Obligation to Submit a Merger Notification

According to the Law on Protection of Competition of the Republic of Serbia (hereinafter: the Law), market participants are obligated to submit a merger notification to the Commission for Protection of Competition if the conditions provided by the Law are met. This notification aims to prevent transactions that would significantly restrict, impair, or prevent competition in the market of the Republic of Serbia or a part thereof, especially if such negative effects would contribute to the creation or strengthening of a dominant position.

What is Considered a Merger?

A merger is any transaction (change of members, change of status, etc.) based on which actual control over a particular market participant changes. Control over a market participant is interpreted under the Law as the ability to exert decisive influence on the conduct of business of another market participant or participants, and may be individual or joint; thus, a merger represents a change in the quality of control over a company:

1. From individual control to joint control (person A who had 100% in the company sells 50% of their share to person B, so that person A and person B jointly manage the company);
2. From individual control to individual control – when the ownership structure changes (example: person A transfers to person B 100% of shares in the company);
3. From joint control to individual control (persons A and B jointly manage the company with 50% shares each, and then person A buys out person B’s share and becomes the sole member of the company with 100% of shares);
4. From joint control to joint control (persons A and B jointly manage the company with 50% shares each, and then sell their shares to persons C and D, so that C and D manage the company with 50% shares each).

Additionally, a merger also occurs when two or more market participants make an investment for the purpose of creating a new market participant or acquiring joint control over an existing market participant that operates on a long-term basis and has all the functions of an independent market participant.

Furthermore, it should be kept in mind that the Commission for Protection of Competition is not bound by shares in a company, and that based on other parameters it may determine functional control over a company by persons who do not have a majority share, if the founding documents enable them to make certain decisions in the company, or if they can effectively “veto” certain matters related to company management.

The Law specifies cases in which a change of control over a company occurs, but which transactions are not considered mergers for purposes of mandatory application (temporary acquisition of shares by banks, insurance companies, and other financial organizations during normal business operations, acquisition of participation in a market participant by an investment fund for the purpose of preserving the value of investment, etc.).

Is the sale of a part of a business considered a merger under the Law on Protection of Competition?

Yes, the sale of a part of a business is considered a merger under the Law, and in the event that the conditions regarding annual revenues realized in the year preceding the year in which the transaction is carried out are met, the participants in the merger are obligated to submit a notification to the Commission for Protection of Competition.

When is Submission of a Merger Notification Mandatory?

Submission of a merger notification becomes mandatory when the legally prescribed conditions regarding annual revenues realized by the participants in the merger are met. It should be emphasized here that realized profit, as the difference between revenues and expenses, is not considered, but exclusively revenues, i.e., turnover in the year preceding the transaction.

A merger must be notified to the Commission for Protection of Competition if:

1. the total annual revenue of all participants in the merger realized on the world market in the previous fiscal year exceeds 100 million euros, provided that at least one participant in the merger has revenue exceeding ten million euros on the market of the Republic of Serbia;
2. the total annual revenue of at least two participants in the merger realized on the market of the Republic of Serbia exceeds 20 million euros in the previous fiscal year, provided that at least two participants in the merger have revenue exceeding one million euros each on the market of the Republic of Serbia in the same period.

The merger notification is submitted to the Commission for Protection of Competition within 15 days from the date of execution of the first of the following actions:

1. conclusion of an agreement or contract;
2. publication of a public call or offer, or closing of a public offer;
3. acquisition of control.

Obligations When Submitting a Notification

Participants in a merger must submit a notification to the Commission for Protection of Competition along with relevant documentation. This includes information about the participants in the merger, the transaction itself, the relevant market, market shares, financial statements, and other information prescribed by the Regulation on the Content and Manner of Submitting a Merger Notification.

The Commission for Protection of Competition may reject the merger, approve it with or without certain conditions, or dismiss the merger notification if it determines that the legally prescribed conditions for its submission have not been met.

Specialized Training

The Marović Law Office organizes specialized training for companies and other market participants to enable them to recognize situations that require merger notification, as well as situations that may constitute violations of competition prescribed by the Law on Protection of Competition. The training covers all legislative changes and regulations, and also provides practical guidelines for resolving obstacles that may arise during the conduct of business activities.

Submission of a merger notification is mandatory for transactions that meet the legal conditions. Through the legal assistance and training provided by the Marović Law Office, market participants can be confident that their business operations are in compliance with the Law on Protection of Competition.