Content
SERBIA/
BOSNIA AND HERZEGOVINA/
MONTENEGRO/
MACEDONIA/
SERBIA
The Law on Capital Market Operations (Official Gazette of the Republic of Serbia, no. 31/11, "LCMO") completely replaced the Law on Market of Securities and Other Financial Instruments (Official Gazette of the Republic of Serbia, no. 47/06, "LMS") whereas its entry into force has been postponed until 17 November 2011. The LCMO substantially changed the Serbian capital market regime after five years of the LMS’s application. It predominantly relies on the EU legislation model, as well as international standards such as the standards of the International Organization of Securities Commissions (IOSCO).
- Harmonization with the European Union regulations. The LCMO has embedded the EU regulations, that is, it is based on the following European Union directives:
- The Markets and Financial Instruments Directive 204/39/EC (MiFID);
- Directive 2004/109/EC of the European Parliament and of the Council of 15 December 2004 on the harmonization of transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market and amending Directive 2001/34/EC (the Transparency Directive);
- Directive 2003/6/EC of the European Parliament and of the Council of 28 January 2003 on insider dealing and market manipulation (Market Abuse Directive);
- The Prospectus Directive 2003/71/EC; and
- The Investor Compensation Scheme Directive 97/9/EC.
- Substantially new definitions for principal terms such as financial instruments, investment companies, investment services etc.;
- New regime for public offerings, market entry and exclusion as well as market listings;
- Capital market reorganization, which now, following the EU model, consist of a regulated market and a multilateral commercial platform, with possibilities for over the counter trading;
- A redefinition of the conditions for the performance of licensed activities i.e. regulated activities;
- A change regarding institutional competencies i.e. concerning the competencies of both the Securities Commission and the Central Depository and Clearing House, as well as the introduction of new institutions such as the Investor Protection Fund;
- Stricter reporting obligations for public companies; and
- A different definition of penalty provisions, including prohibited acts.
Amendments to the Law on Foreign Exchange Operations
A step forward in the liberalisation of foreign exchange market in Serbia has been accomplished by the enactment of the Law on Amendments to the Law on Foreign Exchange Operations (Official Gazette of the Republic of Serbia, no. 31/2011; "F/X Law Amendments"). Certain restrictions that impeded foreign business operations have been removed or clarified by F/X Law Amendments. Nevertheless, the foreign exchange regime remains subject to detailed regulation and the classification of business operations either as permitted or unpermitted which in practice requires careful transaction structuring when Serbian residents are involved in order to adjust to the permitted business operations' modalities.
The 180 day restriction for effecting transfer of funds into Serbia under foreign trade operations does not apply anymore. Provisions pertaining to the obligations of residents to effectuate the transfer of funds into Serbia from export of goods and services abroad, that is, to import goods and services into Serbia that have been paid for in advance, ceased to be applicable in accordance with F/X Law Amendments. Under newly established regime, all export/import operations of goods and services under which the contracted time between import/export is in excess of one year are regarded as commercial credits and are therefore subject to registration with the National Bank of Serbia ("NBS") jointly with other foreign trade operations.
More Detailed Regulation of Cross Border Set-Off. The F/X Law Amendments finally confirmed that a set-off between residents and non-residents in foreign trade of goods and services is allowed. In practice, this shall be achievable upon the enactment of corresponding secondary legislation. The F/X Law Amendments provide for the possibility of setting off the claims arising from foreign credit operations, foreign trade and direct investments as well as real estate investments, in accordance with the conditions to be prescribed by the Government of the Republic of Serbia, upon the proposal of the NBS. Additionally, it would be necessary, in each particular case, to procure the approval of the Ministry of Finance confirming the fulfilment of the relevant conditions, issued on the basis of debt status confirmation provided by the NBS. Relevant secondary legislation is expected in November 2011.
Extension of the grounds for foreign currency payments in Serbia. The grounds for payments made in foreign currency in Serbia are extended and include, inter alia, (i) programs and projects financed from development aid provided by the EU, (ii) donation for humanitarian, scientific and cultural purposes, (iii) banking guarantees, provided that such a guarantee is a condition for the execution of the principal operation which may be conducted in foreign currency in Serbia, (iv) the payment of allowances for business trips abroad (that can be effectuated in foreign currency), and (v) the payment of salary to employees in diplomatic and consular representative offices, organizations within the UN and within international financial institutions in Serbia etc.
Reporting on tax haven operations. The Government of the Republic of Serbia has been granted by the F/X Law Amendments the authority to enact secondary legislation regulating the reporting by residents on operations with non residents seated in any country or territory that adopts a privileged tax system, or with which no proper information is shared or in which information concerning business or assets is protected by strict confidentiality rules. It is foreseen that the Government of the Republic of Serbia shall enact a national list of respective countries or territories based on the relevant lists of the international organizations.
Regulation of the Guarantee Operations. After years of having a legislative gap, cross border guarantee / surety operations have finally been regulated. Under the new regime, domestic banks are allowed to issue guarantees, bill of exchange security and other types of suretyship with regard to operations between residents and non-residents. Domestic banks can also acquire guarantees provided by foreign banks in relation to such operations. Additionally, a domestic bank may procure guarantees provided by foreign banks as well as guarantees, assurances and other types of security for claims that non-residents have against residents. Moreover, it is provided that the resident – legal entity may provide suretyship in favour of a non-resident with regard to the import of goods and services of other resident as well as to non-residents that perform investment operations in Serbia. Also, a resident – legal entity may obtain a guarantee and suretyship from a non-resident in relation to the export of goods and services and with regard to the performance of investment operations, as well as in relation to operations between such residents and other resident - legal entities in Serbia.
The regulation of syndicated lending and subordinated loans that have been provided to a foreign entity branch office. Amongst other things, it is stipulated that domestic banks may participate in syndicated credit/loans provided by a group of foreign creditors to a resident provided that the participation of the domestic bank is not lower than 10%. However, for financing import of goods and services, the participation of the bank can be less than 10%.. Also, domestic banks may participate where a syndicated credit/loan is granted to a non-resident, provided that the payment security instruments are provided by a non-resident. As an exception to general restrictive regime, purchase and sale of claims between consortium members is allowed.
Crediting from abroad into the RSD has been enabled. In the wider context of the "dinarisation" policy of the NBS, the possibility for international financial organizations and development banks or financial institutions founded by foreign countries to grant credit in dinars to residents has now been provided.
Other changes. The F/X Law Amendments introduce a few other changes such as: (i) the introduction of a unified public registry for the foreign currency accounts of local companies held with the NBS; (ii) money transfer services with regard to international payment operations are now regulated for the first time; (iii) the obligation of transferring revenue realized abroad into Serbia on the basis of conducting investment operations abroad is no longer applicable; (iv) the competencies of the Foreign Exchange Inspectorate have been extended etc.
Entry into force and application. F/X Law Amendments have entered into force and became applicable as of 17 May 2011 except for several provisions (mainly pertaining to exchange operations and certain misdemeanours) whose application has been postponed until the 31 December 2011 i.e. 1 January 2012. Secondary legislation for the execution of the F/X Law should be enacted within 6 months as of its entry into force i.e. by 17 November 2011 (subject to few exceptions which will be implemented until 31 December 2011). Until the enactment of new secondary legislation, the existing by-laws shall remain applicable, to the extent that they are not contrary to the F/X Law.
The Protection of Financial Services Customers
For purpose of the fulfilment of international undertakings and the harmonization of legislation in the field of the protection of financial services consumers, with the Consumer Credit Directive 2008/48/EC and the Payment Service Directive 2007/64/EC, for the first time in Serbia, the Law on the Protection of Financial Service Customers (Official Gazette of the Republic of Serbia, no. 36/11;"PFSC") has been enacted.
The PFSC has entirely incorporated the Consumer Credit Directive 2008/48/EC into Serbian legislation, and in addition, new consumer rights have been established to coincide with the domestic market’s particularities. Unlike the aforementioned Directive, the PFSC encompasses all of the banking products and services, and not only consumer loans.
Application – financial services customers. The PFSC regulates the rights of financial service customers with regard to services provided by the banks, leasing providers and merchants, as well as conditions and the manner of the realization and the protection of such rights. The financial service customer is a natural person, and the PFSC excludes its application to that of legal or natural persons that perform commercial activities.
Rights of financial service customers. The principal rights of financial service customers are (i) the right to equality in relation to a financial service provider, (ii) the right to protection from discrimination, (iii) the right to be informed, (iv) the right to the concreteness and definability of contractual commitments, and (v) the right to the protection of one’s rights and interests.
Change of essential contractual terms. As one of the most important changes, the PFSC introduces rule according to which the bank (or leasing provider) that intends to amend (change) any essential contractual term is obliged to procure prior consent from the customer. In case the customer does not consent to such change, financial service provider cannot unilaterally amend essential contractual terms or rescind the agreement. As concerns other contractual terms (non essential), the customer has to be timely and in prescribed contractual manner informed on change of such terms of the concluded agreement.
Assignment of receivables arising out of credit agreement. The bank may assign receivables arising out of a credit agreement solely to the other bank. In the case of assignment, the customer retains all of the previously agreed contractual rights. The bank, to which the receivables have been assigned, cannot place the customer in a less favourable position compared to position that such customer would have had in the case that such an assignment had not taken place in the first place. Furthermore, the customer cannot be exposed to additional costs. Naturally, the bank is obliged to inform the customer upon the assignment of receivables.
The NBS’s competencies. The prescribed monetary penalties that the NBS can impose in the event of a breach of PFSC provisions range from RSD 500,000 (approx. EUR 5,000) to RSD 2,000,000 (approx. EUR 20,000).
Entry into force and application. PFSC has entered into force on 4 June 2011 and shall be applicable as of 5 December 2011, except for the provisions of Article 38 paragraph 5 which shall become applicable as of 1 January 2012 (customer liability up to RSD 15,000.00 (approx. EUR 150) in case of unauthorized use of payment card). The deadline for the enactment of this secondary legislation was 4 September 2011. The financial service providers are obliged to harmonize their general acts with the PFSC and the secondary legislation within three months as of the enactment of the relevant regulations.
Interest rates. Under another important rule, financial service providers will not be allowed from now on to increase interest rate on the basis of undeterminable contractual factors. The same applies during the intermediate period i.e. as of PFSC's entry into force until the beginning of its application (i.e. as of 4 June 2011 until the 5 December 2011). Additionally, the finance service providers are bound to decrease all interest rates in the existing agreements to the amount applied at the date of signing of initial agreement (to the extent such interest rate was not sufficiently determined).
Adjustment. Until the commencement of the application of PFSC on the 5 December 2011 the financial service providers are obliged to adjust all of the respective agreements in order to comply with the rules on the determinability of contractual obligations and the prescribed amount of variable interest rates. In order to avoid the misuse of the process of adjusting contractual provisions the legislator has foreseen (Article 54 paragraph 4 PFSC) that the financial service providers are not allowed to charge additional fees for contractual adjustment services to their consumers, nor are such providers entitled to ask for additional documentation to be provided either. Concerning the amount of requested adjustments it is evident that the adjustment process shall require adequate time and recourse on behalf of the respective financial service providers.
Enforcement and Security
As of the 17 September 2011 enforcement and security is regulated by the new Law on the Enforcement and Security (Official Gazette of the republic of Serbia, no. 31/11, "LES"). The purpose of the LES enactment has been to cure deficiencies of the currently applicable Law on Enforcement Proceedings (Official Gazette of the Republic of Serbia, no. 125/04) which brought about a situation whereby following the finality of a judgment a new ambiguous and protracted enforcement proceedings had to be initiated sometimes lasting longer that initial litigation proceedings.
Professional Bailiffs. The professional bailiff i.e. the "bailiff" (as defined by the LES) is a new profession in Serbian legal system with corresponding public competencies. In the enforcement request, creditors are obliged to decide, that is, to indicate whether the enforcement shall be carried on by court or by professional bailiffs. Enforcement by court enforcers is exclusively provided in the area of family matters and employee's return to work.
The fundamental characteristics that are required of the bailiffs in the system established by the LES are as follows:
- Bachelor law degree;
- Relevant working experience;
- Passing a specialized exam, licensed by the Ministry of Justice of the Republic of Serbia;
- It’s own funds and equipment, and liability with its own entire assets;
- Acting individually within the legal framework and the competencies granted by the creditor;
- Charging for provided services in accordance with specified tariff;
- Paid by the debtor that carries on the enforcement costs;
- Obligation to be insured against professional risks.
Payment transactions
Amendments of the Law on Payment Transactions (Official Gazette of the Republic of Serbia, no. 31/2011, "LPT Amendments") were adopted in order to solve problems arising in practice, which relate, inter alia, to debtor-creditor relations and certain anomalies associated with the forced payment procedure.
Submission of information in payment transactions. One of the changes concerns the way banks are informed of status and other changes of legal entities and entrepreneurs. Namely, in accordance with the LPT Amendments, the obligation of legal entities and entrepreneurs to inform the bank within 3 days on the performed status change has finally been abandoned. Banks are obliged to obtain information on the status and other changes from the Business Registers Agency each day, electronically.
Registry of bills of exchange and authorizations. The most important change is related to the manner of forced collection on the basis of bills of exchange and collection authorizations ("authorizations"). In accordance with the LPT Amendments, the registry of bills of exchange and authorizations, run by the NBS, has been introduced, and it is prescribed that, with certain exceptions, a forced collection (performed by the NBS) will be possible only if the bills of exchange and authorizations were registered in the registry.
The registry for bills of exchange and authorizations is managed electronically, and information will be available on the NBS website. A request for the registration of bill of exchange or authorization is submitted to the bank by the debtor, and the bank then issues a confirmation regarding the registered bills of exchange and authorizations. The date and time that the information inscribed in the registry is announced on the NBS website is deemed to be the date and time of the registration of bills of exchange and authorizations, and the bank shall be liable for the correctness and accuracy of the information.
In accordance with the LPT Amendments, the NBS has adopted a Decision on the Detailed Terms, Contents and Manner of Keeping the Register of Bills of Exchange and Mandates (Official Gazette of the Republic of Serbia, no. 31/2011, "Decision") which will become effective on 1 February 2012. The Decision, inter alia, stipulates that bills of exchange issued by 31 May 2004 as well as authorizations issued before 1 April 2010 will not be registered and may be enforced by way of a forced collection. Likewise, bills of exchange/authorizations that are due for payment within 120 days from the Decision becoming effective will not be registered. The mandatory registration of bills of exchange/authorizations, as a precondition for forced collection, applies to bills of exchange/authorizations that are issued at the latest within 120 days of the Decision becoming effective and which are due for payment after the expiry of this deadline (120 days), i.e. from 30 May 2012.
Forced collection from the accounts of the debtor. Ranks of priority for forced collection have remained unchanged and collection on the basis of due securities, bills of exchange and authorizations (third rank of priority) is enforced according to the time that the forced collection order was received (regardless of the day of issuing the document). Changes are reflected in the manner of the carrying out the forced collection and relate to the following:
- First, grounds for a forced collection of a first and second rank of priority are disclosed directly to the NBS, which immediately orders all banks to block all RSD and foreign currency accounts of the debtor, not to open new accounts for the debtor and to disclose promptly to the NBS information on the balance on the existing accounts of the debtor;
- Secondly, the NBS informs the bank where the debtor has the highest balance on an open RSD account, by way of an order, that the forced collection order shall be enforced from that account, and that if that account does not have sufficient funds such orders will be issued to other banks where the debtor has opened RSD accounts. In the event that RSD accounts do not have funds, enforcement is ordered from other accounts;
- Finally, assets exempted from the enforcement procedure are those assets excluded from enforcement by law, act of the Government, an NBS regulation, a court decision or a decision of the tax or customs authority. Apart from these, assets that have been determined as being set aside for a payment on the basis of a letter of credit and deposited as security for a loan are also exempted from such enforcement.
- It is expected that the abovementioned changes will contribute to the better and faster collection of obligations due, as well as leading to a better overview of the financial standing of potential business partners.
Penalty interest rate
The Parliament of the Republic of Serbia has adopted the Law on Amendments to the Law on Penalty Interest Rate (Official Gazette of the Republic of Serbia, no. 31/11, "LPIR Amendments") which has been applicable since 17 May 2011.
- The monthly consumer prices growth rate; and
- A fixed monthly 0.5% rate.
The LPIR Amendments prescribe that in the transitory period from 1 January to 16 May 2011, the penalty interest rate was set at 1.2305% (monthly), as determined on the basis of "monthly retail price growth rate" (the earlier parameter) for December 2010. However since 17 May 2011, the "monthly consumer prices growth rate" is exclusively used for the determination of penalty interest rate.
In months where "monthly consumer prices growth rate " is greater than 10% or more of the NBS reference rate, the arithmetical median of the NBS reference rate and the "monthly consumer prices growth rate" shall be used for the calculation of the penalty interest rate, instead of the "monthly retail price growth rate", which was the case earlier prior to the introduction of the said amendments.
The publication of relevant information. In accordance with Article 5a of the LPIR Amendments, the Statistical Office of Serbia publishes on its web page (www.stat.gov.rs) information on the monthly growth of consumer prices in the Republic of Serbia. Likewise, the NBS publishes on its web page information on the reference rate (http://www.nbs.rs/internet/english/30/30_4/30_4_5/index.html). The interest rate for the relevant period shall be calculated on the basis of the information that has been published.
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Month of the 2011
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Penalty interest rate
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January – May (until 16.05)
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1.2035%
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May (from 17.05)
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0.9020%
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June - July - August
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0.5000%
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Voluntary financial restructuring
The Law on Voluntary Financial Restructuring (Official Gazette of the Republic of Serbia, no. 36/11), was drafted in response to the problems that the Serbian economy is facing It has been applied since 1 September 2011, and introduces a number of changes in different areas. Financial restructuring under this law concerns companies that are experiencing financial difficulties (illiquidity, threatened illiquidity or over-indebtedness), that are entering into a financial restructuring process (including a moratorium) with at least two foreign or domestic banks as creditors.
The law is very short, and the following provisions are of special importance:
- Content of the financial restructuring agreement: the law stipulates a number of measures that could be implemented by this agreement (i.e. changes of tenor and interest rates, debt write-off, debt for equity swap, the conclusion of loan agreements or securities issue etc.), and the agreement has to be mandatorily registered with the Business Registers Agency;
- Pledge: collaterals established in order to secure a receivable that is undergoing restructuring continue to exist, and the law explicitly prescribes that the cadastre and pledge registry have to amend information regarding registered collateral in such instances;
- Dispute resolution: the Serbian Chamber of Commerce acts as an institutional mediator between debtors and creditors whose mutual interests are subject to restructuring.
Bearing in mind the existing experience of financial restructuring in Serbia, especially regarding security interests, it is certain that the practical application of this law will be followed by certain controversies.
The deadline for the adoption of bylaws has since expired, but only the Chamber of Commerce has adopted the requisite rulebook on institutional mediation. The Minister of Economy and Regional Development still has to prescribe in detail the content of the moratorium agreement.
Redefined insolvency criteria (a permanent inability to pay and over indebtedness, as well as the failure to comply with a reorganization plan that has been adopted, or the participation in a fraudulent and/or illegal plan) and principles regarding the insolvency proceedings;
BOSNIA AND HERZEGOVINA
Over the last nine months there were few significant legislative changes in the area of banking and finance regulations in Bosnia and Herzegovina. The following regulations have been adopted in the Republic of Srpska: (i) the Law on Amendments to the Law on Banking Agency of the Republic of Srpska and (ii) the Rulebook on the Banking System Ombudsman of the Republic of Srpska. In the Federation of Bosnia and Herzegovina the main legislative changes pertain to the enactment of (i) the Rulebook on the methods, deadlines and the manner of the preparation, presentation and hand over of consolidated financial statements as well as (ii) the Guidelines for Licensing and the Issuance of Other Approvals by the Banking Agency of the Federation of Bosnia and Herzegovina.
Extension of powers of the Banking Agency of the Republic of Srpska and the Introduction of a Banking System Ombudsman in the Republic of Srpska
The Law on Amendments and Supplements to the Law on the Banking Agency of the Republic of Srpska (Official Gazette of the Republic of Srpska, no. 40/11, "LBA Amendments") has been effective since the 21 April 2011.
Competencies of the Banking Agency. The LBA Amendments have extended the competencies of the Banking Agency of the Republic of Srpska ("Agency"). The Agency can now:
- Supervise and carry out the necessary activities in order to prevent money laundering and the financing of terrorism, in relation to the activities of banks, microcredit organizations, savings and loans organizations and other financial organizations;
- Supervise and carry out other activities in accordance with the regulations on the introduction and application of certain temporary measures for the efficient performance of international restrictive measures;
- Adopt bylaws on anti-money laundering and counter-terrorism financing and consumer protection, as well as carry out consumer protection activities.
Amendments to the Rulebook on Consolidated Financial Statements in Federation of Bosnia and Herzegovina
Consolidated financial statements. In accordance with the Rulebook, consolidated financial statements are statements prepared at the level of a group of related legal entities which for reporting purposes form one economic entity: (i) a legal entity exercising control over one or more legal entities as well as controlled legal entities, (ii) legal entities participating in the joint control over one or more legal entities, (iii) legal entities having significant influence over one or more legal entities.
The standards and form of reporting. This Rulebook regulates the preparation of consolidated financial statements, and provides that the International Accounting Standards (IAS) and International Standards of Financial Reporting (IFRS) shall be applied. Consolidated statements prepared in accordance with IAS/IFRS and the Rulebook must be prepared in the specified form depending on the organization of the parent company. The management are obliged to make financial statements publicly available.
Deadlines for the preparation and submission of financial statements. Legal entities that are obliged to prepare and present their consolidated annual financial statements must submit them by 30 April of the current year (for the previous year).
Licensing and issuing of consents by the Banking Agency of the Federation of Bosnia and Herzegovina
The Managing Board of the Banking Agency of Federation of Bosnia and Herzegovina on 7 July 2011 adopted Guidelines for the Licensing and the Issuance of other Approvals by the Banking Agency of Federation of Bosnia and Herzegovina (Official Journal of Federation of Bosnia and Herzegovina, no. 46/11, "Licensing Guidelines"). These closely define the grounds for the issuing and terminating of licences. It also provides guidelines for other approvals concerning the performance of banking activities by the Banking Agency of Federation of Bosnia and Herzegovina ("FBA").
The main goal of the Licensing Guidelines is the establishment of the general criteria for the performance of the statutory competences of the FBA whilst facilitating the effective issuing of its decisions and rulings. The Licensing Guidelines regulate that banks may disclose their requests to the FBA which relate to: the issuing of a banking license, the termination of a banking the license; the authorization to establish organizational units (branches and other organizational units), a license to establish a subsidiary of the bank seated outside of the territory of the Federation of Bosnia and Herzegovina, the approval for a capital reduction or the reduction of the capital structure through the repurchase of its own shares, the approval for an increase or decrease in the qualified shareholding interest in the bank etc.
Banks are obliged to adjust their operations in order for them to be in line with the provisions of the Licensing Guidelines by 27 October 2011.
In Montenegro, a new Law on Insolvency was adopted in December 2010 and entered into force in the beginning of 2011. Furthermore, as of the end of July 2011, public notaries began providing their services in accordance with the Law on Notaries.
Insolvency Law
Main characteristics.
The LI has largely been based on the UNCITRAL Guide on Insolvency Law from 2004. The main characteristics of the LI are the following:The LI has largely been based on the UNCITRAL Guide on Insolvency Law from 2004. The main characteristics of the LI are the following:
• A change in the competence of the authorities in the insolvency proceedings, as well as changes to the procedural provisions that relate to the insolvency estate, the ranking of creditors and the settlement of insolvency creditors;
• The redefining the consequences of the insolvency procedure, including provisions related to important matters such as the right to set-off, conditional claims and cherry picking;
• Changes to the regime for the challenging of the transactions of the insolvency debtor (regular and irregular settlement, direct and wilful harm to creditors, transactions at undervalue or without consideration as well as transactions with related parties);
• Provisions regulating reorganization, as well as the detailed regulation of the reorganization plan;
• Provisions regulating international insolvency.
Notaries began to work in Montenegro
Transactions executed as a notarial deed. The Law prescribes a list of transactions which, in order to be legally effective, need to be notarised. These are as follows: 1) marital agreement and an agreement on property issues between spouses and partners; 2) agreements on the disposal of assets of minors and persons without business capacity (regarding immovables or objects or rights of greater value) 3) agreements on the division and transfer of assets, maintenance agreements and inheritance statements; 4) purchase agreements with a retention of title; 5) gift pledges and gifts causa mortis; 6) transactions related to the transfer or acquisition of title or other property rights over immovables (to be notarised by a notary who’s jurisdiction is within the area the immovables are located). From the beginning of the notaries’ work, agreements may not be certified anymore in competent courts (which have previously provided such service).
With respect to collaterals, mortgage agreements and (preferably) share pledge agreements should from now on be executed in the form of a notarial deed.
MACEDONIA
In Macedonia, on 4 February 2011 the amendments to the Law of Investment Funds entered into force while the amendments to the Law on Foreign Exchange Operations are applicable since the 1 April 2011. Further amendments to the Law on Foreign Exchange Operations Act are in a preparatory phase.
Changes in the Law on Foreign Exchange Operations in Macedonia
Operations by residents with securities abroad. The most important amendments are the ones that allow residents to subscribe (free of charge) and to sell securities abroad using the services of authorized participants of foreign stock exchanges or other organized securities markets abroad. This change comes alongside the previously given opportunity to indirectly participate on international stock markets by utilising the services of authorized participants of the securities market in Macedonia (i.e., broker-dealer houses, banks, insurance companies, pension funds, investment funds). Furthermore, the FOREX Law Amendments place an obligation upon residents that perform the registration or trade of securities abroad, using the services of authorized participants of the foreign markets, requesting them to submit a respective report to the National Bank of Republic of Macedonia. The respective report should be submitted on a monthly basis, by the 20th day in the month reporting for the previous month. Reports are submitted only for the months where transactions were performed.
However, regardless of aforementioned amendments, as opposed to the subscription (free of charge) and sale of securities abroad, residents (other than authorized banks) are still not allowed to purchase the securities abroad. The final provisions of the FOREX Law Amendments prescribe that this restriction would be removed (and the provision that limits the right of residents to trade directly on foreign securities markets would be invalidated) after the entrance in the second stage of the Stabilization and Association Agreement between Macedonia and the European Union. However, this decision depends on other political issues and it cannot be predicted when this will formally happen.
Supervision and implementation. The FOREX Amendments expand the authorised institutions for supervision of the implementation of the law. Aside the previously authorized institutions (National Bank of the Republic of Macedonia, Customs Administration, Ministry of Economy and Securities and Exchange Commission (the "SEC")), the amendments introduce the State Foreign Exchange Inspectorate, body within the Macedonian Ministry of Finance, as responsible for supervision of the implementation of the FOREX Law Amendments.
Furthermore, the changes introduce new rights and obligations for the inspectors that supervise the enforcement of the FOREX Law Amendments. The amendments aim to increase the efficiency of the inspectorate.
Amendments of the Law on Investment Funds in Republic of Macedonia
Amendments related to non-compliance. The amendments introduce a new provision regarding settlements and payment orders related to the offences prescribed by the Law on Investment Funds. Overall tendency of reduction of the amount of fines is evident, compared with the previous provisions of the law. On the other hand, there are new misdemeanours introduced which are related to (i) conclusion of written agreements with clients, (ii) principles of advertising of investment funds, as well (iii) establishment of risk management of the funds.
Further development of the Macedonian securities regulations
At this moment, the Macedonian Assembly is processing draft amendments to the Law on Securities (Official Gazette of the Republic of Macedonia, nos. 95/2005 25/2007, 7/2008 and 57/2010). Such amendments should improve the procedures before the SEC related to the obtainment of authorisations, approvals and other similar documents. The proposed amendments should reduce the time period in which the SEC would have to decide on requests regarding the extension of licences of brokers and investment consultants. In that direction, the amendments in details prescribe a new administrative procedure for cases of silence of administration. Moreover, it is expected that the changes would introduce opportunity to address the president of the SEC and further alarm the State Administration Inspectorate, prior to initiation of administrative disputes.
The amendments of the Law on Securities should introduce the changes mentioned here, as well as other changes, and are expected to be enacted until the end of 2011.