Status changes – types, procedure, and legal consequences

Status changes of a company are reorganization procedures through which assets and liabilities are transferred from one company to another, or a new company is formed, while simultaneously regulating the rights and obligations of shareholders or company members. The Serbian Company Law precisely defines the conditions and procedures for implementing status changes, emphasizing that they can have significant legal and economic consequences for all parties involved.

In practice, a status change can involve the termination of a company without liquidation, the transfer of business activities to another company, or the establishment of an entirely new entity. These changes are highly important because they enable operational flexibility while ensuring the continuity of legal relations and the protection of creditors.

For owners and investors, status changes provide an opportunity to restructure business operations in line with strategic goals, while for the market, they serve as a mechanism to encourage competitiveness, consolidation, and more efficient use of resources.

Types of status changes

According to the Serbian Company Law, status changes can take several forms, depending on the goals of the reorganization and the specific needs of the company. Each form has its own characteristics and legal and economic implications for the companies involved in the process.

Merger by acquisition

Merger by acquisition involves one or more companies being absorbed by another company through the transfer of all their assets and liabilities to the acquiring company. The absorbed company ceases to exist without liquidation, while the acquiring company continues its business on an expanded scale. This type of status change is often used to consolidate operations, increase market share, or reduce costs.

Merger by formation of a new company

In this procedure, two or more companies merge to form a new legal entity. All rights, obligations, and assets of the merging companies are transferred to the newly established company. This type of merger is typically carried out when companies aim to pool their capital and resources to create a stronger market player or achieve strategic synergies.

Division

Division involves the transfer of assets and liabilities of one company to other companies, resulting in the dissolution of the transferring company. It can be carried out in the following ways:

• Division by formation – new companies are created.

• Division by acquisition – assets are transferred to existing companies.

• Mixed division – a combination of forming new companies and transferring assets to existing ones.

Division is often used when a company wants to separate different business activities into distinct organizational units.

Spin-off

A spin-off is a form of division in which a company transfers part of its assets and liabilities to one or more newly established or existing companies. Unlike division, however, the original company continues to exist and operate. It can be carried out through:

• Spin-off by formation,

• Spin-off by acquisition,

• Mixed spin-off.

This form is most commonly applied when a specific business unit is separated for easier management or in preparation for a strategic partnership.

Procedure for implementing a status change – plan, contract, and registration with the Business Registers Agency (APR)

The implementation of a status change is a carefully regulated procedure that requires the preparation of extensive documentation and compliance with legally prescribed deadlines. While the process may vary depending on the type of status change, there are several mandatory steps that apply to all forms.

1. Status change plan

The first step is to prepare a detailed status change plan, which clearly outlines the reasons for the reorganization, the method of transferring assets and liabilities, and the position of shareholders or company members in the successor company. The plan includes financial statements, an asset and liability valuation report, and a business projection for the period following the reorganization.

2. Status change contract

Based on the plan, the participating companies enter into a status change contract, which regulates their mutual rights and obligations. The contract must be in written form, and in the case of joint-stock companies, it is subject to additional requirements and shareholder protection procedures.

3. General assembly decision

A status change cannot be implemented without a decision by the company’s general assembly, adopted by the majority required by law or the company’s founding act. This decision confirms the company’s intention to carry out the reorganization and accept the terms of the contract.

4. Registration with the Business Registers Agency (APR)

Once the decision has been adopted, a request is submitted to the Business Registers Agency (APR) for the registration of the status change. The APR examines whether all legal requirements have been met and, if so, issues a registration decision. From the date of registration, the status change is considered effective, and the participating companies are treated in accordance with the new legal structure.

This procedure requires accuracy and legal expertise, as any mistake in the documentation or process can result in the rejection of the application by the APR or lead to future disputes between the parties involved.

Rights and protection of shareholders and company members

Status changes have a direct impact on the position of company members and shareholders, which is why the law provides specific mechanisms for their protection. These mechanisms ensure that the rights of members and shareholders are not diminished as a result of reorganization, but that they receive fair treatment and the opportunity to safeguard their interests.

Right to additional payment

If, after a status change, a company member or shareholder receives shares or equity interests whose value does not correspond to their previous share in the company’s capital, they have the right to request an additional cash payment. This ensures fairness in the distribution of assets and preserves proportional ownership.

Dissenting shareholder’s right

A shareholder who votes against the status change decision and believes that their rights are being jeopardized may exercise the dissenting shareholder’s right. This allows them to request that their shares be bought back at fair value, preventing them from being forced to remain in a company undergoing a reorganization they do not agree with.

Right to information

All members and shareholders have the right to be informed in a timely manner about the planned status change. This includes access to the status change plan, financial statements, and the opinions of certified auditors, enabling them to make well-informed decisions.

These rights are essential to maintain a balance between the interests of the majority and the protection of minority shareholders or members. They also contribute to transparency and trust throughout the reorganization process.

Protection of creditors and third parties

Status changes affect not only company members and shareholders but also creditors and other third parties that have legal relationships with the company. For this reason, the Serbian Company Law provides specific mechanisms to ensure legal security for all interested parties.

Right to claim security

Creditors who believe that a status change could endanger the collection of their claims have the right to request appropriate security. This is usually achieved through guarantees, mortgages, or pledges, and the company is obligated to provide such protection if the creditor proves that their claim is justified.

Joint and several liability of participants

All companies involved in the status change are jointly and severally liable for obligations that arose before the registration of the change. This prevents creditors from losing their ability to collect their claims, regardless of how assets are redistributed among the companies.

Liability of directors

Directors and members of management bodies are required to act in good faith and in the best interest of the company during the status change process. If their actions cause damage to creditors or third parties, they may be held personally liable.

These mechanisms help build trust among business partners and strengthen the stability of the legal system. Without adequate creditor protection, status changes could not fulfill their main purpose — to contribute to the growth and sustainability of the economic system.

Tax aspects of status changes (2025 updates)

The tax treatment of status changes is one of the most sensitive issues in practice, as improperly executed reorganizations can lead to significant tax liabilities and financial risks. For this reason, the law provides special rules governing taxation in cases of mergers, acquisitions, divisions, or spin-offs.

Who files the tax return?

The acquiring or newly established company is required to submit a tax return within the deadline prescribed by the Corporate Income Tax Law. The tax return must include all transferred rights and obligations, as well as any adjustments resulting from the status change.

VAT treatment

When it comes to value added tax, transfers of assets and liabilities within status changes are generally not treated as the supply of goods, provided that the transfer involves the whole or a part of a business that constitutes an independent economic unit. This avoids additional taxation and ensures business continuity.

2025 updates

As of 2025, stricter reporting obligations have been introduced for divisions and spin-offs. Newly established or existing companies receiving part of the assets and liabilities must submit a division implementation report to the Tax Administration. This report documents the exact scope of the assumed liabilities and the value of transferred assets, increasing transparency and facilitating tax audits.

Proper understanding and application of tax obligations in status changes are crucial for maintaining financial stability and avoiding disputes with tax authorities.

Cross-border status changes and European company forms

With growing globalization and the integration of the European market, cross-border status changes are becoming increasingly important. They allow companies registered in Serbia to reorganize by transferring assets and liabilities to companies established in other EU member states, and vice versa — enabling foreign companies to enter the Serbian market through mergers, acquisitions, or spin-offs.

European company forms (SE and EEIG)

In addition to national legal forms, European company structures are increasingly used in practice, such as:

• SE (Societas Europaea) – a European public limited-liability company that allows for the free transfer of its registered office within the EU and facilitates business operations across multiple markets.

• EEIG (European Economic Interest Grouping) – a form of cooperation between companies from different member states, aimed at enhancing shared business objectives without creating a traditional commercial company.

Advantages for investors

Cross-border status changes give investors the ability to organize their operations internationally more efficiently, optimize tax structures, and gain access to broader markets. They also allow for capital consolidation and the transfer of business models to new markets without having to establish an entirely new company from scratch.

Incorporating these mechanisms into national legislation aligns Serbia’s legal framework with European standards and contributes to attracting foreign investment.

Legal consequences of a status change

The implementation of a status change leads to important legal consequences that affect not only the existence of the participating companies but also their members, creditors, and third parties.

Termination of the company

In cases of mergers and acquisitions, the transferring companies are removed from the register and cease to exist without undergoing liquidation procedures. Their rights and obligations are automatically transferred to the acquiring or newly established company.

Transfer of rights and obligations

All assets, claims, contracts, and liabilities are transferred to the legal successor. This means that the new entity assumes all ongoing legal proceedings, tax obligations, and contractual relationships of the transferring company. This ensures continuity of legal relations and the protection of third parties.

Successor’s liability

The acquiring or newly established company becomes the universal legal successor, meaning it takes over not only assets but also all liabilities, including those not recorded at the time of the change. In cases of division or spin-off, the successor companies are jointly and severally liable for obligations that existed before the change, unless otherwise regulated by law or contract.

These consequences highlight the importance of thorough preparation and legal certainty during the process, as status changes have far-reaching effects on all parties involved.

The role of lawyers in the status change procedure

Status changes are complex procedures that require professional preparation and careful implementation. The role of lawyers in this process is crucial, as they ensure legal security, regulatory compliance, and the protection of all parties’ interests.

Legal security

A lawyer provides legal certainty to the participating companies by drafting or reviewing the status change plan, contract, and accompanying documentation. Their expertise helps prevent errors that could lead to the rejection of registration or future legal disputes.

Tax risks

Corporate reorganizations also carry significant tax implications. A lawyer advises clients on the tax treatment, new obligations, and potential reliefs, helping them avoid additional costs and the risk of penalties.

Protection of clients’ interests

By representing clients before the Business Registers Agency (APR), the Tax Administration, and other institutions, a lawyer protects their interests and ensures that the rights of shareholders, members, and creditors are fully respected. This achieves a balance between legal compliance and the client’s business goals.

The involvement of a lawyer in status changes is not merely a recommendation but a practical necessity for any company seeking to carry out a reorganization safely and efficiently.

Conclusion

Status changes are not merely a legal requirement but also a strategic tool that allows companies to adapt to market conditions, optimize their operations, and create opportunities for growth. When properly implemented, reorganization enables companies to consolidate resources, separate business activities, or manage capital more efficiently — all while ensuring legal certainty and protecting the interests of all parties involved.

In a dynamic business environment, status changes serve as a mechanism for achieving long-term stability and competitiveness. Their proper application not only strengthens business operations but also builds greater trust among investors, employees, and partners.

Because of their complexity and far-reaching consequences, the implementation of status changes requires the professional support of lawyers who will ensure that the entire process is carried out in accordance with the law and in the best interests of the company.

FAQ – frequently asked questions about status changes

What are status changes of a company?
Status changes are reorganization procedures of companies through which assets and liabilities are transferred from one company to another, or a new company is formed.

What types of status changes exist?
According to the Serbian Company Law, status changes include mergers by acquisition, mergers by forming a new company, divisions, and spin-offs. Each of these has specific consequences for the participating companies and their members.

How long does the status change procedure take in Serbia?
On average, the procedure takes from several weeks to several months, depending on the complexity of the change, the preparation of documentation, and the processing speed of the Business Registers Agency (APR) and other relevant authorities.

What is the difference between a merger by acquisition and a merger by formation?
In a merger by acquisition, one or more companies transfer their assets and liabilities to an existing company. In a merger by formation, a new company is created, and the assets and liabilities of all participants are transferred to it.

Does a status change affect obligations toward creditors?
Yes. Creditors retain their rights, and all companies participating in the status change are jointly and severally liable for obligations incurred before the registration of the change.

How do status changes affect taxes?
Transfers of assets within a status change are generally not subject to VAT, but specific obligations to the Tax Administration must be met. As of 2025, new reporting requirements have been introduced for divisions and spin-offs.

Is the consent of all company members required for a status change?
In most cases, a status change cannot be carried out without a resolution of the company’s general assembly, adopted by the qualified majority prescribed by law or the company’s founding act.

Is it possible to carry out a cross-border status change?
Yes. Cross-border status changes allow the transfer of assets and liabilities between companies established in different EU member states. In practice, European company forms such as SE and EEIG are also frequently used.