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Legal Aspects of Digital Business Transformation

David Bojić • may 16, 2023

Legal Aspects of Digital Business Transformation


The accelerated technological progress in recent decades has brought about fundamental changes in the way businesses operate. Digital transformation has become imperative for the survival and growth of companies. In addition to introducing innovative technological tools that radically change the way of working, an essential segment of digital business transformation is that it triggers numerous legal challenges that require the attention of business leaders and legal experts.

Just as the industrial revolution and the development of machinery changed the way goods are produced and services provided, advanced digital technologies are transforming the way tasks and processes are carried out in today’s companies. Throughout history, new inventions have led to increased productivity, allowing people to produce more goods and provide more services with fewer resources. Similarly, advanced digital technologies contribute to the growth of companies’ productivity through automation, data analytics, and process optimization.

In today’s digital age, the business climate is constantly changing under the influence of technological innovations and changes in consumer habits. On the other hand, due to the introduction of new regulations that legally govern this area, new legal challenges are also prevalent, which companies must face.

Currently, the most prevalent advanced digital technology that companies use in their business is undoubtedly artificial intelligence (AI). Following it are the Internet of Things (IoT), robotics, cryptocurrencies, and blockchain. These technologies are transforming the way companies operate and provide value.

In recent years, advanced digital technologies have been developing at an extremely rapid pace. Legislators are being put to the serious test of providing legal frameworks for the digital economy to regulate the implementation of digital innovations in detail. The trend is towards an increasing number of laws regulating this area (while it is reasonable to assume that changes to these laws will be more frequent due to daily technological changes), but also that these laws will become increasingly complex. Hence, one of the key challenges for modern companies due to their digital transformation will be aligning (digital) business with new regulations and legal provisions governing that area.


As already mentioned, the more digital business models the more complex legal regulation. Proper understanding and compliance with these regulations become a key factor for the success of companies, but at the same time, they represent a challenge due to their complexity and variability.

Some of the legal topics that have the potential to be particularly relevant and important due to the introduction of digital innovations in company operations are: corporate governance, digital assets (cryptocurrencies) and payment transactions, data protection, intellectual property, labor law (employees), contractual relationships, etc.

  1. Corporate Governance

Harnessing the benefits of digital technologies within corporate governance can be a key component in the growth and development of a company, as well as in its differentiation in the market compared to competitors. Advanced digital technologies can be used in many ways within corporate management and thus significantly improve the performance and value of the company.

Digital technologies in this field may have the greatest significance in terms of decision-making issues within the company. The application of these technologies enables faster and easier access to information about company operations, as well as precise analysis of a large amount of data in a short time, enabling corporate managers to make better-informed decisions and more efficient decision-making.

An especially interesting question and currently one of the most controversial topics in this area is whether a robot (artificial intelligence) can be part of the board of directors instead of a human. For now, such a thing is difficult to achieve (although there are a few examples in practice worldwide), so artificial intelligence is mostly used as an auxiliary tool for directors in decision-making. However, constant technological advancement could make it possible for artificial intelligence to perform the task of an automated decision-making system within the company in some cases. The application of such systems in practice requires special caution from companies and detailed regulation, which does not currently exist, but it is reasonable to expect it in the future.

Since currently the greatest advantage of artificial intelligence is to assist management in making certain decisions, the most significant recommendations and guidelines for companies that can be emphasized in this regard are to appoint one or more individuals (a commission) who will have specialized knowledge about artificial intelligence, all with the aim of more efficient business operations and decision-making.

In addition to assisting in decision-making, artificial intelligence has the potential to significantly facilitate and improve issues related to communication among members within the company. This primarily concerns holding company assembly meetings. In this regard, artificial intelligence can be significant for issues such as member identification, electronic voting, as well as virtual holding of assembly meetings. In connection with this, companies are tasked with paying special attention to aligning these issues with regulations in the field of corporate business in terms of laws, regulations, rules, etc.

  1. Digital Assets (Cryptocurrencies) and Payment Transactions

The digitalization of the economy also includes a gradual transition to the use of digital assets, accompanied by a decrease in the use of cash. Digital assets are a new and complex area, which is becoming increasingly important. Cryptocurrencies stand out among digital assets, becoming more and more attractive for modern companies. Republic of Serbia can boast of being one of the first countries to legally regulate this complicated area through the Law on Digital Assets.

Cryptocurrencies are digital records of value used as a medium of exchange or for investment purposes. Their primary advantages and reasons why they have the potential to completely change the way payment transactions are conducted are:

  1. Decentralization – There are no central authorities or institutions that control them, such as central banks or governments;
  2. Security through transparency and immutability of data – Blockchain is the technology behind most cryptocurrencies, including Bitcoin and Ethereum. It is a distributed, decentralized database that contains a series of blocks of information, where each block contains transactions that are verified and linked by cryptographic methods. These blocks form a chain, or “blockchain”;
  3. They provide the opportunity for significant innovation in the financial sector.

In addition to numerous advantages, companies should also consider the following issues if they are considering their use in their business. Cryptocurrencies also carry certain risks, including price volatility, security threats, regulatory challenges, and potential use in illegal activities. It is particularly important to note that the regulatory framework is very complex, especially in terms of cryptocurrencies regarding anti-money laundering and counter-terrorism financing.

Regarding the question of the permissibility of digital assets as contributions to a company, Serbian law stipulates that virtual currencies cannot be contributed as a contribution to a business entity; instead, they can be converted (exchanged) for money and then contributed as a cash contribution to the company. On the other hand, there is a provision for the possibility of non-cash contributions to a company in the form of digital tokens that do not relate to the provision of services or the performance of work (except digital tokens may relate to these services if the contribution is made to a “ortačko društvo” or “komanditno društvo”).

  1. Data Protection

Data has become one of the most significant resources in the modern (digital) economy. With the increasing amounts of data collected and processed, companies are facing increasingly stringent data protection regulations, such as the General Data Protection Regulation (GDPR) enacted at the European Union level. Compliance with these regulations requires not only the implementation of appropriate technical security measures but also compliance with procedures for data collection, storage, and processing.

As the most well-known example of the importance of this area in practice, consider Meta, the company that owns social networks Facebook and Instagram. Namely, this company has been fined several times so far for non-compliance and violation of GDPR rules. Their latest fine was imposed for transferring personal data of EU users to the US without providing adequate legal mechanisms and amounted to a record €1.2 billion. It is precisely for these reasons that compliance with regulations is extremely important, both to avoid potential fines and to ensure responsible business conduct.

  1. Intellectual Property

Issues related to intellectual property can manifest in various ways. Primarily, due to the shift of business to digital content, as well as the creation of various software and innovations, there is an increasing need for adequate protection and management of intellectual property rights. Trademarks, patents, industrial designs, and copyrights must be legally protected from unauthorized use, ensuring that only they can materially exploit their intellectual property rights.

In addition, digital transformation brings new ways of creating, distributing, and using intellectual property. Growing trends such as artificial intelligence (AI), the Internet of Things (IoT), and 3D printing pose new challenges for copyright protection, patents, and trademarks. Legal protection of intellectual property becomes crucial for protecting companies’ assets and encouraging innovation. This statement is well illustrated by the legal proceedings between the New York Times and OpenAI (ChatGPT). Namely, the NY Times has filed a lawsuit against OpenAI, stating that they have infringed their copyrights by using millions of their texts to train ChatGPT without authorization, thus becoming the main competitors of these newspapers. The lawsuit demands damages for unauthorized use of copyright and the destruction of the chatbot model using NY Times texts. This legal proceeding is currently ongoing, and its outcome is expected soon, which will certainly have a significant impact on the further development of this field.

When it comes to legal theory, an emerging question is who holds the copyright to content created by artificial intelligence. Considering that Serbian copyright law currently allows only natural persons to hold copyright to a work, it follows that artificial intelligence itself cannot hold copyright (which is certainly not possible due to the lack of legal and business capacity of artificial intelligence at this time). Therefore, in that situation, the copyright holder of content created by artificial intelligence is the natural person who provided instructions (inputs) to artificial intelligence that preceded the creation of that content and is authorized to protect such content with intellectual property rights.

  1. Labor Law

The digitalization of business can affect labor law and employees within the company, especially regarding remote work, flexible working hours, and the protection of employees’ privacy in the digital environment.

The growing digitalization allows an increasing number of employees to work remotely. Companies must comply with relevant labor laws related to remote work, including issues such as working hours, compensation, access to health insurance, and the protection of employees’ privacy.

Digital business transformation requires a review and updating of employment contracts with employees, as well as internal company documents in this area, to ensure compliance with the law and the protection of employees’ rights.

  1. Contractual Relationships

Digital transformation encourages the expansion of e-commerce and e-business, opening up the global market and new business opportunities. However, these new business models bring various legal challenges, such as the regulation of cross-border transactions and their taxation, consumer protection, electronic identification, and electronic document signing.

Digitalization can change the way companies enter into and execute contracts. On the one hand, with the introduction of electronic signatures, companies have the option of signing contracts in digital format that have the same legal force as certified handwritten signatures, while on the other hand, there is an increasing presence of so-called smart contracts. Smart contracts, based on blockchain technology, are a revolutionary way of entering into and executing contracts, providing automation, transparency, and security. This poses new legal challenges, such as questions of the legal validity of smart contracts and the responsibility of contracting parties in case of non-performance or improper performance of contractual obligations.


The legal challenges of digital business transformation require continuous monitoring and adaptation to changes in legislation and regulation. Companies must engage in continuous education of staff on the legal aspects of digitization and collaborate with legal and technology experts to ensure compliance and reduce the risks of violating specific provisions and thus avoid punishment. It is evident that awareness of the legal aspects of digital transformation and the adequate management of these challenges are crucial for the long-term success and sustainability of modern companies in the digital age.