Government Support For Issuance Of Corporate Bonds

14 April 2020 - On 10 April 2020, the Serbian Government adopted the support package for the Serbian economy in response to the COVID 19 pandemic that is worth in excess of EUR 5 bn and that had been initially announced on 31 March 2020.

One of the measures that the support package envisages is the streamlining of the issuance of corporate bonds by Serbian companies. The following is a summary of the general Serbian rules related to the issuance of the corporate bonds and those introduced by the support package.

1. Corporate bonds – in general

   Issuance of corporate bonds in Serbia is primarily regulated by the Law on Capital Markets ("Act"). Under the Act, bonds are issued and offered as dematerialized financial instruments. A resolution of the relevant corporate body (i.e., Shareholders' Assembly for most cases) on the issuance of bonds is a mandatory step prior to the actual issuance. Also, a prior consent of a competent authority may be required (e.g., in case of denominating corporate bonds in foreign currency, as explained in more detail in Section 2 below); however, this is an exception, rather than the regular requirement.

2. Corporate bonds – denomination

   Corporate bonds may be denominated in Serbian Dinars or in a foreign currency. However, prior to the issuance of bonds denominated in a foreign currency, the issuer should obtain a consent from the National Bank of Serbia ("NBS"), the Serbia's central bank and the main supervisory authority for the foreign exchange operations in the country. Having this in mind, the denomination of corporate bonds is an issue that can impact the timing for their issuance.

3. Prospectus requirement

   The requirement to publish prospectus applies to the majority of the securities' issuances. When this is the case, any public offer made prior to the publication of a prospectus would be deemed as null and void. In addition, it is prohibited to admit securities (including bonds) to the regulated market in the Republic of Serbia (i.e., currently only the Belgrade Stock Exchange – BELEX; https://www.belex.rs/) prior to the publication of a prospectus. Also, a prospectus needs to be approved by the Serbian Securities Commission ("SEC") prior to its publication. All this, of course, has an impact on timing, which might be critical for some prospective issuers.

   However, under the Act, a prospectus is not required in certain situations, some of which are set out below:

   an offer addressed solely to the so-called...