According to the action plan of upcoming reform of the process of registration of companies in Republic of Srpska, there are at least twenty laws that should to be changed. Among them, in the first stage of reform (“normative activity” as planned for the first quarter of 2013), Law on Companies should be adapted in order for the initial capital that is required for the establishment of limited liability company (LLC) to be lowered from current 1000 EUR to 500 EUR. It can be said that the reduction of financial obligations of the owner is actually, beside the elimination of administrative procedures, main goal of the reform, and all of this should be conducted so that the development of entrepreneurial spirit could take place inside the so-called real sector of economy.
Law on Companies of the Republic of Srpska recognizes two legal concepts of the companies: Limited Liability Company and Joint Stock Company (corporations). Due to the nature of Limited Liability Company that separates liability of owner from the liability of company, it is clear that this legal form is the most suitable one for the establishment of business, so it is true that this form is the main subject of upcoming reform. As the participation of third parties, such as the mandatory notary processing of the establishment act, is required by the law, it is obvious that legislature intended to boost the level of legal security by leaving these jobs to the public notary service which was introduced in our legal system in 2008, and which was active between the First and Second World War. In addition to the notary, significant role is played by other public offices such as the Tax Administration (in order to obtain a tax identification number), the Institute of Statistics, and Commercial court responsible for the registration, etc. Taking into account all the necessary checks and preparations, issuance of permits and decisions of the court, the participation of these stakeholders in the registration process significantly slows registration of the company, which, in the best case, by using the planned One-stop shop system with previous computerization of the entire process can be reduced to three days only.
The dynamics of modern business, especially in the era of IT-based business, requires a shorter timescale with a solid degree of legal certainty for the founder (or founders). In order to achieve this goal, it is necessary to conduct normative intervention in order to facilitate the founders while reducing the “black labor” or prevent unlicensed activity and attract foreign investors who, among the legal certainty, are seeking for much easier registration of their foreign business ventures.
Also, the public (state) interest is expressed in terms of promoting entrepreneurship among young people who decide to launch their own start-up, or companies that their future performance are based on innovative and profitable ideas. In this way, with the effective reduction of the state apparatus and the elimination of numerous burdensome taxes, and by revising tax policies (in the VAT collection process, for example) to enable the economy boost on the basics of small and medium enterprises which is definitely a concern of all governments in the region.
These normative interventions, or “reshaping” of the simplest form of company has led to an explosion of entrepreneurship in some developed economies such as Germany and Austria. Although the registration of the limited liability company (GmbH) in Germany still requires level of initial capital of 25,000 EUR, “Simple LLC” may be registered for a few euros only. In accordance to the business growth (turnover) and by meeting the limits of a “classic” LLC initial capital, simple LLC is automatically preregistered to the LLC. This allows the effective conduction of business to those who have an idea but do not have the initial capital, so that, in terms of law, they can be equalized with the “larger” and well-established company owners.
The introduction of a simple limited liability company in a legal system of the neighboring Croatia is established upon the Act of the amendments to the Companies Act (“Official Gazette of the Republic of Croatia”, No. 111/12) entry into force in October of 2012. Article 13 of that law allows the simplified registration for companies with up to three members, and one member of the management by filling the notary form (statement) and its notarial authentication. Also, in Article 16, simple LLC is formally introduced as a new form of company where initial capital is limited to 1.25 EUR and the minimum nominal amount of share at 0.25 EUR per owner. Similar to German law, increase of the initial capital up to the 2.645 EUR automatically converts simple LLC to a limited liability company.
According to the claims of some Croatian entrepreneurs, in some cases, a simple LLC can be registered through hitro.hr system in 24 hours, with nine times lower costs compared to LLC. The practice of commercial courts shows huge growth of newly-registered simple LLC’s. For example, in the register of the Commercial Court in Zagreb in the period from 10.10.2012., (from the date of entry into force of the amendments to the Companies Act) by mid-December of the same year, there were more than eight hundred simple LLC’s registered.
Reform of the process of registration of companies that will take place in the Republic of Srpska throughout the 2013 is a convenient moment for the introduction of a simple limited liability company form to our legal system. Changes in the legislation in the first quarter, design and implementation of information system that will create a single register of business entities in the second and third quarter, logistical preparations, and uninterrupted operation of the projected One-stop shop system at the Agency for Business and IT services (APIF) in the last quarter of the following year, sets the entire commercial segment on a healthy basis. Accompanying reduction of the administrative, judicial and notarial fees is another impetus towards popularization of entrepreneurship, and fast and simple registration of simple LLC seems like the best indicator of the success of the reform that is set before us.