Financial report for companies with non-serb...

Financial report for companies with non-serbian directors
– Is it possible to submit it in time? -

It is only fair to start this analysis with the statement that 2020 is a challenging year in many ways for all of us. Covid-19 virus has turned our lives upside down, we are wearing masks, keeping social distance from our friends, family and coworkers, washing our hands much more than usual etc.

Not only our personal life has been affected, but the economy is suffering too, both globally and nationally. Since it is, unfortunately, our reality at this moment, we all have to strive to go an extra mile, work a bit harder, help endangered ones a bit more, be more responsible. That applies to us as individuals, us as lawyers, and it should also apply to public authorities. And it does, in most of the situations.

However, here we would like to present one problem, serious problem, where the state authorities did not find the best way to deal with the crisis that we have. It was a business problem that has affected companies whose directors are not Serbian, nor are living in Serbia. Not to be confused by this narrowing formulation, that is actually a huge number of companies.

The problem consisted of the fact that every company has a duty to file a financial report in a certain deadline, and that financial report has to be signed by the company director’s electronic certificate. In order to have an electronic certificate (or renew one if he already have had it) a director has to, after the procedure is done, personally collect that signature in official certification body (e.g. in Serbian Chamber of Commerce head office). And there lies the problem. If the director is not a Serbian citizen nor he lives in Serbia, in Covid-19 conditions, it was impossible or at least very difficult for him to come in Serbia, so he could not collect his electronic certificate, which means that company could not submit the financial report on time, which finally leads to company and himself paying a huge penalties for that.

After this short introduction to the problem, we would like to give more detailed explanation:

It all started with the first wave of Covid-19 pandemic in Serbia, when the authorities have thought about the financial reports submitting problem, and have done following: The Government of Republic of Serbia, with co-signature of President of Republic of Serbia, has on the day of 16th April 2020 given the Decision on postponing the deadlines for holding the regular session of the companies assembly and submission of annual consolidated financial reports of companies, cooperatives, other legal entities and entrepreneurs, as well as deadlines for submission of applications for income tax and self-income tax, validity of licenses of certified auditors and licenses to perform estimates of the value of immovable property expiring during the extraordinary Covid-19 diseases caused by SARS-Cov-2 virus.This legal act has moved the deadline for submitting the financial reports (among other things) for 90 days, more precisely, moved it to 04th of August 2020. And that was a good move at the time, no doubt.

After some time, the pandemic seemed to have ended, everything was back to normal (more or less), both lives and economy. And then it happened. Approximately 20 days after the “normalization”, the virus hit us again, and even harder than the first time. As a result we have had an entry ban for Serbian citizens in most countries in Europe (temporarily, of course). At the same time, most European governments have made it very difficult for their citizens to come to Serbia, and even harder to come back home.

This time, however the state of emergency was not pronounced and we were trying to withstand this attack on our feet (which is not necessarily a bad thing, especially for economy) and no deadlines were extended on that behalf. Implication is that deadline for submitting a financial report has not been prolonged, and 04th of August was the last day for submission of financial reports.

Now why was it impossible for foreign directors to fulfill this obligation in that deadline? It is simple, because certain official certification bodies does not perform issuance of their electronic certificate to anyone else but to them personally (companies attorney, for example), and Business Register Agency does not recognize any other way to submit the financial report, then for it to be signed by directors electronic certificate.

And they all claimed that they are only following the legal procedure, both the official certification bodies and the Business Register Agency. And they surely were, no doubt about that. But in this situation, we have had a legal procedure pushing companies and the directors of those companies into an inevitable economic offense. And the fines are large. According to the Article 57 of Serbian Accounting Act, the fine for the company is RSD 100.000,00 - RSD 3.000.000,00 (EUR 850,00 - EUR 25.000,00), and the fine for the director personally is RSD 20.000,00 - RSD 150.000,00 (EUR 170,00 - EUR 1.280,00).

In these hard times, these fines could easily throw some companies that are struggling to survive the crisis, into severe financial problems. And more important than that, they would be fined for something they are not guilty of, and that is and should be unacceptable.

To finish the same way we started, we understand that the situation caused by the pandemic is new to everybody and that it is hard to get used to it and find solutions for every aspect of it, but we all have to be responsible and try and make the best out of it, and that mostly refers to the public authorities.

We are not criticizing nor judging, we are simply pointing out that there was a big problem and it had to be solved in an inevitable manner, for example:

  1. Extension of the deadline for certain period of time, hoping that the virus situations is going to be better by than;
  2. Allowing authorized parties to collect the electronic certificate for directors (e.g. companies attorneys with an valid, Apostille verified Power of Attorney);

To conclude, it was a serious, but easily solvable problem, and we hope that relevant authorities are going to recognize it and learn from it for the future, to be able to do what is best for national economy.