Corporate Law in Bosnia and Herzegovina: Legal Support for Your Business

Launching and running a company brings numerous legal challenges. Corporate law covers all legal aspects of a company's operations – from forming the company to complex mergers and acquisitions (M&A). In today's competitive business environment, every company needs legal certainty and regulatory compliance in order to grow without obstacles.

Expert legal support in business helps to avoid costly court disputes and unnecessary risks. An experienced corporate lawyer can ensure that your business decisions comply with the law, giving you peace of mind and the ability to focus on growing the business. Law Office Prnjavorac offers comprehensive services in the field of corporate (business) law, tailored to the needs of your business – from formation and registration of the company, through the drafting of contracts and business advice, to representation in disputes. Corporate law is closely connected with the broader field of business (commercial) law, so our approach covers the whole of your operations.

Below we highlight the main legal services our office provides within corporate law, together with useful information and advice for companies seeking legal certainty in their operations:

Due diligence (legal due diligence review)

In larger investments or acquisitions, full information is paramount. Due diligence (an in-depth legal review of operations) is a detailed examination of the legal and financial state of a company before its purchase or merger. The aim of legal due diligence is to uncover all facts and potential risks that could affect the decision of an investor or buyer.

Our lawyers carry out a thorough due diligence review of the documentation and operations of the target company: we check the ownership structure, existing contracts and obligations, active court disputes or threats of lawsuits, the state of assets and debts, compliance with labour, tax and other regulations, as well as other relevant legal aspects. After the analysis, we present you with a report containing findings and recommendations. This transparency allows you to negotiate better purchase terms or, if serious problems are uncovered, to withdraw from a harmful transaction in good time. In short, well-conducted due diligence protects your interests and prevents unpleasant surprises in future operations.

Company formation and registration

Forming a new company is an exciting but, from a legal point of view, also a complex process. Before your company starts operating, it is necessary to choose the appropriate legal form (for example a limited liability company – LLC, a joint-stock company – JSC, and similar) and to prepare all the necessary documentation.

For the successful formation and registration of a company, several key steps must be completed:

• Choice of legal form: expert advice helps in deciding whether your company will be an LLC, a JSC or another appropriate form, depending on the size of the business and the founders' plans.
• Drafting of founding acts: preparation of the founding agreement or decision on formation, the statute and other acts that define the ownership structure, the activity and the management of the company.
• Registration with the competent authorities: filing the application for entry of your company in the court register (registration of the company), and obtaining identification numbers (ID number, VAT number) and the appropriate operating permits.
• Commencement of operations: opening bank accounts, registering employees and meeting the other conditions for starting work in accordance with the law.

Our legal team guides you through each of these steps of company formation, ensuring that everything is done correctly and efficiently. This avoids potential mistakes that could later hinder your operations or lead to legal problems.

Status changes and reorganizations

Over time, a company may grow, merge with another or change its structure. Status changes include procedures such as the merger of two companies into one, the division of one company into several entities, a change of registered seat (the address of the registered business), a change of name or legal form of the company and similar reorganizations. Each of these changes requires careful planning and implementation in accordance with the law, in which a corporate lawyer can assist you.

For example, in a merger it is necessary to conclude a merger agreement, harmonize property rights and obligations, and observe all the statutory steps. In a division of a company a detailed division plan is drawn up determining how the assets and obligations are allocated to the new companies. Even a relatively simple change of registered seat requires the filing of the appropriate applications and amendments in the court register.

Our law office provides complete support during these status changes – from advice on the best way to reorganize, through the drafting of all necessary decisions and agreements, to communication with the court register and other institutions. In this way we ensure that your company carries out the changes legally and properly, with a minimal risk of legal complications.

Shareholders' agreements

When several persons or companies jointly form a new company, it is of key importance that their mutual relationship is clearly regulated from the very beginning. A shareholders' agreement (also known as a founders' or inter-owner agreement) defines the rights and obligations of each founder, the ownership interests, the manner of decision-making, the distribution of profit, as well as the procedure in case one of the partners wishes to leave the company or sell their interest.

Such an agreement serves as the foundation of a stable business relationship between the partners. Without clearly defined rules, disputes over the management of the company or strategic decisions may arise later. Our team of lawyers prepares detailed shareholders' agreements tailored to the specific arrangements of your business venture. We also advise you on all key clauses – from the protection of minority owners' rights to mechanisms for resolving any disagreements – so that you have a complete picture and certainty from the very formation. A well-drafted founding agreement is an investment in calm relations between partners and the long-term success of the company.

Legal advice for business and corporate governance

Running a company successfully is not only about making business decisions, but also about ensuring that those decisions are legally sound. Legal advice for business means continuous support from a lawyer in all segments of your business – from interpreting new laws and regulations that may affect your operations, through advice on how to align internal acts and procedures with statutory obligations, to consultations in crisis situations.

Corporate governance refers to the system by which a company is directed and controlled. Well-established corporate mechanisms (for example rulebooks, boards, the management structure) reduce the risk of irregularities and abuse. Our office advises your management and owners on how to set up effective corporate-governance frameworks, in line with domestic legislation and international standards. Through such legal monitoring of operations we also provide business advice from a legal angle – we help you make strategic decisions with full awareness of the legal consequences and obligations. The aim is to prevent problems before they arise and to enable you to run the company safely, knowing that you operate in compliance with all regulations.

Drafting and review of contracts

Day-to-day operations are unthinkable without various contracts – with clients, suppliers, employees and business partners. Every contract your company concludes should be clearly written, legally valid and protect your interests to the maximum. A poorly worded or imprecise contract can lead to misunderstandings or even financial losses.

Our team deals with the detailed drafting and review of all types of business contracts. Whether it is a simple purchase contract, a complex partnership agreement, a non-disclosure agreement (NDA) or a contract with a member of management, we carefully consider every clause. We identify potential risks, advise where protective provisions should be added (such as penalties for non-performance or clear conditions for termination), and ensure that each agreement complies with the applicable regulations. In this way your company can conclude deals with confidence, knowing that the contracts are firm and unambiguous.

Sale and purchase of companies (M&A): mergers and acquisitions

The sale and purchase of companies, that is the process of mergers and acquisitions (M&A), is one of the most demanding business operations. Whether you are selling your company, acquiring a competing company or merging in order to expand the business, every step must be carefully planned and covered by quality legal documents.

Our legal team has experience in conducting M&A transactions from start to finish. We provide support with:

• initial negotiations and the drafting of a term sheet (memorandum of understanding) between the parties,
• assessing the best legal structure for the transaction (whether it is more favourable to buy the interests/shares or the assets of the target company),
• the detailed drafting of purchase agreements, acquisition agreements and the accompanying documentation,
• obtaining the necessary approvals of regulatory bodies (for example the approval of the Competition Council for the protection of market competition, where applicable),
• closing the transaction and post-transaction integration.

Through each of these steps we protect your interests, anticipate potential problems and negotiate favourable terms. With expert legal support, even the most complex M&A processes become safer and more certain for all parties involved.

Representation before courts and administrative bodies

Even with good prevention, situations sometimes arise that lead to a court dispute or proceedings before state authorities. At such moments it is important to have a reliable legal representative. Our law office represents companies in all types of commercial disputes before the courts – whether it is debt collection, disagreements between partners, disputes arising from contractual relationships or claims for damages. An experienced lawyer knows how to present the facts and legal arguments in the best light in order to protect the interests of your company. Where appropriate, we first explore an amicable resolution of the dispute, including mediation and settlement.

In addition, we also represent clients before administrative bodies and regulatory authorities. This may include proceedings before inspectorates, agencies, tax authorities or other state institutions that supervise business. Whether you need to obtain a particular permit, defend yourself in misdemeanour proceedings or challenge a decision of an authority, we provide you with full support. Our aim is for your rights to be adequately represented and protected in every such procedure, thereby preserving the reputation and continuity of your company's operations.

Types of services we provide in corporate law

The most common services we provide as lawyers for corporate and business law are the following:

Secure the legal certainty of your business

Corporate law is the foundation of the legal certainty of every successful business – it enables you to operate safely, in compliance with the law and focused on growth. Whether you have just founded a startup or run an established corporation, having a legal advisor by your side means having a reliable support in all legal matters. Our mission is to provide legal support to companies in Bosnia and Herzegovina so that you can devote yourself to what you do best – running and developing your business.

Contact us today so that we can discuss your needs and provide concrete assistance. With an expert and approachable team on your side, you can make business decisions boldly, knowing that every step is legally covered. Leave the legal details to us, and you continue to build the success of your company with the full support of experienced corporate lawyers.

Frequently asked questions « Corporate law in BiH

The answers below have been prepared by Law Office Prnjavorac and are based on the regulations in force in the Federation of BiH and the Republika Srpska, primarily the Companies Act. The answers are informative in nature and do not replace legal consultation in a specific case.

1. Which legal forms of companies exist in Bosnia and Herzegovina?

The Companies Act of the Federation of BiH (Official Gazette of FBiH 81/15, 75/21) provides four basic forms: a general partnership (d.n.o.), a limited partnership (k.d.), a joint-stock company (d.d.) and a limited liability company (d.o.o.). The Republika Srpska recognizes the same forms (Companies Act of the RS, Official Gazette of RS 127/08 with later amendments). In practice the d.o.o. is the most common choice because of the limited liability of its members and simpler management. The choice of form depends on the number of founders, the planned capital, the activity and the liability you are prepared to assume.

2. What is the minimum founding capital for a d.o.o. in BiH?

In the Federation of BiH the minimum share capital for a d.o.o. is 1,000 KM. For a joint-stock company the amount is higher, and for an open joint-stock company the law requires at least 4,000,000 KM and at least 40 shareholders. In the Republika Srpska the conditions differ and are subject to amendment. Because the amounts and the procedure are changed by legislative amendments from time to time, we check the current regulation for your entity before formation.

3. How long does it take to form a company in BiH?

With complete documentation and the one-stop registration system (introduced by amendments in the FBiH in 2021), registration of a d.o.o. usually takes from a few days to two or three weeks. The duration depends on the workload of the registration court, the need for notarial processing of the acts and obtaining approvals for particular activities. Preparing complete and correct documentation significantly shortens the procedure.

4. Can a foreigner or a company from the diaspora establish a company in BiH?

Yes. Foreign natural and legal persons may establish a company in BiH under the same conditions as domestic founders. For diaspora clients and foreign investors we conduct the procedure on the basis of a power of attorney, without the need for them to attend in person, with communication in Bosnian, German and English.

5. What is due diligence and when is it needed?

Due diligence is an in-depth legal and financial analysis of a target company's operations before a purchase, investment or merger. The ownership structure, contracts and obligations, active disputes, the state of assets, debts and compliance with regulations are examined. The aim is to uncover risks that affect the price and the decision, and to enable the negotiation of better terms or timely withdrawal from a harmful transaction.

6. What is the difference between a d.o.o. and a d.d.?

In a limited liability company (d.o.o.) the capital is divided into interests and a member is liable up to its interest; it is suitable for small and medium-sized enterprises. In a joint-stock company (d.d.) the capital is divided into shares, with stricter requirements regarding capital, governing bodies and reporting; it is suitable for larger companies and for raising capital. The choice depends on the size of the business, the number of owners and financing plans.

7. What is a shareholders' agreement and why is it important?

It is an agreement by which co-founders regulate their mutual relationship: ownership interests, decision-making, profit distribution, protection of minority owners and the procedure for a partner's exit (sale of an interest). Clearly defined rules from the outset prevent later deadlocks and disputes over management, which is why such an agreement is one of the most important preventive investments in the stability of the company.

8. How are status changes (merger, division, change of form) carried out?

Status changes (merger, acquisition, division, change of legal form or registered seat) are carried out according to a plan and decisions of the company's governing bodies, with the appropriate agreements and registration in the court register. In a merger the property rights and obligations are harmonized, and in a division the plan determines the distribution of assets and obligations to the new companies. In certain cases the approval of the Competition Council of BiH is also required.

9. What does an M&A transaction (mergers and acquisitions) include?

M&A includes the purchase and sale of companies and mergers. Typical steps are: a letter of intent and term sheet, due diligence, choice of transaction structure (purchase of interests or shares, or purchase of assets), drafting of the purchase and accompanying agreements, obtaining regulatory approvals (for example the Competition Council), closing the transaction and post-transaction integration.

10. Is a notary mandatory for formation and status changes?

For most founding acts and status changes notarial processing or certification of signatures is required, in accordance with the law. For a single-member d.o.o. that pays in the prescribed minimum monetary part of the capital, notarial certification of the founder's signature is often sufficient. The exact form depends on the legal form and the type of act, so before the procedure we determine what is needed in your specific case.

11. Can you represent a company in a commercial dispute or debt collection?

Yes. In addition to advising and formation, we represent companies in commercial and international commercial disputes, debt collection, enforcement proceedings and before administrative bodies. When possible, we first explore an amicable solution (negotiation, mediation, settlement), and if necessary we conduct proceedings before the competent court.