We have written about the payment of the founding contribution in general in a text that you can view here.

In this article, we will focus on the specifics related to the procedure for paying the founding contribution when the founder, i.e. a member of the company, is a foreign legal entity.

These specifics primarily relate to selecting the correct inflow purpose code and overcoming issues arising from differences between the currency of payment and the currency in which the capital is registered with the Serbian Business Registers Agency (APR). Namely, foreign companies pay founding contributions in foreign currencies, while the share capital can be registered with the APR only in Serbian dinars.

Let us assume that a foreign company has established a company in Serbia and determined a founding contribution of RSD 100,000, but did not pay it at the time of registration of the subsidiary. The registered share capital is therefore recorded as subscribed but unpaid capital in the amount of RSD 100,000.

The question then arises as to how the founding contribution is paid in this situation.

The founding contribution may be paid only by the member, in this case the foreign company. The payment is made via a foreign-currency transfer from the parent company’s bank account to the foreign-currency account of the subsidiary company in the Republic of Serbia.

Once the funds are received, the commercial bank will require the subsidiary to complete a “Notice on Allocation of Inflow.” The inflow purpose code that the company should indicate is 557 – Direct investments – Payment of founding contribution. Along with the inflow allocation notice, the company submits the articles of incorporation, at the bank’s request.

After receiving the completed Notice on Allocation of Inflow, the bank will credit the received funds to the company’s accounts and issue a confirmation stating that the founding contribution has been paid. The confirmation will specify the amount of the founding contribution in dinar equivalent, calculated according to the applicable foreign exchange rate.

The Serbian Business Registers Agency will register the payment of the founding contribution exclusively in the dinar amount stated on the bank’s confirmation.

This means that the amount obtained through conversion of the amount paid by the parent company may not correspond to the amount of the founding contribution expressed in dinars in the articles of incorporation and recorded in the APR register.

For example, if the parent company from our example transfers EUR 854 as a founding contribution, and the commercial bank applies an exchange rate of 116.80 RSD/EUR on the payment date, the dinar equivalent of the founding contribution will amount to RSD 99,747.20. The commercial bank will issue a confirmation stating that a founding contribution in the amount of RSD 99,747.20 has been paid. If the company then submits a registration application to the Serbian Business Registers Agency for registration of a founding contribution in the amount of RSD 100,000, the Agency will not register the payment in that amount. The Agency can only register a founding contribution of RSD 99,747.20, in accordance with the bank’s confirmation. In such a case, the company will have to go through another payment and registration cycle, this time for the difference of RSD 252.80.

In order to avoid additional administration and complications, we recommend the following:

• Transfer slightly more funds in foreign currency than the exact dinar equivalent of the founding contribution (in our example, for instance, transfer EUR 870).
• Establish communication with the commercial bank to verify the applicable exchange rate of the dinar against the foreign currency, so that on the inflow allocation date you can calculate the exact foreign-currency amount corresponding to the founding contribution expressed in dinars. In our example, let us assume that the bank informed us that the applicable exchange rate for conversion would be 116.95 RSD/EUR. In that case, we calculate that we need EUR 855.07 in order to receive exactly RSD 100,000.00 after conversion. We will allocate EUR 855.07 under code 557 – Payment of founding contribution.
• Allocate the excess funds under another inflow purpose code, for example 560 – Additional payments that do not increase share capital. Since in our example we allocated EUR 855.07 out of EUR 870 under code 557, we are left with EUR 14.93, which should be allocated under another inflow purpose code.

If you opt for code 560, together with the inflow allocation notice you must submit a Decision on Additional Payment. Prepare a draft of this decision in advance so that you can complete the entire procedure in one day, once you receive the applicable dinar exchange rate that will be used in the process. The amount allocated under code 560 is not registered with the Serbian Business Registers Agency at the time of inflow, but it must be registered before returning the funds to the parent company, should you decide to repatriate this excess amount abroad.