. Commercial Registers is registration thedata areof rigid control most The literally. kept Directive the has adopted States at courts (what constitutes the judicial The German limited liability company is a good example to illustrate that none of the Member 4.3.1 GmbH 4.3 Germany itto beimportant. treated legislator away was thrown Serbian the draft Directive’s part of the 75 single-member. is ifit ofthe company and documents other letters labeling business the of is regime requisite of Serbian the interesting particularity Another Act on Limited Liability Companies, Act on Business Companies, supra note 13,art. 22. supra note 16, §40. 34 76 Because managing directors canbe elected directors Becausemanaging 75 Notwithstanding thatthis CEU eTD Collection condition that the managing director is not at the same time the company’s only member. only company’s the time same the at not is director managing the that condition 79 78 77 debatesespecially infurther academicsurrounding. the Legal single-member basisstanding of German company pre-incorporated forcan servegood 4.3.3 Pre-incorporation entries made into the individual the registers. for responsible also are they located; is company the where district in the court commercial is before The the in completed procedure registrar. exclusively own company’s the It seems that neither GmbH- nor AG Act takeswithout adequate sanctioning by Memberthe States thearticle 3remains inoperable. advantage of the option to register creditors. the these data to for the causeddamage liable is person) personally aseparate or shareholder sole either the is know who action.the obligedtotake GmbH In case of (whocan managing the be director There is no sanctioninterpretation. foreseentheir for basis as served be should for Law is which question the non-compliance synonyms; even be can delay’ with systemsthis use so fuzzy determination of time paragraph;of registrationlegal the duty. why ‘Immediately’, occasion interesting ‘withoutis an It delay’. ‘without given be shall notification and The we also do not delay." without court benotified tothe shall andof residence place name,occupation given surname, shareholder’s sole the with facttogether then this company person companies on paragraph Actprovides separate Corporation Stock the of GmbH Unlike incase 4.3.2 AG requirement. mentioned abovethe with compliance Thislitigation. question can if arise causes managing by director the damage creditors to non- The managing director is also liable to affected shareholders or in our case to single shareholder under shareholder single to case our orin shareholders affected to liable also is director managing The Stock Corporations Act, Corporations Stock Act on Limited Liability Companies, 79 The Directive does not require infliction penalty on the guilty person but require infliction person Theon doesnot guilty the penalty Directive . "If all the shares belong to one shareholder solely or jointly with the with jointly or solely shareholder one to belong shares the all "If . supra note 24, § 42. § 24, note supra note 16, §40. 35 77 78 one CEU eTD Collection 82 81 80 personality and defines the powers; latterregulatesthe internalthe management questions. its Thefirstvery company’stogether. legal beingthe one establishes statute –constitute akin sightfirst – at association of articles and lawmemorandum UK Inthe regime. continental the association; ithas similar as role incorporation the documentnot butdoes have in synonym of application memorandum -and of by beginsdelivery procedure The registration 4.4 UnitedKingdom managing director. of a tasks the ondoing it only shareholder can the be applicable whether misunderstandings liable. heisnolonger personally company, agentwithout properauthority); butif is there agreement on assumption of by debts the the scope of his authority bind the director after registration under general agency law (like an exceptionally (beingjust an employee). In case of stock corporation the debts created out of certain he take inpre-incorporation phase, isliable only even hasauthority acts to though sole member andmanagingif director he is from appointed outside. In GmbH the director the of position the We differ should shareholder. sole the be saidabout cannot It predecessor. claims pre-incorporated the isfor towards thecompany because liable shareholder sui generis company. be sued because of certain debts (so to be subject to duties together with the shareholder)personality; as a but because it has own assets (from the paid contribution) it is capable to sue or to In stage of exist’, suchhave does notpre-incorporation GmbH ‘as itcannot so, legal pre-incorporationthe is suitablecompany organized." reservation that to the founder is it view aspecial subject of the adopt property that the others theviewisit"Some take thathaving partiallegal entity writers aneconomic whilst capacity, Stock Corporations Act, Corporations Stock Act on Limited Liability Companies, Supra note17, at 77 81 supra After registration there is no need to make transfer of liability of the of liability of transfer make to need no is there registration After note 24, § 41. § 24, note supra note 16, §11. 36 82 80 Especially provision this causes CEU eTD Collection 84 event’ is very abstract; it can include either the day of occurrence or the day immediately day immediately after orthe of occurrence day includeit the either can isvery abstract; event’ that of occurrence the ‘upon formulation The delay. in being without event the notify should specified,time inknow exactly not limit isof shareholdernotdoes what sothe registration The duedate too. behasin to entered, membership the date of the member,decrease/increase Companies’ Register.in memberthe only berecorded should company one has the that statement sole member,the If the number ofThe Companies Act goes intodetails the and specifies that beside the name and membersthe address of the fallsnot. or changes the register to one or it ceases to decide whether to discretion shareholder’s leave the on to not and this question harmonize to be single- only if wants because asfreedom thisinterpreted of sole toregister life the shareholder changein company’s the he/she will not be baredit havingnotsay does one memberbut enteranything about duty the thisIt can to fact. be to do so. But the aimfollowed that only partially.of Registration application cannotthe be thrown away solely on basis of Directive isAlthough imposes Directivethe (by positive obligation ‘must’) wording the Regulation the to company limited by byshares or itguarantee solely becausehas member"only one stated: "A companyincomparisonAct the 1992).It solution Regulation’s with 1985 (amending the Companies in interesting very is 3 article the of shall implementation of way complex really This, more. not be preventedbecoming single-member during andincreaseofmembership existence from totwo or one from publicity in by separately requirement threeofa formation member,singlecases: company registering under this Act as a private 83 companies member single on section special a has Act Companies The whatagrees tobecome member. in statement shareholder’s the include to is enough it ischanged; memorandum of role Today TheRegulation inserted a new sub-subsectionsection in 680of Companies the Act 1985. Companies Act, supra note 31, § 123. 31, note 37 83 regulating the regulating 84 . CEU eTD Collection 87 (9 85 thedebts. canassume company Then the registration. after one previous asthe terms same onthe with company the contract renew the behalf by onlyfounderthe results personal liability of founder.the The only ispossibility to called into question. be can company the of existence the longer no incorporation of certificate of issuance After contravention. of day every for 3 level of one-tenth as is determined fine the action in scalebut standard of levelthe exceeding case continued 3 on not is pecuniary The sanction legal person. is beingseparate because of company in It understandable who default. were Non-compliance with these provisions implies liability of the company itself and every officer he/shethat has become the sole member. notice moment’s at realize not does shareholder remaining ifthe curiosity further a is It that. 86 scale. standard current the with in accordance pounds 1000 is 3 Level 1982. Act Justice Criminal inthe contained is scale but the Act Companies by the case ourin law, by relevant fixed is offence SALEEM SHEIKH,A GUIDE TO THE COMPANIES ACT 2006 260 (2008) Thestandard scale applies only to summary offences. Referring to the BLACK’S LAW DICTIONARY 1188 Companies Act, th ed. 2009) summary offences can be prosecuted without indictment. The level of a fine for a particular for fine a of level The indictment. without be prosecuted can offences summary 2009) ed. supra note 31, § 15. 86 Before registration there is no company at all; contracts made on its 87 38 85 CEU eTD Collection 88 anywayconstitute the only protect possibility to creditors. the that requirements minimum the even reduce to tend endeavors simplification the Today were necessary. they sometimes eventhough was refused regulation thrown away. Every attempt to introduce some formalities into the single-member company was means administration specify of the to proposal the procedure negotiation the During formal way. in such decisions member’s single the record to duty no is if there achievable is aim this how oncertain level, minutes protects but interests third on a piece persons’ of Publicity paper? of can itbebe informally written by everything read,even to suitable done electronic or means specify‘draw innot is Theup So, writing’. what‘writing’ does enough Directive covers. to law. The shareholder has to record the decisions taken on the general meeting in minutes; or it sessions; as well as thein be brought these areto which decisions laws penalties innational toregulate States for Member for non-complianceThe scope of general meeting’s competence has notwithbeen yet harmonized on the EC level. Itisthe requirementscontain prohibition.this is So, there delegation opportunity of of powers. are leftnot does to Directive statethe of version final the process, making decision main the into intervention Althoughmembership. itis drafters’ first the intention against allow people’ to other company’s the of out power this convey to member only the for possibility no be should there meeting. general of the powers the exercise According to the next examined5.1. General overview article of the Directive the sole shareholder is required to Twelfth Company Directive, Law Company Twelfth CHAPTER supra note 1, art. 4. 5 – GENERAL 88 39 This wording including ‘shall’ assumes that assumes ‘shall’ including wording This MEETING CEU eTD Collection members in a company). Interesting provision of the Serbian Act is with Act thatnon-compliance Serbian the of provision membersina company). Interesting numbernotwithstanding applicable of the (even though requirements aregeneral these meeting’s resolutions contain hasthe to also document aseparate minutes of compilation beside in Serbia writing, other or minutes either terminology: optional an uses Directive undue Whilst signtheminutes. delay)decisionsand together the piecing after (without into book theresolutionsof the member the authorized enter should The single person or itis not case. in the companies usually case of founder) single-member founding acttomake decisions independently (otherwise is action this in of competence the by inlatter agentcasehe/shecan opportunity the the Although of this get company. the he/sheonly as act can as director but maker decision istheprimary he/she role In theformer as managing director). founder (andnot as beby shareholder signed single to the always are Notwithstanding thefounder and the managing can director be same personsthe decisions Act). in with the to oneperson accordance members do notregulate otherwise (for one meeting only one authorization can be given only authorization somebody to else delegating the if voting rights; foundingthe act orstatute of gives he/she that is possibility There literally). words Directive’s the implemented has of meeting Act bring (in decisionsthe incompetence this part the meetingthe general and/or In single memberlimited liability company onlymemberthe shall exercise powers the of the moremembers.with corporations as functions insameway structure and has company corporate same One-man the session. without writing in making decision or modern technologies) of audio-visual byuse or session ‘physically’ (attendance statute: company foundingmodalities byactor/and be the can sphere ofactivity determined different Every shareholder, all 5.2 Serbia together constitute the general meeting of a company. To realize its 40 CEU eTD Collection 90 89 one shareholder, too. certified power of attorney we can assume that this provision is applicable on cases only notarially holdingin fact) (attorney his/her representative orthrough meetingswith in the person in meeting; because every can participate hasbut of shareholder person) general powers the authorized him/her by (or shareholder only the that literally said not is it Act GmbH the In 5.3.1 GmbH 5.3 Germany without anymodification. too, shareholder, sole corporations with The applicable are onstock above parts. mentioned differentthe solutions between inter-reference easier) (and makes possible that in act same located the are still they in corporationAlthough stock limitedSerbia and separately, liability company are regulated making. decision companies’ one-man quorum, too) cannot remain in their original formulation to be at the same time suitable for number oncompaniesWhen general (including issignificant shareholders of provisions companies. one-man on be applicable to deficient is form in this that definition this to given numberof votes isof quorumandthe of constitutes nothingshareholders/members total else majority Actis comparative our for Serbian important issue Inthe analysis). substantial (that iscompanies.addressed It by not United Directivethe butthe has though Kingdom beto in one-man ‘quorum’ question,important bewith caseof of should that dealt question The implementation can bein determined way. trustworthy other of the relevant minutes’the formal requirementdoes notaffect the resolutions’ validity if their authenticity article 4 of the Directive was full but still there is an Act on Business Companies, Id. art. 275(3) art. supra note 13,art. 150(5) 89 41 90 CEU eTD Collection 93 meeting, a second meeting shall be called at which the quorum requirement shall not apply."] 94 not shall requirement quorum the which at be called shall meeting asecond meeting, ata present not is quorum necessary the if that provide usually also articles the company, of the process making 92 91 undue delay. without shareholder inmust In andsigned berecorded one-man bythe GmbHwriting shareholder’s resolution respected; but the shareholder cannot diverge from the article 130 on 130 diverge from article the shareholdercannot the but respected; have be not to does meeting of shareholders’ the etc. notification time, and place of calling, in company). of one-man avoided easily case be can situation which objects shareholders the of none that condition (with formalities follow need to without canpass than aresolution rights) voting the delegate he/she can that (evidence If have represented all single-memberincludes shareholders appearedor companies). the in sort some (what forbenefit bemuch AG small very can companies’ of some particularities meeting, eventhough There areonly onshareholders’ paragraphs as theGmbHAct.general article 4 investigated Directive’s the Act Corporation hassimilar approach to The Stock very 5.3.2 AG for various categories of undernot (butdecisions concept of quorum). represented) for passing a resolution,in Germany there are different thresholds tobe achieved be(or present minimum shareholdersinstatutory numberof question to requiring general this regulates legislation Serbian still the isthat between them difference only The companies. in paragraph noseparate on inquorum is one-man Like caseof there in Serbia GmbH overcome." might beproviding upon,aproblem evidencewas that difficult of whatto resolved problem of faces the soleshareholder the but andvoid,be null necessarily to deemed not is resolution respective the of resolution, the protocol suchwritten prepare fails to shareholder the event the "In paragraph. this of non-respect for sanction serious is no if there even frame, Campbell, Stock Corporations Act, Corporations Stock MÜLLER, Act on Limited Liability Companies, supra 92 supra note 22, at 23-117/118 ["To ensure that individual shareholders cannotblock decision- the note 18, at53-54 supra note 24, § 121 § 24, note supra 91 Again the problem is the abstract formulation of the time note 16, § 48 (3) 48 § 16, note 94 42 It means that requirements concerning the way 93 minutes. Being inform CEU eTD Collection 99 98 or an act not indictable, but punishable summarily or by the forfeiture of a penalty."synonymous with‘felony’ as sense or withspecific a ‘misdemeanour’, in beused may or as the case may misdemeanour, be, and oras signifyingcrime every a crime ofcomprehend may lesser it grade,one; a minor often 97 96 passing the resolution). copy by is signed chairmanofthe supervisory (unlessboard thisStock CorporationAct requires ¾ majorities for to trade onexchange, an there is no requirement to record resolutions in notarial protocol.is enough It that its shall inform the company about details of the decision ‘unless that decision is taken by way of companies. for regulation one-man Companies separate Act2006provides as we used tothe But get finepunished (maximum islevel3 on standardscale).the committed by every officer of the company failswho toact in this way under possibility beto 95 which case a written record of the decision must be kept." in aresolution requires decide on an issuewith ameetingto or constitute to for [him] either is possible "it powers meeting’s the exercises member sole the that literally saying Without member)". of sole (decisions comprisingmust keeprecords details provided tothe in company accordance with section 357 years.Offence least ten atbe kept are to what resolutions the of copies and both limitedpublic maintain private minutes and must liability of ones records of proceedings section the with In accordance 5.4 UnitedKingdom associations todefine this question otherwise. Act does not containconcerning this field of ittheirfunctioning)can be said quorum aboutthe AGregulation, too. anythingAs it previously wasmentioned similarity between the andAGGmbH isveryhigh (especially with respect is company a stock on exchange).quoted the that condition (under tomeeting the of ruling each contain this should minutes deed notarial of question but it allows the articles of CHARLESWORTH & MORSE, COMPANY LAW 284 (15 Companies Act, BLACK’S LAW DICTIONARY 1186(9th ed.2009): Offence isdefined as"violationof law,the acrime Companies Act, Stock Corporation Act, Corporation Stock 98 The two sections on records should be interpreted together: "every company supra supra note 31, § 357 note 31, § 355 supra note 24,§130(1)sentence 2provides shares exception: if are the not admitted on records of resolution andmeetingsetc on recordsof 95 43 th ed,1996) 99 Itmeans that the only shareholder 96 every every company, 97 can be can CEU eTD Collection 102 resolution. 101 single-member company it is questionable beside the only memberwho canobject to the decision. company is bound but it is no necessary to hold a general meeting only to express the consent again. Incase of 100 inapplicable companies). one-man quorumisnot enough rule defaultto constitute (this arenot such representatives only but insteadthem, of vote to others authorize can also they members/shareholders, more are there a proxy in relation to a particular meeting (what was can appoint he/she meetings ongeneral voting rights the delegate to the possibility shareholder’s case in the other regimes, too). one only company andsingle-member incase of the quorum respectto with persons" be may all "qualifying at the meeting proxy or present representative member, in An individual corporate quorum attention one-man companies. to The United Kingdomis onlylegislation the (from researchedthe has ones)which paid legalprevious two regimes). does nothave civil consequences on the decision’s effectiveness it(so, has same results as the person’sdoes not commitmentinvalidate decision the because evenbeing it criminal sanction punishable byfine of level scale standard the (maximum 2: 500pounds). Butthe guilty an company offence the constitutes information toward the duty with Non-compliance having effect of resolution (because only information about its details isnot enough). a written of decision the mustbeprovided company byawritten resolution’. Then record the Companies Act, Written resolution in this context refers to the situationwhen all members assent to a transactionby what the Id. § 324 (1) 101 It evinces, too, that even though there is no separate section on the single onthe section separate isno there even though that evinces, too, It supra note 31, § 318 (1) 44 qualifying person qualifying is enough to pass a 100 102 If CEU eTD Collection 105 available at 104 103 Directive requires recording (or drawing of contracts these upinwriting). Twelfth the why reason isthe This member. its and company the of liabilities) and assets separate sametime the at (and legal personalities separate the aware of not whoare creditors interest; even though this riskis higher when isthere only one member.Itis easy defraud to shareholdersof riskits between includes and of conflict company the transaction Whatever 6.1 General overview companies’ main but documents this idea didnot survive. transactions the drafters acts intereston behalf or of toprotect third company.the In positionorder persons’ such in wantedin self contract a concludes he/she to whether distinguish include to hard is it usually director managing an enumeration of Directive". First everywith the possible contactin accordance register companies atthe party any interested to wereaccessible documents in the such basis orinstrumentinthe incorporation, on of for that provided company's statutes the of any agreement between company memberandthe sole the be byhim represented to it possibility the "required text: thefinal than stronger was Directive the of proposal The first is no explanation whatit means "but it is hoped that a commonsense approach will prevail". ‘tocurrent operations concluded under normal conditions’ limitor to exceptional cases. There arefree member todecidecontact; they mentioned states whether approach above the apply form does isand affectnot byhimwritten mandatory. company the It represented every sole shareholder the between for agreements matters) forcorporation oral contracts allows (namely otherwise formalities the lawregulate would contract on legislation national the even Edwards, Hugh Fraser, Twelfth Company Directive, Law Company Twelfth CHAPTER – SOLEAND6 CONTRACTSBETWEEN MEMBER 2010 WL supra Directors' interests in contracts: fair andfoul dealing, note6,at 214 105 Because the sole shareholder can take over the functions of a supra note 1, art.5. 1, note COMPANY 45 15(2) COMP. LAW. 46, 49 (1994) 103 It means that It 104 CEU eTD Collection companies the single shareholder answers the statutory definitionof control-shareholder (article 367.) 108 documents. 107 106 language.Directive onSerbian decisions of book that mean can decisions of book in or writing in Either does was. intention legislator’s not have writtenoption to enter form. these contracts is another form Maybe there in written of being instead because is bestone notthe The terminology into it the wasbook of resultdecisions. memberonly (orhis/her proxy/representative) and companythe itself must bein form.written Itof is notdeficient companies. understandable single-member in meetings general of requirements whattranslation the The of Serbian6.2 Serbia the Actsuccessfully on abuses by inevidences recorded writing. on Corporationsreact to meetings: general 4on article previous asthe aims similar serves This article regulates this question in the same article as the liability company always must have managing board. If we ‘translate’ this on case of one-man associations (what liability managing ora eithercompanies director board can inbe appointed articlesthe of refers to the close limited In case of words. only in should considered management) few be the concerning stock corporations, (especially corporations, structures differentliability corporate companies stock and their too), still they be samepersons). can (even though the open public limitedmanaging orthe director soleeither aretaken bythe shareholder transactions Anyway, these formalities. the follow not need operations current that of Directive the part second the alsoaccepted Serbia of is under documentation appropriate condition to be in writing. way other any because voluntary is only it but decisions; of book the in transaction the record to shareholder the of is option the answer the will) original drafters’ the with accordance Altough the general provisions concerning duties applies to control-shareholders in case of one-man of case in control-shareholders to applies duties concerning provisions general the Altough indifferent be entered itcan inwriting’ is contract the ‘unless terminology the uses Act UKCompanies The Act on Business Companies, supra note 13,art. 136(2),(4) 107 So, if interpret try it we properly to in (approximately 108 Because this is a common article for both limited for both Becausethis is article a common 46 106 Agreements between the between Agreements CEU eTD Collection interpreting the relevant paragraph on paragraph relevantinterpreting the solution interesting has Act GmbH German The laws. national the into implemented Maybe the6.3.1 GmbH article 5 6.3 Germany of the Directive aspossible). as soon of reform purpose serves the what evidences is the only onecase such whatresults in regulation previousthe gaps as the one isonly one of (this the that has been areapplicableinthis with duties sanctionsgeneral fornon-compliance provisions separate the most lacking Becauseof himself/herself? canexcuse mean sole member it the that differently Does liability. from is excluded theshareholderthese fide transactions bonaon give shareholders consent majority If of the companies. single-member for being unsuitable parts problematic are there Act, Serbian underthe of corporations onalltypes areapplicable these articles However, too Serbianlegislation, the 112 assigned to thecompany assigned to and if he profits from these businesses the transactions together with all the benefits must be 111 110 109 opportunities. be company’sthe loyal assets,confidentialinformation toward its businessor is if to required decides) can sametimemanagingbe atthe The shareholder director (who the structures. corporate withsimilar legal systems other on the are true these all entity. Generally, another of as amember but as entrepreneur act not he/she does that Although singlethe shareholder in can itsparticipate for outsiders the work, itbewill obvious companies possibility the of fraud and abuse issmaller when is there a managing board. Act on Limited Liability Companies, Id Act on Business Companies, Id . art. 15. . art. 37. 109 In case of In breachcase of of he/she is duty this liable the for company damagesto 110 111 supra (personal liability is of consequence alter egodoctrine in regulated ). note 13,art. 33. supra note 16, § 35 (4) 35 § 16, note representation bythemanaging directors 47 112 in CEU eTD Collection 115 from language initial actors intothe beincorporation the of can restriction the included release to assent such that thoughts are there though (even association of article of amendment by is done companies incase single-member by subsequentwhat can be of approval cured ineffectiveness" of pending state [such] the ineffective. "In conditionally inmanaging only andbyhimarenovoid company the director context) this represented is(who the attorney-in-fact the between transactions The is applicable. Civil Code the director managing solethe is also who shareholder sole of the areundercontrol If theshares all later. market on the consequences harmful the tolerate to in advancethan by soleshareholder the misuse toprecludepotential andbetter dangerous Serbia and United is idea This Kingdom). becausegood isvery self-contracting such of too,extendingnormal is paragraphmaximallyconditions, thescope the casein not both (it Germany forbusiness contact every on currentoperations apply requirementthis does under memberAlthough introduce Directivethe only provides to thisto states optionally formality 114 involves the fulfilment of anobligation.”] himself in his name orinhis capacity as attorney-in-fact fora third party, unless the transactionexclusively attorney-in-fact cannot, unless otherwise authorized, enter into transactions onbehalf of his principal with 2909;738), lastamended(BGBl.I p.42, 2003Ip. by of4Decemberstatute 2008 (BGBl.I 2586)§181.[“An 113 paragraph on immediately after being concluded; otherwise claim for damages arises in accordance with the contract the record to only important is it evidence; written the contain should document director at the same time or not) is whether he/she nomatter (so its sole and shareholder company between the transactions must be entered in writing. Itsame is nottime specified or there what is kindboardthe at director managing sole is the shareholder sole the either ofpossibilities There aretwo instead of individual manager.representation. Anyway, both multiple cases and self-contracting on (BGB) Code’sarticle Civil the with accordance require that MÜLLER, Act on Limited Liability Companies, Bürgerliches Gesetzbuch[CivilCode] of 18 Augustthe version 1896in promulgated on2 January 2002 supra managing directors’ liability 113 note 18, at 35 supra note 16, § 43 § 16, note . 114 48 115 the agreements the CEU eTD Collection 117 =onepage&q=&f=false http://books.google.com/books?id=TAHtXWpA9soC&printsec=frontcover&dq=german+business+law&cd=2#v 116 profitabilitythe liquidity or of company"the upon material havemay impact "transactions a that report because but of to duty corporation for the can financial disadvantage governed board managementcause by self-interests of member company the whoas influence member inhigher.Thesole represents shareholders’ the latter in the still business transactions; to relating for any them toward purpose issupervisory board control liable andto managing the representdirectors company to the called so body, a separate former the In companies. liability limited in private dealings their from corporations in stock directors managing and shareholders the between relationship bydifferent can beexplained It itspublic company. of memberwith contracts sole the Unlike GmbH - the German Stock Corporation Act does notcontain precise provisions on the 6.3.2 AG andmanaging beingthe shareholder sole person. the director private acting shareholder as they are regulate atall, avoids Germany thenon-understandings by covering both solethe part on Serbia. Stillin the in mentioned have the I problems the Serbian on well very focuses Act GmbH the Act in solution weThis do not know what cases are regulated oris The result by the sameasin him/her. situation. previous represented whetherthe his/her in also parties company business with (as sole third shareholder) represents managing director is whatwhen the case the too multiple representation for stand limitations documents from verythe beginning of existence).company’s Besidesself-contracting these through through corporation’sthe its shareholders." to relationship prevention increase"decrease in an wealth in or of of is company caused the which assumed be to ‘hidden Asdistributions’. defined by Federal the (BFH) Court Tax they include intentionsscreening such .Evenifbesides checking suchactsresultbenefitshim,for are they MARCO ARDIZZONI, GERMAN TAX GERMAN TAX AND BUSINESS MARCO (2005) LAW ARDIZZONI, 3-032 Stock Corporations Act, Corporations Stock supra note24, § 90(1),(4) 49 116 to supervisory tosupervisory board isthere highlevel of 117 available at CEU eTD Collection 119 118 default. The only in with officer formalities the anymoreliablethe forThe company is not non-compliance penalty law).especially inare present (and Serbian the what avoids these misunderstandings contracts is very highmay with inaccordance possible question arise what every covers This section exhaustively (what isexistence). their evidence about is written (sothere writing’ reasonablein is contract the ‘unless contract the of conclusion after meeting first the of minutes in with respect or memorandum in awritten either be recorded areto they thesetransactions of control later to thediscourage them from wrongfulnature trading out of ordinary business of the corporation. To ensure of is of to this the solution purpose So, personality. separate company’s forthe of abuse the more arespaces there butactingas managing director inentity; membership the‘aggrieved’ of notwithstanding liability to subject be always will he/she interest personal exclusively with his/her company Whenshareholder contacts scope. from sole the company this are excluded with personbeinginbusiness the as private whenhe/she acts company) situation the the of behalf on (so theoretically as director company the with deals shareholder when thesingle cases those only itregulates Because fulfilled. becumulatively must conditions These three in is beside of andthetransaction managing not him/her) business. course ordinary directors company enters into member of the only applies where the are tobefaced section with. The Act Serbian the a contract who is directors) director at the same chapter on separate provides Act2006 The Companies time (it is6.4 UnitedKingdom allowed to be more written contract" prior a clear-cut bebasedon "should between them agreement on equal footing (underindependent as the contractors ‘arm’s lengthprinciple’) and any be treated to a business are to asparties corporation stock and shareholder sole the However, Companies Act, Id. 119 and because of that escapes those problems what the readers (practical users) of users) readers(practical the what problems those escapes becausethat of and supra note 31, § 231 50 contracts with solemembers(who are 118 . CEU eTD Collection 120 act." to accustomed are of a company directors the instructions or directions whose with in accordance person directors in their treatmentThe last mentioning thing worth istheequalization withof managingthe director shadow the (only for the purposesapplying tothis business question on basis).other of this section). " law rules of or concern enactments not itdoes (even though of contract validity the the the same way as in the previous sections and criminal character of the sanction does notaffect can beis imposed(it more no now than Anyway,5000 pounds). Companies the Act follows level and transactions causable harms); 5 on standardthe scaleis maximum sanction the what liable on the same grounds as actor. samethe onthe liable grounds heis harmfulif instructions his/her becauseof directly.company wascaused But damage the behind singleshareholder the asadvisor either or givingfinancerhis/her withoutname tothe http://www.manches.com/practices/corporate/service.php?id=250 120 In our case the shadow director probably wanted to stay probably to case backgroundin Inour wanted shadowdirector the 51 A shadow director is a CEU eTD Collection 123 1998 O.J. (98/C 93/02) 122 121 liability companies are good for small enterprises being less complicated in their nature and nature in their complicated less being enterprises small for good are companies liability complex." is too it because structure, legal this choosing from refrain in. many shareholderssmallbusinesses . entrepreneurs and/or numberinitial of subscribers minimum the concerning requirements high setting] of "[because But forms. association For purposes the businessof transfer public liability limited companies suitableare the most Anyway,harmonization eventual of inlegal their status is all States Member understandable. point. asazero serve can liability companies limited public on requirements Directive’s the of application obligatory but yet; laws national several limited workedon)in that liability would bethe hasbeenachievedcompany finalstep (or public simplified a of Introduction regimes. legal in the position companies’ single-member legislation.organized larger as company corporationssingle-member is than a hot topic in EC the Among othersNowadays the EC Council question simultaneously. Directive bethe with harmonized than to complicated made ofa morelimited regulation of corporations; forcompaniesare public existing the part only proposalsmall- andincludingany without ittradition was a on single-member companies introduce big newthe stepeven to medium reformation sizedwe know from the legal history of UK (even though itis not the only system) for the countries enterprises of As EU act. this of beginning in very location the justify would its importance text of half the the thatnot. or that accept to decide whether to free tend to beThe Directivemore oftenonly recommends7.1 General overview inclusion of stock corporations and the member states are Communication from the Commission on the transfer of small and medium-sized enterprises of March 28, of March enterprises medium-sized and of small transfer the on Commission the from Communication Twelfth Company Directive, Law Company Twelfth Id . at C93/4 CHAPTER 7 – PUBLIC LIMITED LIABILITY COMPANIES LIABILITY LIMITED 7 – PUBLIC CHAPTER supra note 1, art. 6. 121 52 Although this article is located in is second located the this article Although 122 123 Privatelimited CEU eTD Collection new users of this formentity can getbig helpin its understanding. whoareinto those only the ones other articles single-member of company the incorporation demandedWithout readertothe leading the quickly. solution specification sections of private) and and majorboth (public for types general being sections aredivided relevant Directive. The it fastensthe youngesttheis UK the Act Companies the into corporations application. stock one-man of Inclusion states). other to one among The legislationUK is specialstory in itself (sub)types(having of companies arestrangethat SerbiaAnother and good single-member companiesGermany with the other general sections on polynomial corporations. point in and on mixes is paragraphs the Act more still abstract itis GmbH about, the understand what ofimplementation this Act more theproblems Usually them easierto is concretely being AGAct different. the addresses is high of levelthe be) theway wereach how to have they (and arealways same consequences the Although article of 6 parts. between the inter-reference of it possibility excludes acts,so has separate Germany of the is case all.there nodiscrepancy at limitedregulation liabilityon also (that companies refers to stockcorporations).the In this place, atone under located are companies single-member concerning In Serbia article every both types of companies, usually the terminologies vary from each other. apply to areto rules same the though even that shows paper of the structure The approaches. especially by limited beingmotivated companies,too, abovementionedthe aims and today most of countriesthe have expanded theirsingle-member regulations on public the The United Kingdom’s stance the illustrates best the general objection thisagainst conceptbut all article not has laws6of even though at once. Directive adopted the The national examined generations more difficult. banks before makes thebearer and of bynon-issuance transfer of shares company the through standing less credit result can form this companies medium-seized of in butcase formalities 53 CEU eTD Collection 127 328 (1989) 126 125 124 liability is very strict. Sole trader is not separate legal entity; he is liable personally, directly legal heisliable personally, isentity; separate not Sole trader is strict. very liability concerning individual In Serbia andtheir companies between division the entrepreneurs 8.2 Serbia obligation". such be usedfor to assets aretheonly assets and those from activity for arising business used solely obligations the be are to theaccount] [on "assets The entity). nature of this actual the picture to ‘company’ term best the is not it (however, capital initial company’s the represent to account bank entrepreneur can limit his/her liability by allocation of one portion of individual his the personal where assets legislation on a Portuguese in the found is examples rare the of One [meant]." this yet what [knew] "[n]o-one its isspecific andin of acceptance construction time in audit. This or lawDirective but ECcompany legal the ingeneral disclosure on accounting, in only not Twelfth the contained safeguards: basic and apply the who should respect to "a sum devoted to a stated "a sum activity"". to astated to devoted would businessmanup enableanindividual set an to undertaking whoseliability was limited which introduces such "legislation state particular company the single-member formation of corporations. idea one-man the of to opposed who are those for –especially MemberStates the for regime analternative provides The Directive 8.1 General overview Edwards, Janet M. Dine DINE, Twelfth Company Directive, Law Company Twelfth CHAPTER 8– WITHLIMITED LIABILITYENTERPRENEUR supra 126 available at available supra note30, at7-4 , The Community company law harmonisation programme note6,at 213 2010 WL supra note 1, art. 7. 127 125 It would mean a sole trader with limited liability limited with trader sole a mean would It 54 124 It is possible thatinstead of , 14(5) European Law Review 322, CEU eTD Collection 1108_Articles_Schmidt.pdf 129 and to CombatAbuses] of 23. Oct.2008 (BGBl.I S. 2026) Bek¨ampfung vonMissbr¨auchen(MoMiG) [Act to Modernize the Law PrivateGoverning Limited Companies 128 a “genuine”GmbH" to way entrepreneurs on their smallpromote businessesGermany. inand out "UG as “interima kind solution”of for ActandtoCombatits the ModernizationofPrivate Limited Companies Abuse Although hasbeenallowing one-man long by Germany companies with tradition the 8.3. Germany traders. for forms business possibility change/extendlawto the current in nearthe by future introducing anynew is areacceptablecompanies by usedinhigh and low population there percentage the Becausesingle-member companies. for issevere andcheaper than morebookkeeping lower; are contraventions same for the Sanctions associations. small needof the answers Anyway in itevery iscase most prevalent the individual form of organization principally that liability. his limit to possibility no is there Law Serbian limitation andfor his thedebtsarisingoutof with all activity.the without assets of the Under Comparison Although initial has entirecapital the from be beginningto paid very the founder can the in cash. contribute to possibility nor capital minimum for requirement neither is There law. German the into isimplemented what with the specific nature on Limitedof Liability Companies adding reducing or some formalities being inaccordance UG. It means indirectly the application of the Twelfth Directive ‘ individual isbeing fora newsubtype entrepreneurs. of setup especially designed GmbH Unternehmergesellschaft Jessica Schmidt, GesetzentwurfderBundesregierung. Entwurf Gesetzeseines Modernisierung zur des GmbH-Rechts undzur 3 , http://www.germanlawjournal.com/pdfs/Vol09No09/PDF_Vol_09_No_09_1093- GMBH –SPECIAL ISSUE The New (EntrepreneurialCompany) and the Limited – A ’ (UG) in English means in English ’ (UG) 55 129 is regulated, upon the whole, by the Act entrepreneurial company entrepreneurial what tends to 128 (MoMig) Law for CEU eTD Collection 132 guarantee Entity falling8.4 UnitedKingdom into the scope of article 7 is said to be similar to a company limited by 131 have maximum three shareholders; otherwise it is not determined. 130 contribution. as company members are not personally liable. Itis also allowed to offerthe a promise because to do a debts work the forcover the cannot it that matter no be paid; to enough is sum nominal even means that It is only mature then). amount contribute apredetermined to promise/guarantee duringcontribute company’s the existenceonlyin of event the winding up(their establishedby foundersmore one or ornatural (legal obligedpersons) whoarenot to Company limited byguaranteeis legal person usuallyfor non-profitmaking activities Directive. “UG for translations, theneed no incorporation procedure, “for free,” simplified liability "Limitation of be expected. comparativelyis to entrepreneurs the for primarily attractiveness its anyway, less but traders) individual only not strict German rules legal onDirective andmore (becauseboth same founders atthe persons from timeit, canprofit distributions (albeitIt is say hard to ‘mini this that fall is to GmbH’ appropriate of scope under the article 7of the with the assets. personal (founder’s) entrepreneur’s can on the rely creditors the determined neither not is capital Minimum investments. potential business partners’ discourages itweakness possible financial ‘UG’ canreflect Because UGhas company’snamethe Necessarily, mandatory drawbacks, too. the including can be even single-member (either natural- or legal person or both). it isminimum of of number Becausethere shareholders, norequirement amount. its determine Schmidt, can it statutes sample the UG uses If the procedure. incorporation simplified to referring anexception is There See - twist” of the mandatory reserve) – what more could an entrepreneur want?" DINE, 132 supra supra ; but again, it is not exactly that form what has been aimed to create by create the been to formaimed whathas exactly that is not it again,; but note129, at14 note30 56 130 131 CEU eTD Collection question. regulation on entrepreneurs. Thisis German bythe evinced and the UK solutions on this the into facilitation more introduce to need no is there companies small for beneficial in limitation liabilityof fortheir duties if butof their enterprise; areprovisionsthere being traders individual help to was 7 article the of objective basic The Serbia). (except legislations in their similarcircumstances create try to they in conception its original use this category much needs of currenteconomicthe world. none Although investigatedthe legalsystems of theirideas and financial opportunities such liability‘limited entrepreneurship’ can serve very possibilities for businessmen build to upcorporations being maximallyin accordance with by structuresarepromoted that hugethe of 7.Providing arange movearticle toward to tend EC the throughout enterprises small especially concerning Simplification-tendencies 8.5 Conclusion systems, but we can conclude that none of them has implemented the article literally. functionsThis serves of bestthe type English company legal 7in of investigated article the 57 CEU eTD Collection bigger problem that the latter can be said about the whole Act notwithstanding its can notwithstanding language. be aboutthewhole Act bigger latter said problem the that is a It all in translation. presented at the not is meaning real the that huge discrepancies are so there ones, Serbian original the with themselves articles variant English the comparing Also actual the title. be insteadof Act on Business to Corporations version statute the Englishof UK Companies Act’s terminologyisuse did question not It partnerships another this andcompanies). Serbianlegislator why the in translation of laws is on as it in are separate forms done UKwherethere (similarly the corporation other its act. It would be betterregulate only andnot is it but notthebest becauseitCompanies’; assumes companies one to to rename the Business on is‘Law act law company Serbian major the of translation official The on corporations that evinces the deepness of the problem in this non-EU country. rules basic Serbian reformulation)the of (or in liesreformation such decline of consequences necessary to solution The number. intheir decrease of is atendency there Serbia various measures introduced promoteare to this kind of enterprises; sideother on whilst in of higher large efficacyin publichandwith comparison companies. former On intheEU one because of state the restructuring ineconomic key SMEs played role andprocess privatization seized enterprises. These debates did not sidestep Serbia, too; especially in period of transition used andmedium onsmall- is in companies Nowadays conceptof single-member discussions Serbianlegislation. into the implemented canbesuccessfully that inthem points findsome positive to but countries these the lawof estimate to not is The task thesame articles. toward approaches different resulted has it and LawDirective Company partiallyof in Twelfth the adaptation memberspowers could theirbeing use EU discretionary comparison in withcompanies single-member on rulings relevant Serbian the evaluate is to paper the of aim The provisions of the German and the UK acts. These countries even CONCLUSION 58 CEU eTD Collection http://www.prsp.sr.gov.yu/attachment/attachment/Analiza%20regulatornih%20prepreka%20za%20razvoj%20M DEVELOPMENT of SMALL- and MEDIUM SEIZED ENTERPRISES inSERBIA] (2008), RAZVOJ MALIH RAZVOJ MALIH I SREDNJIHPREDUZE ZA PREPREKA REGULATORNIH ANALIZA Centre], Development Society [Entrepreneurial DRUŠTVA every possible article where the context required such sanctioning. Although the Serbian act Serbian the Although such sanctioning. required context wherethe article every possible with particular provisions. BothGermany and the United Kingdomhave doneitalmost in non-compliance for penalties regulate to discretion states’ the to leaves Directive The Twelfth atapparent reading. arenot firstdefects general not getting Until terms. insideviews moreother perfectly formedof laws these On Act pagesof on the papergapsinthethe Business Serbian were Companies in analyzed lawyers. toeducated tasks give the should country rules the Unfortunately,work negligent is such typical andinstead of creation Action of better plan on if we compare the same articles in Germany and the United Kingdom with the Serbian ones. level high on is proven It interests. term long country’s the much very serve not do procedure keep in in deadlines the EU-accession- to steps by taken legislator law.order Fast the cover the same) are onlyexisting national opportunities. Strategy emptyplans, action plans etc. (in this case the different titles words without with the in accordance adaptation than real provisions relevant of acceptance literal more a expert groups and cadrehas harmonized approximately its whole company law with the experiencedEU standards it is shown to be in systems wecanconclude problems thatthe EU doexistin quality the law.Althoughof Serbian it lightHowever,of isstrong reason disagree there this approach. Inexaminedthe legal with to way application. the of their practical in but themselves thestatutes the not of isquality problem the emphasized that advanced. It accessibility fieldsof fundsand public being as importantpermissions tobelegally most SP%20u%20Srbiji_final.doc?id=565 133 Serbia in enterprises seized medium and small- of development on obstacles regulatory of Analysis See MILANLALOVI 133 determined labor relationship, social insurance, tax law, custom and law, custom insurance,procedure tax relationship, social determined labor û &ZORAN SKOPLJAK FOR ZA RAZVOJCENTAR PREDUZETNI û A U SRBIJI [ANALYSIS of REGULATORY OBSTACLES onA U OBSTACLES REGULATORY SRBIJI [ANALYSISof 59 ý KOG CEU eTD Collection together) should be critically examined in same way to discover the statute’s real effects. discover statute’s the way insame examined to should becritically together) all (having457articles of parts Act the the‘low-class’; other are companies andstill they single-member concern directly paper) that in the (analyzed fewparagraphs There areonly withoutin regulation. adequate necessarily presumed such structures all assets. An instableagainst abusive forms when inanothercompanypure shareholding company’sthe constitutes economy especially introduced asbe should limitations the possible companies of Serbian chain of elimination overall one cannot allow Instead of insuch respected. not dangerous business moral basicvaluesof country are where itself so big risk whichare that allowedThe otheris areais pyramidin it tothe structures really related Serbia; is perfectionism in its acts. level of should this state request revered a constitutional arenot member companies articlesin of association) and in requirements usually managementrelated practice single- the only Althoughone member. it is (and formality only canbe subject todifferent of rules butmembership; coverssuch situations bigger adequatewhennot with is is quorum there and issue, isnecessarily issuethe statutory regulated next It of quorum. It isconnected tothe relevantprovisionsany without thinking on possible consequences. Directive’s the of bysimple translation are formed concept this on rules wherethe Serbia applicable on entities with more members. It can be very beneficial in such countries as are otherwise which articles companies onone-man of any article of application extension an be may resolution UK-type Alternative, UK). the and in Germany done was it (as legalmore’ canavoid‘one before moreacademicquestion and/or persons’ the or ‘natural this definition onbusiness mentionedAdding in foundersassociations areonly where the plural. companies would justifygenerally separate rules on also contains areapplicable solutions parts onthisquestion those onthewhole document this problem. (and It can be alsoon saidevery about the basic type of corporations); but atypical nature of single-member 60 CEU eTD Collection maker’s negligent work work is negligentmaker’s that causingacountry-wide effective trouble. more serious are not intentionallymakeand toisdeveloped ownlawmore its problem perfect clear. The thatthe countries gaps preserved sense in legal other tofrom experience help ‘borrow’ should body legislative Serbian peoplethe sum up, To in evasion of law legal security. but it is result of theinterpretations in thatdirectly especially affect provisions practice avoid inconsistent would law- statutory Transparent way. same inthe treated not is Companies Business on Act the The only question is if thelegislator is sofast to react on improper rulings in other cases, why into effect. yearcoming of next immediately acts are amended the Act) Registers Business and cost efficiently. be time- out carried cannot necessary changes its enactment lack before of of control Because This is the reason why so often in Serbia (as the case was with the 61 CEU eTD Collection http://www.apr.gov.rs/LinkClick.aspx?fileticket=EfO7DH6pvsE%3d&tabid=181&mid=733 134 joint stock company,in addition to data from paragraph 1 of this article, contain information (2) Business and letters documentsother of company with limited liability, and closed- open number. identification number andtax account number of corporation;the business name and address of bank in itwhich has account, bank it registration is andthe where registered registry office, registered legal form of corporation, which are addressedtothird information: partiescontain business name followingthe and andBusinessletters (1) of including in documents other corporation, those form,electronic Article 22 -Use of Business Name and Other Information in Documents oflimitedprinciple liability notapply cases fromdoes to paragraph 1 of this article. court taking intoaccount all the circumstances of abuse, but especially that the general (3) Liability toparagraphsreferred 1,2 of this article shallbe determined by competentthe jointly. corporation (2) Persons referred to in paragraph 1 of this article are responsible for the obligations of the exist. does not legal being person as corporation the astheir own assets corporation’s or the treat obligations of the corporation if they abuse the corporation for illegal or fraudulent purposes and corporations shareholders of may bestock heldpersonally liable to third parties for (1) Limited partners oflimited partnership as well as members limited of liability companies Article 15 - law. with this in accordance obligations these assume with foundersthe orother persons specified in paragraph 1 of this article if registration after For 1 (2) the toparagraph of obligations referred this isliable corporation the jointly article parties who have claims on that basis provide otherwise. undertaken in relation to the establishment of the corporation, unless contracts with third (1) Founders and persons other areliablejointly with all of their for the assets obligations Article 12-Liabilityfor Obligations of Pre-incorporated Corporation term ‘company’ is notadequate. Articles from 1to47 version. official ofthe non-acceptance of because translation author’s inthe attached are articles important most the The official translation is available at Abuse ofLegal Person 1. ENGLISH TRANSLATION of of of ENGLISH TRANSLATION RELEVANT PROVISIONS 1. concern business corporations in general and because of that use of the ACT on BUSINESS COMPANIES ACT onBUSINESS APPENDIX 62 134 ; but some of some but CEU eTD Collection (1) Member of company may any appoint person forvote other to him in meetinggeneral by Article 143-Proxy concluded undernormal conditions written form or entered in the book of decisions, unless in case of current operations Agreements between(4) member toparagraph referred 2 hereof companyand the must bein signs minutes and the taken decisions records in the book of decisions. company member of limited liability company in 2 of paragraph this Article prepares and (3) After adoption of decisions within competencethe of general meeting of limited liability powers the meeting.of general (2) Inlimited liability company with one member that memberorauthorized person exercises (1) Members oflimited liability company compose generalthe meeting. Article 136-Definition andcompetence [ofgeneral Generalmeeting] provisions from yearsor three of violation. date the violation, or represents at least 5% of company capital, within 60 days of discovery of the committed rules may be performed by corporation and general partner, member or shareholder who has (2) Rights that corporation has on basis of violations of conflict of interest and competition corporation. 3) all claims arising from activity performed on behalf of such person to be assigned to person tobe assigned tocorporation, 2) any moneyamount of from generated activities conducted on behalf of breaching the behalf of the corporation, 1) recognizemade transactions selfby for breachingaccount the party as tobe on executed addition to right to damages right to: (1) Violation of interestconflict of and competition prohibition gives thecompany,in Competition Prohibition Article 37 -Consequences of Breaching the Rules on Conflicts of Interest and duty loyalty). the (Hereinafter: of needs,for etc.. personal corporationthe for personal enrichment, donotuse business opportunities of corporationsthe beneficial information of corporationthe for personal enrichment, notto abuse positions in particularuse not to property the of incorporation their personal interests, nottouse Persons(2) referred toparagraph 1 of this articlehave who personalinterest,are obligedin corporation. the toward loyally and Persons(1) referred toparagraph 1 of article 31of this law,are actconscientiouslyobliged to Article 33-Dutyof Loyalty company indicationcontain itthat is single member company. (3) Business and letters documentsother of single memberlimited liability - and jointstock subscribed. about the founding capital companythe of indicating how much itof is paid in and 63 CEU eTD Collection rights of more than 50% of ordinary shares in stock corporation (majority share) (majority corporation stock in shares ordinary of 50% than more of rights 1) has more than 50% of voting in rights company,the whichmeans ownership andvoting action): (collective corporation in terms of this law is the person who alone or together(1) Controlling member of limited with liability company controllingor shareholder of stock other persons Article 367-Control by shares incapital prohibited. (7) Linking of in corporations violation lawsof governing protection of competition is business activity includes activities referred toinbothparagraphs (4) and(5) of Article.this (6) Affiliated corporations organized when asbusiness groups controllingthe corporation’s exclusive business activity is management and financing of dependentthe corporations. Affiliated areorganized(5) asholdings corporations when corporation’s dominantthe corporations. business activity being its dominantactivity besides the management ofits dependent (4) Affiliated corporations areorganized as concerns when the controlling corporation has any orother business organizational groups forms in with of provisions accordance this Law. Affiliated(3) corporations (by capital, ormixed) contract areorganized asconcerns, holdings, corporation(dominant) moreand one or dependentcorporations. Affiliated(2) as corporations indefined (1) of paragraph this Article include one controlling 3) by both capital (mixedand contract affiliated corporations). 2) by (corporationscontract linked by or contract); 1) by ownership of partnership shares (corporationsor interests linked by share in capital); either: corporations”(1)”Affiliated in Lawmeanthis two or more corporations which are linked Article 366-Definition andTypes [affiliated corporations] provided otherwisein Articlesthe Associationof or company agreement. (2) Decisions referred toparagraph1 of articlethis are valid from date the issuance,of unless delay. book without a separate of decisions into entered be shall company liability limited of members of meeting ingeneral adopted Decisions (1) Article 151-Book of Decisions of this law. are employedmembersin who to persons company the them meaning and related within the (5) Director or members of Boardoflimitedthe liability may company benot proxies of meeting. (4) Power of attorney is given for one session of general meeting, including the repeated paragraph withwithout 1 of respectto authorization article.this represent companies (3) Legal representatives of natural persons and representatives of legal entities in their own proxy who would have only part of his voting rights, nor give attorney in law to more persons. (2) Member oflimited liability maycompany neither be represented in generalthe meeting by companyor agreement signing a written power of attorney, unless provided otherwise in the Articles of Association . 64 CEU eTD Collection 137 136 135 article 135of this law inenters bankruptcy the estate. property bankruptcy the of was not that debtor subjectto estimation paragraph 2 referred toof Contract on sale of the bankruptcy debtor as legal entity mustcontain provision that the relation bankruptcy to the debtor. After sale bankruptcy of asdebtor legal bankruptcy entity,proceedingis in suspended Article 136.-Consequencesof Sale of Bankruptcy Debtor as Legal Person protection of with competition in procedure. acts particular urgency shortened of lawthe governing the protection of andcompetition, the authority responsible for the Sale of the bankruptcy debtor as legal entity can not be done contrary to the provisions its value. Before sale of the bankruptcy debtor as legal person, liquidator is required toestimate 4) other measures in toprovide protection interests. creditor’s order adequate of secured sale; andseparate entity, 3) separation of from secured property assetsthe of bankruptcy beingdebtor sold aslegal security; valuation either of bankruptcy the as legal debtor or of person property which is subject to 2) new estimation of suitability referred to paragraph 2 of Article 132 of this law or the 1) adjournmentof sale; judgebankruptcy may liquidator to order the take ormoreone of followingthe measures: proposal securedcreditor’s adoption of of case In saleof property. separate comparison with whether for performed with inaccordance national managementandthe of standards bankruptcy estate valuation aslegal property bankruptcy of the or security debtor person being subjectis to such paragraph 2 of article 132 to sale aslegal referred person bankruptcy suitability the resolutionintoaccount of debtor’s days, especially taking 5 within sale of Article 133 paragraph 5 to referred property’s encashment favorable of way on a more secured creditors achieves paragraph 2 of In casearticle 133of doesnotadopt this that Act. proposal the liquidator the of with in accordance creditors of secured notification andprior with the committee creditors’ of consent the with entity, legal as debtor bankruptcy the be may sale obviouslyof Subject Article 135.-Sale of bankruptcy debtor as legal entity unfavorable settlementlaw. this of interms participation significant has meeting general in the (2) The person who alone or with one or more other persons has more than 20% of the votes law). this with ofby of virtue his being status member orshareholder (or on contractual basis in accordance secured2) otherwiseinfluence exercises controlling over management and conduct of company affairs creditor in Article 132, Way of encashment Article 133, Procedure of sale There is no official English translation of the Serbian Bankruptcy Act. 2. ENGLISH TRANSLATION of of of ENGLISH TRANSLATION RELEVANT PROVISIONS 2. 136 of law,this bankruptcy the will judge proposal decide aboutthe by BANKRUPTCY ACT BANKRUPTCY 65 135 137 of this law, and whether the whether and law, this of CEU eTD Collection services providedservices by registry. authority maintainingthe for the responsible registry of bankruptcy estate, as well as the typethe andkeeping amountand of recording fees of for method registration and content the entities. of andbusiness registration prescribe other shall Government law regulating the with in accordance registries, relevant andother entities of economic basis of contract on sale of the bankruptcythe on data) other and shareholders and members debtorfounders, form, legal (of as Changes legalproceedings. entity are registered insolvency opening before in of bills incurred of unpaid because of services performance these the registry suspend cannot the fordebtor bankruptcy the interest of general services entities providing proceeding norbankruptcy-debtor its neither vendeeliable are creditors, tothe and legal bankruptcy of suspension before legal value of estimated the entity. in tothe security relation arising bankruptcy-debtor against claims in to theestimatedproportion For participation in property’sthe value which isproperty subject to law, and the with inaccordance have acquired thepriority they to by sale,according achieved security on any of bankrupt'sthe part property havein priority right divisionthe assets of In caseobligations, unless provided in otherwise Act. this when theon bankruptcytheapplicable also are entities business of registration the regulating debtor conditionslaw of Provisions is sold estate. of bankruptcy via estate Registrar as legal bankruptcy on registry maintains thisarticle the paragraph entity,4 of referredauthority to The securedresponsible for keeping the registry of business entites isand it by represented liquidator. the creditorsandauthority by kept estate bankruptcy continues. on registry estate the in bankruptcy who registered is resulted estate the to Bankruptcy procedure hadin relation proceedings referreddebtor paragraph to 2 of this article in enters bankruptcy the andestate bankruptcy bankruptcy the of assets as well as debtor bankruptcy of sale from obtained Money of Registrar’s appointment, as well as its powers and 66 CEU eTD Collection - The Companies (ModelArticles) Regulations 2008No.3229 - The Companies (Single Limited Member Private Companies) Regulations, 1992No.1699 - Companies Act2006 (c.46) United Kingdom 2008 (BGBl.2586) I January 2002 (BGBl.p. 42,2909;2003 I I p.738), last amended by of statute 4 December - Bürgerliches Gesetzbuch Code][Civil of 18 August 1896in versionthe on 2 promulgated Abuses]2008 of 23. Oct. (BGBl.S. 2026) I andtoCombat Limited Modernize Companies (MoMiG) thePrivate [Actto LawGoverning vonMissbräuchen undzurBekämpfung GmbH-Rechts des Modernisierung - Gesetzes zur Company] of 20.Apr. 1892last amended by statute of 31. July 2509)S. 2009(BGBl. I - Gesetz betreffend die Gesellschaften mit beschränkter Haftung [Act on Limited Liability amended bystatute of 31. July 2009 (BGBl.IS.2509) - Aktiengesetz [Stock Corporation Act] of 6. September 1965 (BGBl. IS. 1089), last Germany [Obligations Act SFRJ Off.Gaz. No 29/78, last amended SRJ Off.Gaz. No 31/93] - Zakon o obligacionim odnosima, SFRJ Služ.Gl. 29/78, posl.izm. SRJ Služ.Gl. 31/93 - Zakon o ste http://www.apr.gov.rs/LinkClick.aspx?fileticket=yDt5L1NrS7U%3d&tabid=181&mid=733 version: English Official last61/2005]; amended No RS Služ.Gl. 61/2005 [Law on Registration of Business Entities RS Off.Gaz. No 55/2004, - Zakon o registraciji privrednih subjekata, RS Služ.Gl. 55/2004, posl.izm. http://www.apr.gov.rs/LinkClick.aspx?fileticket=EfO7DH6pvsE%3d&tabid=181&mid=733 version: English Official Off.Gaz. No.125/2004]; - Zakon o privrednim RSSluž.Gl.društvima, [ActBusiness on 125/2004 RS Companies Serbia DOCUMENTS LEGISLATIVE A) þ aju RSSluž.Gl. ActRS Off.Gaz. 104/09 [Bankruptcy No104/09] BIBLIOGRAPHY 67 CEU eTD Collection ------enterprises, atp.0002– 0012 O.J. 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(2001) 22(1) 27-30 . EU OF 2007) NOVAKOVI MÜLLER, LAW BUSARAC COMPANY MORSE, (COMPANY COMPANIES , The Community lawcompany harmonisation programme ACT SA DICTIONARY http://www.germanlawjournal.com/index.php?pageID=11&artID=124 , A simplified legal regime for small and medium-sized German public German medium-sized and small for regime legal A simplified PROGRAMOM THE 2006 (D û THE , PALMER’S RAGANA û KOMPANIJSKO & COMPETITIVENESS ü , (2 , A single, member company notforconvenient or the founders OBLICI (2 DRAGAN LAW: GMBH ND INTHE ND ED ED . Š (9 . 2009) LAW UJICA 2009) – EEC PRIVREDNIH TH COMPANY ZA A ED MIKI GUIDE ON -B USAGLAŠAVANJE (E . 2009) PRAVO: ANKO ED DDY CORPORATIONS 69 û 15(8) J.I.B.L., 193-197 15(8)J.I.B.L., (2000) , KOMETAR TO W OF LAW: YMEERSCH ED YMEERSCH , . DRUŠTAVA THE PRAVO SMALL 3 (1)GERMAN LAWJOURNAL 2005) ANNOTATED GERMAN ZAKONA 28(12)COMP. LAW. 381-383 , PRIVREDNIH FIRMS 19(7) COMP.LAW. 211- (2005) IN . 1993) [TYPES , 15(2) COMP. LAW. 46- SERBIA LIMITED (1991) O GUIDE , 14(5) EUR. 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