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UNMIK/REG/2001/6 REGULATION NO. 2001/6 The Special Representative of the Secretary-General, Pursuant to the authority given to him under United Nations Security Council resolution 1244 (1999) of 10 June 1999, Taking into account United Nations Interim Administration Mission in Kosovo (UNMIK) Regulation No. 1999/1 of 25 July 1999, as amended, on the authority of the Interim Administration in Kosovo, For the purpose of establishing a legal regime for the formation, maintenance, and termination of personal business enterprises, partnerships, and corporations in Kosovo, Hereby promulgates the following:
Section 1 1.1 The purpose of the present regulation is to enable the orderly creation of for-profit business organizations in Kosovo; the allocations of ownership, liability, and decision-making powers associated therewith; the means, devices, and procedures for organization, structure, and management thereof; the means, devices and procedures for termination or liquidation thereof; the rights and duties appurtenant thereto; and for authorizing relevant officials and agencies (and their successors) to enforce the provisions hereof. 1.2 The present regulation governs only for-profit business organizations in Kosovo. Section 2 Wherever used in the present regulation, the following words and phrases shall have the following meanings, unless the context clearly requires otherwise or unless the present regulation clearly states otherwise: "Agent" means a person authorized by another person to act for him. "Business organization" means any person or group of persons who are engaged in commerce. "Capital" means property, whether movable or immovable, tangible or intangible, that is owned by a business organization and used for the production of wealth. "Commerce" means the conduct of any sustained activity for the purpose of realizing profit, whether such purpose is expressly stated or not. "Operation of law" means the manner in which liabilities or rights devolve upon a person by the mere application to a particular factual situation of the established rules of law. "Person" means both a natural person and a legal person. As used herein, the singular includes the plural and the plural includes the singular, unless the context otherwise requires. The personal pronoun "he" includes "she" and "it"; and the word "him" includes "her" and "it" unless the context otherwise requires. References to "section" herein are references to sections of the present regulation unless otherwise indicated. Section 3 3.1 A business organization may be a personal business enterprise, a general partnership, a limited partnership, a joint stock company or a limited liability company. 3.2 A personal business enterprise and a general partnership may arise by operation of law. If a natural person or a group of natural or legal persons engage in commerce but fail to comply with the formation and registration requirements set forth herein as they relate to limited partnerships, joint stock companies, or limited liability companies, they shall be deemed to be, respectively, a personal business enterprise or a general partnership for purposes of relations with creditors and other third parties. Section 4 4.1 A business organization may engage in any activity that is not prohibited by law. 4.2 Directors and officers of a business organization shall use their best efforts to pursue the purposes of their organization. However, no member of any competent management body shall be exposed to any liability for any action or omission if the underlying decision to act or to refrain from acting results from consideration of reasonable information and is rationally related to the goals and purposes of the relevant business organization.
5.1 A natural person engaged in commerce who is not an agent or an employee of another business organization acts as a personal business enterprise. A natural person acting as a personal business enterprise is liable for all debts incurred in the course of his acting as such to the full extent of his sizeable assets. 5.2 In any judicial action, arbitration proceeding, bankruptcy proceeding, or in the course of any post-judgment execution, no court or arbitral body may attempt to separate the property of the owner of a personal business enterprise that the owner uses for business purposes from the property that the owner uses for personal, household, or family purposes, unless an agreement that underlies the relevant claim so provides, the holder of such claim so agrees, or a law on execution of judgments or bankruptcy provides for exemption of such property. Section 6 Notwithstanding any registration, license, or trade name, a personal
business enterprise shall not have the status of a legal person. Section 7 7.1 A natural person engaged in commerce, as a personal business enterprise shall register the trade names he employs in the course of his business with the agency that is authorized to register business organizations. If, after filing a registration statement, he uses additional trade names, he shall amend the registration statement to so indicate. 7.2 The registration of a trade name under section 7.1 shall not create trademark rights. However, a user of a trade name that he has registered enjoys priority as to that trade name over all other non-registered or subsequently registered users thereof. A court may enjoin the non-registered use of a trade name, and it may enjoin the use thereof by persons who have registered the trade name after the first such person.
Section 8 8.1 A general partnership is a business organization that exists as a result of the association of two or more persons for the purpose of engaging in commerce. Persons associating so as to form a partnership are general partners. A partnership arises from the mere fact of such association, regardless of whether the partners formalize their partnership by registration, written agreement, or otherwise. 8.2 Partners are jointly and severally liable for the debts and other obligations of the general partnership to the full extent of their sizeable assets. A partnership is not a legal person, but a partnership may contract and hold property, and may sue or be sued, in its own name as well as in the name of its partners. Any judgment against the partnership shall bind the joint property of the partnership as well as the personal property of all the partners. The provisions of section 5.2 shall also apply to partners. 8.3 The provisions of section 7 regarding use and registration of trade names applies to partnerships to the same extent that it applies to personal business enterprises. Section 9 9.1 The creation of a general partnership does not require a written agreement, although the partners may execute one. No partner who is not a party to a partnership agreement may be bound by it. 9.2 As a general rule, the parties to a partnership agreement may alter any of the provisions set forth herein that govern relations among the partners, but they may not alter those provisions that affect the rights of third parties. Subsections of Chapters 3 and 4 stating a non-mandatory or default rule are introduced by the phrase "Unless a partnership agreement provides otherwise" or similar language; subsections lacking such language state mandatory rules. The non-mandatory provisions of the present regulation apply when the partners have failed to execute an agreement, when an agreement is not effective or when an agreement is silent as to a disputed matter. Section 10 Each general partner is an agent of the partnership for purposes of the usual business of the partnership, and each partner has the power to cause the other partners to incur indebtedness in connection with the operation of the usual business of the partnership. The usual business of the partnership includes only conduct within the scope of the business in which they engage as a partnership. Agreements to the contrary are ineffective as against third parties but are effective as between partners. Section 11 11.1 Unless a partnership agreement provides otherwise, matters affecting the partnership shall be resolved by a simple majority vote. The vote may be conducted by any method that provides all partners reasonable notice of the vote and of the subject matter thereof. 11.2 Unless a partnership agreement provides otherwise, each partner in a general partnership enjoys voting and management rights that are equal to those of each other partner. A partnership agreement may, however, create different classes of partners, may assign different voting rights to different partners, and may deny any partner the right to vote or otherwise participate in the management of the partnership. 11.3 No change may be made in the nature of the partnership business without the consent of all partners. Section 12 12.1 Unless a partnership agreement provides otherwise, each partner in a general partnership is entitled to an equal share of any profits. 12.2 Unless a partnership agreement provides otherwise, a partnership shall distribute profits at least annually. Section 13 13.1 Unless a partnership agreement provides otherwise, each partner in a general partnership shall contribute equally to the general partnership to account for any losses resulting from the operation of the partnership. 13.2 Unless a partnership agreement provides otherwise, each partner is bound to make contributions necessary to cover operating losses as soon as those operating losses are known to any partner, and upon dissolution, all partners shall make equal contributions to satisfy third party claimants and to otherwise cover losses. Section 14 14.1 Unless a partnership agreement provides otherwise: (a) each partner in a general partnership owes to each other partner a duty to refrain from competing with the business of the partnership; (b) no partner in a general partnership may also be a partner or a controlling equity-holder in a business organization that competes with the partnership; (c) no partner may hold a management level position in a business organization or provide management services to a business organization that competes with the general partnership. A partner holds a management level position or provides management services to a business organization when that partner makes or influences decisions regarding the operations of a competing business organization; (d) each partner owes each other partner a duty of good faith and fair dealing, including a duty to share information, preserve confidences, and avoid conflicts of interest; (e) no partner may appropriate to himself business opportunities of the partnership; (f) any partner who breaches any duty he owes to other partners shall compensate the other partners for damages and lost profits that result therefrom; (g) a partner may transfer his beneficial interests in the partnership, including his rights to share in the profits of the partnership, to a third party only upon the consent of all other partners; and (h) a person may become a partner in an existing partnership only upon the unanimous consent of the existing partners. The admission of a new partner does not affect the continuity of the partnership. 14.2 Any person who becomes a partner in an existing general partnership assumes the liabilities of the partnership, including pre-existing liabilities, equally with all existing partners. Agreements to the contrary are ineffective as against third parties but are effective as between partners. 14.3 A partner who resigns or otherwise leaves a partnership remains liable for partnership debts incurred before the date on which he resigns or otherwise leaves the partnership. Section 15 15.1 A partnership may own property in the name under which it conducts business or in any name that it registers pursuant to UNMIK Regulation No. 2000/8 or other applicable regulation. 15.2 Unless a partnership agreement provides otherwise, each partner has an equal interest in all partnership property. Section 16 16.1 Unless a partnership agreement provides otherwise, a general partnership dissolves upon the death of any partner, the withdrawal or expulsion of any partner, the liquidation or winding-up of any partner that is a legal person, the expiration of a term fixed in the partnership agreement, or when the business of the partnership becomes unlawful. 16.2 Unless a partnership agreement provides otherwise, a partner is deemed to have withdrawn from the partnership if: (a) the partner fails to timely pay any contribution to the partnership; (b) the partner informs any other partner that he has withdrawn from the partnership; (c) the partner voluntarily seeks formal protection from his creditors or is adjudicated insolvent pursuant to the applicable bankruptcy or insolvency law; or (d) a partner that is a corporation is liquidated. 16.3 Upon the death of any partner who is a natural person or upon the liquidation of any partner that is a legal person, the entire property of the partnership becomes subject to proceedings provided by law to determine the status or disposition of the property of the deceased or liquidated partner; provided, however, that the partnership. s remaining partners may by agreement with the court or other administrator of the affairs or assets of the deceased or liquidated partner agree to form a new partnership. The partners may also agree regarding the disposition, upon dissolution, of a partner. s interest in partnership property. 16.4 The dissolution of a partnership shall not extinguish the claims of third-party creditors against the partners of the dissolved partnership, nor shall it extinguish the claims of partners against one another. Section 17 17.1 Unless a partnership agreement provides otherwise, and subject to the provisions of the applicable law on bankruptcy, a general partnership may be liquidated upon the simple majority vote of its partners. 17.2 Unless a partnership agreement provides otherwise, and subject to the provisions of the applicable law on bankruptcy, the partners shall appoint a disinterested third party to act as liquidator. Such a liquidator assumes title to partnership property for purposes of carrying out the liquidation and assumes all powers of any partner. The liquidator is entitled to take possession of all books and records of the partnership. 17.3 Within twenty-one days of the date of his appointment, a liquidator shall preliminarily determine whether the partnership was solvent at the time that he was appointed and whether the sale of the assets of the partnership is likely to produce proceeds sufficient to satisfy the valid claims of all creditors. If the liquidator determines that the partnership was insolvent at the time of his appointment or that the sale of the partnership. s assets is unlikely to produce proceeds sufficient to satisfy the valid claims of all creditors, the liquidator shall immediately initiate a proceeding under the applicable law on bankruptcy. If the liquidator is unable to make the determinations as required hereby, or if he fails to do so within the time specified, the liquidation shall be transferred to the court or other body competent to adjudicate bankruptcy cases, where it shall be adjudicated. 17.4 If the liquidator determines that the partnership was solvent at the time of his appointment or that a sale of the assets of the partnership is likely to produce proceeds sufficient to satisfy the valid claims of all creditors, the liquidator shall, not later than thirty (30) days after his appointment, publish in the Official Gazette in Kosovo, in the Albanian, Serbian and English languages, a notice of his appointment as liquidator similar to the initial public notice required of a liquidator in a bankruptcy case; provided, however, that the notice shall expressly state that creditors of the partnership are free to seek satisfaction of their claims from the individual partners of the partnership. 17.5 After the publication of the initial notice required by section 17.4 has occurred, the liquidator shall assemble the partnership. s assets and otherwise conduct the liquidation process in accordance with the applicable law on bankruptcy; provided, however, that the liquidator shall possess no avoidance power. For purposes of this section, "avoidance power" means the power to declare a transaction fraudulent as to creditors or prejudicial as to creditors and to thereby recover the property or money that was the subject of the transaction.
Section 18 18.1 The provisions set forth in Chapter 3 govern limited partnerships and their general partners except as otherwise provided in this Chapter. 18.2 A limited partnership is a partnership that consists of at least one general partner, and at least one limited partner. The general partner(s) are liable without limitation for the debts of the limited partnership whereas the limited partner(s) are liable only to the extent of their contributions to the limited partnership and otherwise as provided herein. 18.3 A limited partnership is created upon the registration of a memorandum of limited partnership with the agency that is authorized to register business organizations. The appropriate agency shall issue a certificate of registration, which constitutes conclusive evidence that the limited partnership was properly created. If a memorandum of limited partnership is not so registered, a limited partnership has not been created and all persons who have contributed capital or otherwise associated for the purpose of carrying on a common business are general partners, with the liability thereof. 18.4 Any person may be either a general or a limited partner in a limited partnership. If the only general partner in a limited partnership is a legal person, it must be effectively established and registered pursuant to applicable law. 18.5 A memorandum of limited partnership must include the full name and residential address of each general partner who is a natural person and the name and principal place of business of each general partner that is a legal person. 18.6 A limited partnership shall maintain a list of limited partners and the amounts of their limited partnership interests. Without the agreement of the limited partner concerned, such information shall be made available only as a court may order or otherwise as required by law. 18.7 Each limited partner shall have fully paid-in his contribution at the time that the memorandum of limited partnership is registered. 18.8 A general partner of a limited partnership may file a lawsuit on behalf of the limited partnership and on behalf of all limited partners of a limited partnership to compel payment from a limited partner who has failed to duly pay in his limited partnership contribution. A limited partner who has failed to pay such a contribution by the date of the registration of the memorandum of limited partnership shall be liable to the limited partnership for all costs, including lawyer. s fees, borne by the limited partnership and any general or limited partner thereof. 18.9 The charter capital of a limited partnership consists of the contributions of general and limited partners. 18.10 Limited partners are obliged to: (a) make contributions as set forth in the memorandum of limited partnership; (b) refrain from being active in the day-to-day operation and management of the business of the limited partnership; and (c) refrain from representing to third parties that the limited partner is a general partner or that he possesses the authority to bind the limited partnership. Limited partners who violate the provisions hereof may be held liable for the limited partnership. s debts as if they were general partners. 18.11 Limited partners may not bind a limited partnership. No creditor may rely upon the representations of a limited partner to establish liability of the limited partnership. If a limited partner engages in a transaction, which purports to bind the limited partnership, the limited partnership may ratify the transaction. If the limited partnership fails to so ratify, the limited partner is personally liable to the creditor and the creditor has no recourse against the limited partnership, unless the limited partnership intentionally or negligently represented to any third party that the limited partner was authorized to bind the limited partnership. 18.12 The memorandum of limited partnership, as well as all business
signs, letterhead, and other means by which the limited partnership. s
name is exposed to third parties, including prospective limited partners,
shall include the name of the limited partnership, the name of at least
one general partner, and the words "a limited partnership." Section 19 19.1 Management of a limited partnership shall be carried out only by the general partners. General partners are not liable to limited partners as a result of any act or omission if the decision to act or to refrain from acting results from consideration of reasonable information and is rationally related to the pursuit of profit for the limited partnership. 19.2 Limited partners may not participate in the management of a limited partnership. A limited partner does not participate in management solely as a result of being an employee or contractor of the partnership, or by taking any action to enforce or defend the rights of limited partners. Section 20 20.1 Unless otherwise provided in the limited partnership agreement, a limited partner may transfer his limited partnership interest only upon the approval of all general partners. A transfer of rights in a limited partnership includes a transfer of all obligations to the limited partnership of the limited partner making the transfer. 20.2 As a court or other authority authorized by law may order, the general partners of a limited partnership shall cause the limited partnership interest of any limited partner to be transferred to another person. 20.3 A secured party to whom a limited partner has given a security interest in a limited partnership interest may exercise all of the said limited partner. s rights therein upon notice to the limited partnership. 20.4 Unless otherwise provided in the limited partnership agreement, a limited partnership interest passes to the heirs of a limited partner who is a natural person upon the death of such limited partner. Upon the dissolution, winding-up, or liquidation of a limited partner that is a legal person, the interest of said limited partner passes in accordance with the law under which the dissolution, winding-up or liquidation occurs. Section 21 Unless otherwise provided in the limited partnership agreement, profits shall be distributed and losses shall be shared equally among limited and general partners. Section 22 22.1 A limited partnership may continue to exist so long as at least one general partner and one limited partner remain in the partnership. Unless otherwise provided in the limited partnership agreement, a limited partner has no power to dissolve the partnership. 22.2 Unless otherwise provided in the limited partnership agreement, in the liquidation of the assets of a limited partnership, the net assets of the limited partnership shall be distributed equally to limited partners and to general partners.
Section 23 23.1 A corporation is a business organization, the capital of which is divided into a specified number of shares of the same par value. Shareholders of a corporation are not liable for the obligations of the corporation. 23.2 A corporation is a legal person. 23.3 A corporation may own property in its own name. The property of a corporation is separate from the property of the founders and shareholders of the corporation. A corporation is liable for its obligations to the extent of its assets. A corporation is not liable for the obligations of its founders or its shareholders. Initial shareholders who subscribe for shares of the corporation are jointly and severally liable with the corporation for the corporation. s obligations if those initial shareholders have not paid-in their contributions to the charter capital of the corporation. 23.4 The shares of a corporation may be represented and evidenced by a document actually issued to a shareholder, by an entry on the books of the corporation, or in the case of a limited liability company, by the terms of an agreement among the shareholders. 23.5 One or more natural or legal persons may establish a corporation and may own its shares. Section 24 24.1 A corporation may be either a joint stock company or a limited liability company, which shall be so indicated in its charter and company name. 24.2 A joint stock company is a corporation whose owner(s) may transfer their shares without the approval of other shareholders or the company. A joint stock company may conduct a public offering of its shares pursuant to such conditions as the law may require. 24.3 A joint stock company may have any number of shareholders, and may have different classes of shareholders. 24.4 A joint stock company shall prepare the reports and make the disclosures required by law. 24.5 A limited liability company is a corporation, the shares of which are distributed only to its founders or among other pre-determined persons. 24.6 A limited liability company shall not conduct a public offering of its shares or otherwise offer these shares to an unlimited number of people. 24.7 The number of shareholders in a limited liability company shall not exceed fifty (50). If the number of shareholders of a limited liability company exceeds this limit, a general shareholder meeting shall, within a year from that date, adopt a decision to reorganize the company as a joint stock company, make corresponding changes to its foundation documents, and register the changes. Upon the expiration of this period, a limited liability company that has not done so may be liquidated in a judicial proceeding upon application by interested parties. 24.8 Unless otherwise provided by the charter or by-laws, a shareholder of a limited liability company who wishes to sell his shares shall offer them first to the other shareholders or to the company itself, and may sell his shares to third parties only with the approval of the company. Section 25 25.1 The founders. agreement of a corporation shall list the classes of shares to be issued by the corporation, the distribution of the shares among the founders, and the rights and obligations of the founders regarding establishing the corporation. The founders. agreement establishing a corporation shall become valid when it is signed and remains valid until the founders complete their obligations to make contributions to charter capital. 25.2 A foundation meeting shall ratify the charter of a corporation and the ratification shall be reflected in the founders. agreement. The charter of a corporation shall contain at least the following provisions: (a) the name of the corporation; whether it is a joint stock company or a limited liability company; (c) the address of its registered office; (d) representative offices and branches, if any; (e) the period of duration, which may be perpetual; (f) the purpose of the corporation, which may be generally described as for any lawful business purpose; (g) classes of shares authorized to be issued, their par value, number, and the rights of their holders; (h) the charter capital of the corporation, expressed in terms of number of shares of specified par value; (i) except as provided in section 34.2, the number of directors and the names and addresses of the initial board of directors; (j) the names and addresses of the founders; and (k) the procedures by which by-laws may be amended. The charter of the corporation may contain other provisions that are not in conflict with the present regulation or that are otherwise required by the present regulation. 25.3 In addition to a founders. agreement and charter, the founders of a corporation may adopt by-laws that more specifically describe the relationship among the shareholders, the board of directors and the officers, and that otherwise regulate the activities of the corporation. By-laws may also specify meeting procedures and related notice procedures. The board of directors and the officers shall abide by the charter and by-laws. 25.4 he charter and by-laws of a corporation shall constitute a contract among the corporation, its shareholders and directors and shall be enforceable as such. Modifications to the charter, in addition to meeting the procedural requirements of the present regulation, shall also make appropriate provisions for the interests of minority shareholders. 25.5 The corporation is created when the foundation documents are accepted for registration by the agency authorized to register business organizations. Section 26 26.1 The charter capital of a corporation is the aggregate par value of shares to be initially issued by the corporation, as stated in the foundation documents. It determines the minimum amount that shall be available to satisfy creditors. It is raised by the initial contributions of shareholders, but if the initial shares are sold for an amount greater than their par value, the corporation may raise more money than the charter capital. 26.2 For a joint stock company, the charter capital shall be at least fifty thousand Deutsche Marks (DM 50,000). For a limited liability company, it shall be at least five thousand Deutsche Marks (DM 5,000). The charter capital may be expressed as the equivalent in any currency that is lawful in Kosovo at the time the shareholders make their initial contributions. For the establishment of banks, financial institutions or insurance organizations organized as corporations, other laws and regulations may provide for minimum charter capital requirements different from those specified herein. 26.3 Fifty percent (50%) of a corporation's charter capital shall be paid-in to the corporation by its shareholders before the corporation is registered. The unpaid portion of the charter capital stated in the foundation documents shall be paid within one year from the date of the corporation's registration. If any shareholder has not made his contribution to the charter capital of the corporation during the year, the foundation documents of the corporation may provide that a penalty for such failure may be assessed. 26.4 No public offering of the shares of a joint stock company shall be made until the charter capital has been fully paid. No shareholder may be released from the obligation to pay for shares except by court order. Section 27 27.1 By decision of the general meeting of shareholders adopted pursuant to the provisions of section 35, a corporation may increase its charter capital by increasing the par value of its shares or by issuing additional shares. 27.2 The charter capital of a corporation may be increased only after it has been fully paid-in as provided in the founding documents. 27.3 The charter of a corporation may provide shareholders a preemptive right to purchase additional shares that the corporation issues. This preemptive right may only be extended to holders of voting shares. 27.4 he notice of a general meeting of shareholders at which a question of increasing charter capital will be on the agenda must contain the following information: (a) easons why the increase is necessary; and the amount of the proposed increase of charter capital; (b) a draft of the changes to the charter connected with the increase in charter capital; (c) an explanation of the number of additional shares to be issued or of increases in par value, as appropriate; (d) an accounting of the shares issued previously and the rights of shareholders regarding the additional shares to be issued; and (e) proposed dates of beginning and termination of the subscription period for the additionally issued shares. If such notice fails to contain the foregoing information, any decision by the general meeting to increase charter capital is voidable. 27.5 If a corporation issues additional shares or changes the par value of the shares, it shall immediately amend its charter to reflect these changes. 27.6 Laws and regulations governing banks, financial or insurance organizations that are organized as corporations may provide for procedures for increasing the charter capital thereof that are different from those provided herein. Section 28 28.1 If the value of a corporation's net assets after the second or any subsequent financial year is less than its established charter capital, the corporation shall announce and register an appropriate decrease of its charter capital. If the value of the net assets, as established by applicable accounting standards, is less than the minimum charter capital requirements set forth in section 26.2, the corporation shall be liquidated unless adequate new capital can be invested. 28.2 A corporation may decrease its charter capital by a decision of a general shareholders meeting. A corporation may accomplish this by decreasing the nominal value of shares or by recalling a portion of its outstanding shares. If a corporation is bound to announce a decrease in its charter capital pursuant to section 28.1, and if, despite such requirement, the general shareholder meeting fails to decide to decrease charter capital or otherwise comply with minimum charter capital requirements, the general shareholder meeting shall be deemed to have conceded the insolvency of the corporation and to have decided to liquidate it. If this occurs, upon the petition of any creditor, a court may adjudicate the corporation bankrupt and conduct bankruptcy proceedings against it. 28.3 A decision to decrease the charter capital of a corporation shall be adopted in accordance with the same procedure as for an increase of the charter capital. 28.4 Upon the expiration of three (3) months from the date of the publication of a corporation's decision to decrease its charter capital, those shares, which were recalled but have not been surrendered to the corporation, become invalid. Section 29 29.1 The founders of a corporation are the persons who undertake to form the corporation. Such founders shall make a written agreement that shall determine the procedure for establishment of the corporation and shall set forth the liability of the founders to persons who subscribed to the initial shares of the corporation and the liabilities of the founders to third parties prior to the time that the corporation is created. By signing such an agreement, any person who acts as a founder acknowledges his liability to such share subscribers and to third parties. 29.2 The founders owe a duty to the corporation to act in the corporation. s best interests during the process of formation. 29.3 The founders bear joint and several liability with regard to obligations that are associated with the establishment of the corporation and that arise prior to its registration. A corporation shall be liable for the founders' obligations associated with its foundation only in the event of subsequent ratification of their actions by a general shareholder meeting. 29.4 No founder who is also a shareholder may possess rights and privileges as a shareholder that is not provided to other shareholders of the same class. 29.5 After the registration of the corporation, the founders, as founders, shall have no further role in managing the corporation. No corporation may establish any meeting of founders or any founders. board or the like, but any founder who is a natural person may serve as a member of the board of directors or as an officer, and any founder may own a majority of the shares. Section 30 30.2 The right of shareholders to pledge their shares may not be limited or prohibited by the corporation. A shareholder has the right to vote pledged shares, unless otherwise set forth in the pledge agreement. 30.3 A corporation may receive its own shares as a pledge only if: (a) the pledged shares have been paid in full; (b) the total number of its own shares pledged to the corporation represents no more than ten percent (10%) of its charter capital; and (c) the pledge agreement is approved by the board of directors. 30.4 A corporation may not pledge its own unissued shares. 30.5 The charter of a corporation may provide for the issuance of different classes of shares and may specify the rights of each class of shares with respect to voting, dividends, distribution of property upon dissolution, or other matters. 30.6 The charter of a limited liability company may establish limitations for the number of shares, total par value of shares, or the maximum number of votes which one shareholder can hold. Section 31 31.1 A corporation shall create and maintain a register of shareholders no later than one month after its registration. The charter shall set forth the location at which the register of shareholders will be maintained. 31.2 All share transfers shall be recorded in the register of shareholders. The register shall be organized so that each share is assigned a consecutive number. For each consecutive number there shall be entered the name of the shareholder and the date of the shareholder. s acquisition of the share. The register of shareholders shall also contain the registered name and address of each legal person shareholder, and the name and place of residence of each natural person shareholder. The names and addresses of those who have informed the corporation that they have pledge rights in shares also shall be included in the register of shareholders, with an indication of whether the pledge holder has the right to vote such shares. The register of shareholders shall also contain a statement of the number of shares that each shareholder owns. The register of shareholders may contain other data. 31.3 A corporation may employ a bank, depositary, or any other agent
authorized by law to maintain the register of shareholders. 31.4 A corporation shall maintain the register of shareholders at its principal place of business in Kosovo, or at the principal place of business in Kosovo of any agent engaged to maintain the register of shareholders, and shall provide for shareholders, pledges of shares, or nominee shareholders to view the register of shareholders. 31.5 Upon the first demand of any shareholder, any duly authorized agent of any shareholder, or any person or entity with a pledge interest in shares of the corporation, the holder of the register of shareholders shall provide relevant excerpts from the register. 31.6 The entry of a record into the register of shareholders should be made no more than three (3) days from the date that the transferee or transferor of a share or any interest therein submits to the secretary or the agent of the corporation either (a) share certificates bearing the signature of the transferor and indicia of the transferor. s transfer of such shares to the transferee; or (b) in the case of uncertificated shares, an affidavit executed by the transferor by which affidavit the transferor states that he has transferred his interest in the uncertificated shares to the transferee. 31.7 If the secretary or agent of the corporation fails or refuses to enter a record into the register of shareholders, he shall, within five (5) days of the date of the request send an explanation of the denial to the requester. 31.8 A person who is aggrieved by a refusal to make a requested entry in the register of shareholders may submit an application to the court. If the court decides that the requested entry should have been made, the secretary or agent shall immediately make the entry. If the initial refusal to make the entry caused the person aggrieved thereby to fail to be included in any dividend distribution, the corporation shall make such a distribution to such person. If the initial refusal caused the person aggrieved thereby to fail to attend a meeting of shareholders, the court may, in appropriate circumstances, order the corporation to reconvene the meeting. However, the remedies contained herein are not available to any party who presented to the secretary or agent a share certificate with (a) a signature of the transferor that is not substantially identical to that which appears in the register of shareholders; or (b) a signature not inscribed under unequivocal language of transfer. Section 32 32.1 The rights of shareholders are: (a) to receive as a dividend a portion of any surplus, if the general meeting of shareholders declares a dividend and if the corporation is permitted to pay and actually pays a dividend; (b) to receive a pro rata distribution of the net assets of the corporation upon its liquidation, subject to the applicable laws and regulations on bankruptcy, pledge, and insolvency; (c) to receive shares, free of charge, upon an increase of the charter capital of the corporation, such that the increase in charter capital does not dilute the value of their interest; (d) a priority right to acquire shares issued by the corporation, unless otherwise provided by its charter; (e) except as the charter of a limited liability company may otherwise provide, to bequeath all shares or a portion thereof to any person; (f) except as the charter of a limited liability company may otherwise provide, to sell and otherwise transfer shares to any person; (g) except as provided in the charter with respect to particular classes of shares, to participate in all meetings of shareholders and to vote on matters properly before such meetings; and (h) to receive all public information released by the corporation regarding its activity, including the right to obtain financial statements and other documents as provided herein and in the corporation. s charter. 32.2 The charter of the corporation may establish limitations on the number of shares that one shareholder may own, as well as the total nominal value thereof, and the maximum number of votes that a shareholder may have. 32.3 The charter of the corporation may provide shareholders' rights in addition to those enumerated herein. 32.4 Each share shall have equal rights with each other share of the same class. 32.5 Shareholders shall pay for their shares pursuant to any applicable share subscription agreement, the present regulation, or the corporation. s foundation documents. 32.6 The competent courts may resolve disputes among shareholders, the corporation, and its officers and directors. However, if a charter or other foundation documents or a share subscription agreement so provides, such disputes shall be resolved by private arbitration or other alternative dispute resolution method. Section 33 33.1 A foundation meeting is an essential step in establishing a corporation. The foundation meeting shall be deemed to have validly occurred if all founders set forth in the founders. agreement are present in person or represented by an agent. The chairman of the meeting shall be elected by a majority of the founders. 33.2 The foundation meeting must unanimously decide to establish the corporation and must unanimously approve its charter. 33.3 The foundation meeting must also, by simple majority vote: (a) elect the officers of the corporation as provided in the charter; (b) elect each member of the initial board of directors; (c) approve the valuation of contributions made in-kind; and (d) approve the initial charter capital. 34.1 Joint stock companies shall apportion management functions among the general meeting of shareholders, the board of directors, and the officers of the company. 34.2 The charter of a limited liability company with fewer than twenty (20) shareholders may provide for management of the company without a board of directors. In that case, the general meeting of shareholders shall exercise the powers otherwise assigned to a board of directors. Section 35 35.1 The general meeting of shareholders of a corporation shall consist of all persons registered in the register of shareholders as of thirty (30) days prior to the date on which the general meeting of shareholders is scheduled. The general meeting of shareholders is the highest governing body of a corporation. Its powers are limited to voting on the matters enumerated in this section unless the charter provides otherwise. 35.2 The following matters may be decided only by the general meeting of shareholders: (a) amendments to the charter; (b) whether to increase or decrease the charter capital; consolidation of issued and outstanding shares; (d) whether to split issued and outstanding shares or whether to issue additional shares; (e) the membership of the board of directors; (f) whether by-laws should be adopted or amended; (g) whether the corporation should liquidate itself, and who should comprise the liquidation committee; (h) whether the corporation should seek the protection of any bankruptcy or insolvency laws; and (i) the selection of the corporation. s external auditor. 35.3 Decisions regarding the matters referenced in subparagraphs (e), (f), and (i) of section 35.2 may be adopted by vote of a simple majority of shares represented at a general meeting of shareholders. Adoption of amendments to the charter, as referenced in subparagraph (a) of section 35.2, require the positive vote of a majority of all shares issues and outstanding. In cases where a proposed charter amendment is disadvantageous to a particular class of shares, its adoption shall require a positive vote of a majority of all share of the affected class. Proposals regarding the matters referenced in all other subparagraphs of section 35.2 may be adopted only by a two-thirds majority of the shares represented at the meeting. 35.4 Decisions regarding matters that the present regulation or the charter exclusively reserve to the general meeting of shareholders may not be delegated to the board of directors or to the officers. 35.5 Even if there has not been compliance with the notice requirements for a general meeting, a corporation may act through the unanimous consent of its shareholders expressed in a document containing the signatures of all shareholders. 35.6 A joint stock company shall hold an annual general meeting of shareholders within ninety days after the close of the company. s fiscal year. 35.7 All meetings of shareholders except the annual general meeting are extraordinary meetings. Extraordinary meetings may be convened by the officers, by a majority of the board of directors, or by shareholders owning not less than twenty percent (20%) of the issued and outstanding voting shares of a corporation. 35.8 At least thirty (30) days before the meeting is to occur, the corporation shall cause notice of a general or extraordinary meeting of shareholders to be sent to each shareholder, at the address in the register of shareholders. The notice shall include the time and place of the meeting and the agenda. For each general meeting of shareholders, the agenda shall include those matters listed in section 35.2 for which action is contemplated. For each extraordinary meeting, the proponent of the meeting shall write and include an agenda in the notice. 35.9 Notice shall be sent to all fully paid common shareholders, to each officer, to each member of the board of directors, and to preferred shareholders who are entitled to vote. In addition to this notice, a joint stock company shall also cause notice to be effected by publication. The company shall be deemed to have accomplished this if it shall have, no fewer than twenty-one (21) days prior to the date originally set for the meeting, caused to appear in a newspaper of general circulation in Pristina, Kosovo, in the Albanian, Serbian and English languages, a notice of the time and the place of the meeting and of the agenda. This advertisement shall be no smaller than ten percent (10%) of a printed page. 35.10 A general meeting of shareholders may not adopt decisions regarding issues that were not included in the agenda unless registered shareholders representing all shares of the company entitled to vote are present. All decisions taken at such a meeting shall have legal force and effect even if proper notice was not effective. A meeting of shareholders may be held at any place in Kosovo or any other place set forth in the charter. 35.11 A general meeting of shareholders may undertake no business unless a quorum is present in person or by proxy. Unless the charter of a company provides otherwise, a quorum is present if shareholders or authorized agents representing at least thirty-three percent (33%) of the voting shares of the company are registered as present. To be registered as present, each shareholder or his authorized agent must demonstrate, and the company must verify, that the shareholder was properly entered in the register of shareholders at least thirty (30) days prior to the announced date of the meeting. A meeting shall be adjourned if the required quorum is not present within a reasonable period after its scheduled time. 35.12 If no quorum is present, the company shall, within one month of the date for which the meeting for which a quorum was not present was called, call and give notice of another meeting of shareholders. For such meeting, the quorum will be twenty-five percent (25%) of the total voting shares. 35.13 At a shareholders. meeting, a shareholder shall be entitled to one vote for each share that he owns or represents by proxy or other agency. The charter of a limited liability company may vary this requirement, but a shareholder. s vote may not be reduced without his consent. 35.14 Each shareholder whose name appears in the register of shareholders as of thirty (30) days prior to the date for which any meeting of shareholders has been called may attend such meeting, either in person or via a duly authorized representative. Section 36 36.1 Except as otherwise provided in section 34.2, a corporation shall appoint and maintain a board of directors. The board of directors shall be responsible for the operations of the corporation. Unless otherwise provided by the charter, the by-laws, or section 35.2, the board of directors shall have the exclusive authority to: (a) hire and discharge corporate officers; (b) authorize all agreements of the corporation; cause the corporation to purchase its own shares; (d) cause the company to incur substantial debt through loans or the issuance of bonds or convertible debt instruments; (e) determine the compensation for officers; (f) determine the disposition of any surplus; (g) ensure that the corporation observes the applicable law and accounting standards; (h) in the case of a joint stock company: (i) ensure that an audit of the books and records is performed at least annually by an independent auditor, with the auditor. s report addressed to the general meeting of shareholders and made available to each director and officer; and (ii) ensure that an annual report containing an independently audited statement of its financial position, a report from the officers regarding the status of its operations, and any other disclosures that may be required by the charter, by-laws or law is prepared, signed by the chair of the board and at least one other director and distributed to all directors, officers and shareholders. 36.2 Only a natural person may be a member of the board of directors. Employees and shareholders may be directors, but the charter may not restrict membership on the board of directors to employees or shareholders. Members of the board of directors may not individually bind the corporation to third parties, but the corporation may ratify any legal act of any individual member of the board of directors if the act is within the powers of the corporation. 36.3 A corporation may have only one board of directors, and neither the foundation documents nor the general meeting of shareholders may create bodies, other than the general meeting of shareholders, that are superior to the board of directors. Unless the charter or by-laws provide otherwise, the powers reserved to the board of directors may not be assigned to the general meeting of shareholders or to the officers. The board of directors may create advisory subcommittees to assist the board of directors, but any such subcommittee may not possess or exercise any of the powers of the board of directors. 36.4 The number of directors shall be established by the charter. A joint stock company may have no fewer than three (3) directors. 36.5 The procedures for meetings of the board of directors and for filling vacancies in the board of directors that occur between general meetings of shareholders shall be set forth in the charter or in the by-laws. 36.6 The charter or the by-laws shall provide the terms upon which a director may resign and the grounds upon which a director may be disqualified or removed. 36.7 A director has fiduciary duties to the corporation, which may be enforced by law. These include: the duty to act in good faith for the benefit of the corporation as a whole; the duty to exercise powers only for proper purposes; the duty to give adequate consideration to matters to be decided; the duty to avoid actual and potential conflicts between the director. s personal interests and those of the corporation; and the duty to exercise reasonable care and skill in the performance of his functions. 36.8 No director may be held liable for any action or failure to act if the action or omission was made in good faith, based upon reasonable inquiry and information, and rationally related to the purposes of the company. Section 37 37.1 The officers of a corporation shall be appointed by the board of directors. A corporation may have as many officers as the charter provides, but no fewer than two (2). In a limited liability company, a single natural person may hold more than one office. 37.2 The duties of each officer shall be provided in the charter or in the by-laws or in separate instructions of the board of directors, provided, however, that each corporation shall appoint a secretary whose duties specifically include, inter alia, the duty to maintain the register of shareholders, to provide requisite notices, maintain minutes and records and otherwise ensure the proper conduct of the general meeting of shareholders and meetings of the board of directors, and to act as the corporation's agent for receipt of notice. 37.3 Every officer owes the same fiduciary duties as the members of the board of directors. 37.4 No officer may be held liable for any action or failure to act if the action or omission was made in good faith, based upon reasonable inquiry and information, rationally related to the purposes of the company. 37.5 Officers may bind a corporation to third party creditors if (a) the corporation's relationship with any such creditor arises in the
ordinary course of the company. s business; 37.6 An officer shall disclose to the board of directors any financial interest that the officer has regarding the corporation's: (a) business competitors; (b) major creditors; (c) major suppliers of goods or services; and (d) major business customers. In this section, "financial interest" of an officer means any relationship, including without limitation any ownership relationship, held by that officer or any member of his immediate family that might cause the officer to favor such a competitor, creditor, supplier, or customer with regard to its relations with the corporation. 37.7 The disclosures required by section 37.6 shall be made by each officer at the later of the time he becomes employed by the corporation or at the time the financial interest arises. If an officer fails to make a required disclosure, he may be liable to the extent of actual harm that the corporation suffers as a result of such failure. 37.8 Unless otherwise provided by the charter, the by-laws, or an officer. s employment contract, an officer shall refrain from activities, which compete directly with the business of the company. An officer who competes with the business of the company may be held personally liable for damages that the company suffers as a result. 37.9 Any officer may simultaneously hold more than one position in the company, unless the charter or the by-laws provide otherwise. However, in a joint stock company, no person may simultaneously hold both the senior office in the company and the office that oversees the company. s finances. 37.10 The charter, the by-laws, or the board of directors may impose upon any officer any duty relating to the corporation, but the responsibilities of the directors set forth in section 36.1 may not be delegated. Section 38 38.1 The determination of profit and loss for the purpose of financial disclosure shall be made pursuant to the applicable law on accounting standards. If a company realizes a profit, any surplus after the payment of taxes thereon ("the surplus") remains the property of the company, and the company may use it as the board of directors may determine. 38.2 The board of directors may declare a distribution of surplus to the shareholders allocated equally to each share of the same class ("a dividend"). 38.3 Even if the board of directors declares a dividend, a corporation may pay a dividend only if: (a) its charter expressly permits; (b) the corporation will be solvent after paying the dividend; (c) the entire dividend can be paid out of surplus; (d) charter capital has been fully paid; and (e) payment of the dividend will not reduce charter capital. In this section, "solvent" means the ability to fully pay debts as they become due and having a surplus on the last audited balance sheet. "Insolvent" means the opposite of solvent. Accordingly, to pay a dividend a corporation must meet both the cash flow and the balance sheet test of solvency. Whether a corporation is solvent and whether the payment of a dividend will render it insolvent shall be determined in accordance with applicable law on accounting standards. 38.4 Any payment of dividends in violation of section 38.3 shall be refunded by each shareholder who actually receives such dividend. 38.5 Unless the charter or by-laws otherwise provide, the board of directors may declare a dividend of any lawful amount. 38.6 Dividends may be paid only in currency lawful in Kosovo. 38.7 Shareholders who are entered in the register of shareholders at least thirty (30) days prior to the meeting of the board of directors at which a dividend is declared are dividend record shareholders and as such are entitled to payment of such dividends. Section 39 39.1 A corporation may be liquidated and its affairs concluded ("a liquidation") by: (a) the vote of the general meeting of shareholders; (b) the termination of the period for which it was established or for other reasons expressly set forth in its charter or by-laws; (c) the order of a court; or (d) the application of bankruptcy laws and regulations. If a liquidation occurs pursuant to subparagraphs (a) or (b) ("a voluntary liquidation"), the present regulation shall apply. If a liquidation occurs pursuant to subparagraphs (c) or (d), ("an involuntary liquidation") applicable bankruptcy laws and regulations shall apply. 39.2 In a voluntary liquidation, the general meeting of shareholders shall appoint a liquidation committee ("the committee") to which all management powers of the general meeting of shareholders, the board of directors, and the officers shall be ceded. 39.3 As soon as practicable after its establishment, the liquidation committee shall file notice of the voluntary liquidation with the agency, which provides registration of business organizations. If such a notice has not been on file and publicly available for at least thirty (30) days prior to the committee. s conducting any sale of assets as provided herein, the sale may be declared void by a court upon the application of any unpaid creditor. The notice shall state, in the Albanian, Serbian, and English languages, that the general meeting of shareholders has elected to liquidate the assets of the company and to conclude its affairs; the date of the decision; the place at which creditors. claims must be presented; and that sale of the corporation's assets may occur no sooner than thirty (30) days subsequent to the date of the notice. 39.4 The committee shall send written notice to all of the corporation's known creditors, and it shall allow secured parties to remove property in which they have a security interest. If the company owns property in which secured parties have a security interest, the committee shall surrender the property to the secured party. The secured party shall sell or otherwise dispose of the property in accordance with the applicable law on pledges. If the sale or disposition produces any surplus over the secured debt, the secured party shall remit the surplus to the committee. 39.5 Within thirty (30) days following its establishment, the liquidation committee shall complete an examination of the books and records of the joint stock company and compile an inventory of its assets and a chart of its debts. The committee shall also determine a commercially reasonable method of selling the corporation's assets and the time and place of their sale. The sale may be public or private and by any commercially reasonable means. The corporation shall make the inventory of assets and the chart of debts available for inspection for at least eight (8) hours per day for five (5) business days preceding the sale. 39.6 No later than thirty (30) days after its establishment, the committee shall cause to be published in a newspaper of general circulation in Kosovo, in the Albanian, Serbian and English languages, an advertisement not less than one-half page in size containing the name of the corporation and all trade names known to be used by the corporation, a notice regarding the time and place of any public sale, or the time after which any private sale shall have occurred, the location of the inventory of assets and the chart of debts and a statement setting forth when the inventory of assets and the chart of debts may be examined. The advertisement shall also provide, for the benefit of creditors or interested parties, information regarding the procedures for filing claims. 39.7 The liquidation committee may pay no claim that is not included on the chart of debts. The committee shall assess the validity of each claim before it includes the claim on the chart of debts. Claimants who claim to be aggrieved by the committee. s refusal to include a claim on the chart of debts may challenge such refusal in court. 39.8 The liquidation committee may not postpone a published public sale date, but may adjourn a sale if necessary. 39.9 The committee shall distribute the proceeds of any sale of the company. s assets in accordance with the distribution priorities in the applicable law on bankruptcy. Section 40 The Special Representative of the Secretary-General may issue administrative directions for the implementation of the present regulation. Section 41 The present regulation shall supersede any provision in the applicable law which is inconsistent with it. Section 42 The present regulation shall enter into force on 8 February 2001.
Hans Haekkerup
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