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Branch office

According to the Law on Companies, a branch of a company is a separate organizational part of a company on the territory of the Republic of Serbia, through which the company performs activities in accordance with the law.
At the same time, in legal transactions, the branch acts in the name and on behalf of the company of which it is a part.

The Law on Companies recognizes four forms of companies:

  • Partnerships
  • Limited partnership
  • Limited liability company
  • Stock company

Regardless of the form, any company can establish a branch. In the following text, we will explain what a branch is and point out the specifics of the same. Also, we will say something about a branch of a foreign company and a representative office of a foreign company.

What is a branch office?

The branch does not have the status of a legal entity, i.e. it does not have legal personality, so the company is responsible for obligations to third parties that arise in the business of its branch, and that responsibility is unlimited. This is logical considering that the branch does not have its own separate property because the property of the company is unique, indivisible and belongs to the company as a whole.

Also, unlike the company of which it is a part, the branch does not have its own bodies, but it can have its own manager. Of course, the branch manager does not have the status of a director, so he is not part of the management of the company.

In addition to that, a branch cannot be the subject of status changes, changes of legal form, as well as the subject of bankruptcy and liquidation, while a company can.

However, although it does not have legal personality, the branch has tax subjectivity, so it is obligated to pay taxes.

It is important to emphasize that the predominant activity of the branch may be different than the predominant activity of the company. Therefore, if a company is engaged, for example, in the production of cars as its predominant activity, the branch may have the same predominant activity as the company, but it can also, for example, provide bookkeeping services, all depending on the decision of the founders of company.

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How can a branch be established and terminated?

The branch can be established by an act of the company. In order to do that, the competent body of the company makes a decision about the establishment of the branch. Which body it is, depends on the form of the company that establishes the branch. Therefore, in a partnership, the decision is made by the partners, in a limited partnership by a general partner, while in a limited liability company and a joint stock company, the said decision is made by the assembly of the company.

Decision must contain the following information:

  • business name and registration number of the company. In legal transactions, the branch acts under the business name of the company, so the branch itself does not have a business name. But, branch can have a name, which must be listed next to the business name of the company that founded the branch. In addition to the name of the branch, it is necessary to state its address and emphasize that it is a branch.
  • branch address
  • the predominant activity of the branch, if it is different than the predominant activity of the company
  • personal name, i.e. business name of the branch representative and the scope of the representative’s authorization, if the branch representative is different from the company’s representative. We note here that, in case that the branch representative is registered in accordance with the Law on Registration Procedure in the Business Registers Agency, he is also considered a representative of the entire company, so that all legal restrictions that apply to other company representatives apply to him too.

The decision to terminate a branch is made by the same persons, i.e. the body, which makes the decision to establish a branch. But, the branch can be terminated not only on the basis of the company’s decision, but also if the company whose branch it ceases to exist. However, if the company ceased to exist due to a status change, the legal successor of that company may decide that the branch will continue to operate.

Of course, the branch, all changes of the information related to the branch, as well as the termination of the branch, must be registered in accordance with the Law on Registration Procedure in the Business Registers Agency.

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A branch of a foreign company

A branch of a foreign company is defined by the Law on Companies as a separate organizational part of a foreign company through which that company performs activities in the Republic of Serbia in accordance with the law.

The specifics of this branch are reflected in the elements that the decision on its establishment must contain:

  • name and address of the branch
  • predominant activity of the branch
  • personal name, i.e. business name of the branch representative and the scope of the representative’s authorization
  • name and head office of the register in which the founder of the branch is registered
  • name, legal form and head office of the founder of the branch
  • registration number of the founder of the branch
  • personal name, i.e. business name of the representative of the founder of the branch
  • information about the registered capital of the founder, if, according to the law of the state in which the founder is registered, such data must be registered
  • e-mail address

What is a representative office of a foreign company?

The representative office of a foreign company is its separate organizational part that can perform preliminary and preparatory actions in order to conclude the legal business of that company.

Like a branch, a representative office does not have the status of a legal entity, and the foreign company that established the representative office is responsible for the obligations that arise in its business towards third parties.

The decision on the formation of a representative office is made by the competent body of the foreign company, and the said decision must contain the following elements:

  • name and head office of the register in which the founder of the representative office is registered
  • name, legal form and head office of the founder of the representative office
  • registration number of the founder of the representative office
  • personal name, i.e. business name of the representative of the founder of the representative office
  • address of the representative office
  • personal name, i.e. business name of the representative of the representative office
  • e-mail address

Representative office, all changes of the information from the decision on its establishment, as well as the termination of the representative office, are registered in accordance with the Law on Registration Procedure in the Business Registers Agency.

Like a branch, a representative office may be terminated both on the basis of a decision of the company and due to the termination of the existence of the company that founded it. However, here too, the legal successor of the company which existence is terminated due to a status change, can decide that the representative office will continue to operate.

What is the difference between a branch and a representative office?

First of all, the Law on Companies speaks about the representative office of a foreign company, while on the other hand, it regulates the branch of both domestic and foreign companies. So, in terms of this Law, the representative office is tied exclusively to foreign companies, while the branch can be established by both domestic and foreign companies.

However, the main difference is that the branch performs a certain activity, which may be different from the predominant activity of the company that founded that branch. The representative office, on the other hand, can only perform legal tasks related to its current business, i.e. tasks that are in fact preliminary and preparatory actions taken in order to conclude the legal work of the company that founded it. Therefore, unlike a branch, a representative office cannot perform an activity that is different from the activities of the founding company, and in addition, the range of actions it can take is limited.

For all questions and consultations regards to corporate and commercial law,our law firm is available for you at any time.

Date: 01.08.2020.

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