When deciding to establish a business in Serbia, understanding the differences between a Joint Stock Company (AD) and a Limited Liability Company (DOO) is crucial. Both forms can be founded by domestic and foreign legal or natural persons, but they differ significantly in terms of capital requirements, management structure, and operational complexity. Below, we outline the key distinctions to help potential investors choose the right structure for their needs.
1. Minimum Initial Capital
- AD: Requires a minimum initial capital of 3,000,000 RSD. At least 25% of the capital must be paid before incorporation by all shareholders.
- DOO: Requires a minimum initial capital of only 100 RSD, unless specific laws mandate a higher amount for particular activities. The capital can be paid within five years from the date of registration, offering greater flexibility.
2. Profit Distribution
- AD: Shareholders receive dividends proportional to the value of their shares. Dividends are distributed based on a formal decision, which includes scheduling a dividend day.
- DOO: Members can agree unanimously to distribute profits in a way that does not align with their ownership percentage, allowing for more flexible profit-sharing arrangements.
3. Corporate Governance and Management
- AD: Must have a more complex governance structure, including:
- Executive and non-executive directors, or an independent director.
- A board of directors, if there are three or more directors.
- Obligations to hold a shareholders’ day.
- DOO: Requires only a statutory representative (director). Additional representatives or directors are optional, making the management structure simpler and less formal.
4. Financial Audits and Reporting
- AD:
- Mandatory auditing of financial statements.
- Obligated to disclose detailed information about financial goals, business strategy, ownership structure, and risk assessments.
- DOO:
- Financial audits are required only if the company exceeds specific thresholds for turnover or employee count, as per the Law on Accounting and Auditing.
5. Legal and Administrative Requirements
- AD:
- Must have a Statute as its constitutional act.
- Both the company and its shareholders must be registered with the Central Registry, Depository, Clearing of Securities, and the Business Registers Agency (APR).
- DOO:
- Registration is only with the Business Registers Agency (APR).
- A statute is not mandatory, simplifying legal formalities.
6. Flexibility in Operations
- AD: Designed for larger, more structured businesses with stringent compliance and reporting requirements. It’s ideal for companies planning to raise significant capital or operate on a larger scale.
- DOO: Suited for small and medium-sized enterprises (SMEs) due to its simpler registration process, minimal capital requirements, and flexible governance structure.
Conclusion
Choosing between a Joint Stock Company (AD) and a Limited Liability Company (DOO) depends on your business needs, scale, and growth plans. An AD is well-suited for larger companies seeking substantial capital and a formal governance framework, while a DOO offers flexibility and simplicity, ideal for startups and SMEs.
If you need assistance deciding on the right structure for your business or navigating the registration process in Serbia, reach out to our expert team for tailored advice and support.