Company Director Duties and Liabilities under Serbian Law

Company Director Duties and Liabilities under Serbian Law

The Law on Companies (“Official Gazette of the RS”, Nos. 36/2011, 99/2011, 83/2014 – other law, 5/2015, 44/2018, 95/2018, 91/2019, 109/2021 and 19/2025, hereinafter: the “Law”) provides a broad framework for regulating the role of a director in a limited liability company (LLC). The company may have one or more directors, who may be:

• employed or engaged outside an employment relationship,

• shareholders or external individuals.

Regardless of their status, directors are subject to statutory duties and responsibilities. Below are the key obligations set out by law.

1. Duty of Care

A director must act conscientiously, in the best interest of the company, and with the diligence of a prudent businessperson. This includes:

• possessing relevant expertise and experience,

• relying on trustworthy information and expert advice,

• acting in line with the company’s interests.

If acting accordingly, the director is not liable for adverse outcomes. Otherwise, the company may seek damages.

2. Duty to Disclose Conflicts of Interest

A personal interest under Article 61 of the Law exists, for example, when:

1. a contract is concluded between the company and the director (or a related person),

2. the company initiates legal or procedural action against such a person,

3. a third party has financial ties to the director which may affect their conduct,

4. a third party benefits economically, and has a financial relationship with the director.

In such cases, the director must disclose the interest to:

• the general meeting (if no other directors exist), or

• the supervisory board (in a two-tier management system).

Without proper approval, the contract may be annulled and the director held liable.

Exceptions: Disclosure is not required if:

• the value of the deal is less than 10% of the company’s assets,

• all shareholders have a personal interest,

• the deal involves acquisition or registration of own shares.

3. Duty to Avoid Conflicts of Interest

The director and related persons must not:

• use company assets for personal gain,

• misuse insider information,

• abuse their position,

• exploit business opportunities meant for the company.

If prior approval was obtained, liability is excluded. Otherwise, the company may sue to claim any illicit gain.

4. Duty to Maintain Confidentiality

The director must maintain business confidentiality during the term of office and for at least 2 years after leaving the role (or longer, up to 5 years, if contractually agreed). A business secret includes any non-public information that could harm the company if disclosed.

Disclosure is not a breach if:

• required by law,

• necessary to protect the company’s interests,

• done to report a criminal offense.

5. Duty to Respect the Non-Compete Clause

Without prior approval, the director may not:

• be a member or representative of a competing company,

• operate as a sole trader in a similar field,

• be employed by a competitor,

• be otherwise engaged with a competitor,

• be a founder or member of a legal entity with a similar business scope.

This restriction can continue up to 2 years after the director’s term ends, if provided by the founding act. An exception applies for single-member companies.

6. Liability and Legal Deadlines

If a duty is breached, possible actions include:

• a lawsuit for damages,

• exclusion from the company (if also a member),

• termination of employment (if employed).

Deadlines for legal action:

• 6 months from knowledge of the breach,

• no later than 5 years after the breach occurred.

Lawsuits may be filed by:

• an individual shareholder (individual claim),

• one or more shareholders on behalf of the company (derivative action).

For further information, feel free to contact us via email at office@mlaw.rs or through the contact form on our website.