LAW ON BUSINESS COMPANIES

18 Dec. 2003 LAW ON BUSINESS COMPANIES Summary Table of Contents PART ONE PART TWO GENERAL PROVISIONS PROVISIONS SPECIFIC TO EACH FORM OF COMPANY General Partnership Limited Partnership Limited Liability Company Joint Stock Company PART THREE PART FOUR PART FIVE LIQUIDATION OF A COMPANY LINKING OF COMPANIES AND PERSONS REORGANIZATION AND MAJOR TRANSACTIONS OF A COMPANY Merger Division Conversion Other Major Transactions Dissent and Appraisal PART SIX FINAL AND TRANSITIONAL PROVISIONS 1

Complete Table of Contents 1 Scope of This Law 2 Use and Definitions of Terms 3 Forms of Companies 4 Branches of a Company 5 Duration of a Company 6 Purposes of a Company PART ONE GENERAL PROVISIONS CHAPTER 1. GENERAL PROVISIONS Scope and Basic Principles Matters Concerning Founding of a Company 7 Articles of Association 8 When a Company Begins Existence 9 Registration and Publication 10 Effect of Registration and Publication against Third Parties 11 Action for Nullity of a Limited Liability Company of a Joint Stock Company Liability of Founders and Other Persons 12 Liability for Obligations Incurred Before Registration 13 Liability for Contributions to Capital 14 Valuation of Contributions in Kind 15 Liability for Wrongful Abuse of Corporate Form Registered Office and Name 16 Registered Office 17 Registered Name 18 Required Contents of Name 19 Abbreviated or Modified Name 20 Restrictions on Use of National and Official Names 21 Restrictions on Use of Personal Names 22 Use of Registered Name in Documents 23 Language of a Registered Name 24 Restriction on Transfer of Registered Name 25 Representatives and Their Authority 26 General Provisions Concerning Procura 27 Issuance and Types of Procura 28 Procurator s Signature 29 Termination of Procuration 30 Registration of Procura Representatives and Representation 2

Duties to a Company 31 General Principles 32 Duty of Care and Business Judgment Rule 33 Duty of Loyalty and Conflicts of Interest 34 Personal Interest in an Act or Transaction 35 Action and Remedies Regarding Conflict of Interest Transactions 36 Duty Not to Compete With the Company 37 Duty to Keep Business Secrets 38 Persons Owing Duties 39 Increase or Decrease of Duties by a Company Court Action to Enforce Duties 40 Direct Court Action by a Partner, Member or Shareholder 41 Derivative Court Action by a Limited Partner, Member or Shareholder 42 Simultaneous Direct and Derivative Actions 43 Actions in Certain Companies 44 Right Information and Access Right to Information Other General Provisions 45 Submission of Public Offering to Registry and to Publication 46 Disqualification of Certain Persons 47 Matters Concerning Courts 48 Prescription PART TWO PROVISIONS SPECIFIC TO EACH FORM OF COMPANY CHAPTER 2. GENERAL PARTNERSHIP General Provisions Concerning General Partnerships 49 Definition and Liability Principles 50 Freedom to Contract Principle 51 Articles of Association 52 Partnership Agreement 53 Relationship of Articles of Association and Partnership Agreement 54 Default Provisions of This Chapter Legal Relations between Partners and With the Partnership 55 Articles of Association and Partnership Agreement May Govern 56 Contributions 57 Delays in Payment of Contribution 58 Increase or Reduction of Contribution 59 Right to Reimbursement for Expenses 60 Transfer of Interests among Partners 3

61 Decision Making by Partners 62 Management of a Partnership 63 Management by More Than One Partner 64 Scope of Management Authority 65 Transfer of Management Authority 66 Resignation of Management Authority 67 Revocation of Management Authority 68 Sharing of Profit and Loss Legal Relations of Partners and Partnership to Third Parties 69 Representation of a Partnership 70 Resignation of Representation Authority 71 Revocation of Representation Authority 72 Liability Defenses Available to a Partner 73 Setoff of Claims 74 Liability of a New Partner 75 Transfer of Partnership Interests to Third Parties 76 Liability Relating to Transfer Dissolution of a Partnership and Exit of Partners 77 Events Causing Dissolution of a Partnership 78 Tacit Extension of Duration 79 Withdrawal of a Partner by Giving Notice 80 Dissolution of a Partnership by Court Decision 81 Expulsion of a Partner 82 Settlement of Accounts on Exit of a Partner 83 Treatment of Outstanding Transactions on Exit of a Partner 84 Procedure in Case of One Remaining Partner 85 Continuation of Partnership with Heirs 86 Entry into the Registry CHAPTER 3. LIMITED PARTNERSHIP 87 Definition and Liability Principles 88 Application of General Partnership Provisions to Limited Partnerships 89 Articles of Association and Partnership Agreement 90 Amendment of Articles of Association 91 Limited Partnership Agreement 92 Relationship of Articles of Association and Limited Partnership Agreement 93 Applicable Provisions 94 Contributions 95 Transfer on Interests 96 Management; Limited Partner May Not Manage 97 Sharing of Profit and Loss 98 Representation; Limited Partner May Not Represent 99 Liability of a Limited Partner as a General Partner in Certain Cases 100 Termination of Partner Status and Transformation of Legal Form 101 Definition and Liability Principles 102 Freedom to Contract Principle CHAPTER 4. LIMITED LIABILITY COMPANY General Provisions Concerning Limited Liability Companies 4

103 Articles of Association 104 Company Agreement 105 Relationship of Articles of Association and Company Agreement 106 Default Provisions of This Chapter 107 Founding Costs 108 Nature of Contributions 109 Calls for Additional Contributions Capital 110 Minimum Initial Capital 111 Increase of Capital 112 Decrease of Capital Shares 113 One Share per Member 114 Voting and Distribution Rights of Shares 115 Certain Other Characteristics of Shares 116 Co-Ownership of a Share 117 Book of Shares 118 Registration of Shares 119 A Company s Acquisition of its Own Shares 120 Pledges of Shares 121 Loans by a Company to Acquire its Shares Prohibited 122 Cancellation of Shares Transfer of Shares 123 General Restriction on Transfer 124 Right of First Refusal on Transfer to Third Parties 125 Transfer in Court Proceedings 126 Certain Requirements for and Consequences of Transfer 127 Division and Transfer in Part of a Share 128 Pledge of a Share by a Member Distributions to Members 129 Annual Financial Statements 130 General Provisions Regarding Distributions 131 Restrictions on Distributions 132 Personal Liability for Prohibited Distributions 133 Certain Loans for Capital to be Subordinated Members Meetings and Decision Making 134 General Provisions Concerning Members Meetings 135 Competence of the Members Meeting 136 Convening a Meeting by the Director 137 Extraordinary Meeting 138 Notice and Agenda 139 Objection to Procedure 140 Action without a Formally-Convened Meeting 141 Voting by Proxy 142 Quorum 143 Conduct of a Members Meeting 144 Required Majorities for Decision 5

145 Meeting by Telephone, Voting by Mail, and Actions without a Meeting 146 Open and Secret Ballot 147 Disqualification to Vote 148 Minutes 149 Book of Decisions 150 Appropriate Application 151 General Provisions Concerning Directors 152 Election of Directors 153 Number of Directors and Vacancies 154 Chairman of the Board 155 Competence of the Board 156 Liability for Business Books 157 Certain Actions by More Than One Director 158 Meetings of the Board 159 Action Without a Meeting 160 Quorum and Majority 161 Disqualification to Vote 162 Committees 163 Minutes 164 Resignation of a Director 165 Removal of a Director 166 Internal Auditor or Audit Committee 167 Election and Removal 168 Competence and Method of Work 169 Company Auditor 170 Appropriate Application Declaration of Nullity of a Meetings Decision Directors and Board of Directors Supervisory Bodies Auditors Amendment of Articles of Association and Company Agreement 171 Required Agreement for Amendment 172 Retention of Company Documents and Information 173 Access to Records and Information Rights Based on Termination of a Members Membership in a Company and Termination of Company 174 Events Causing Termination of Membership 175 General Provisions Concerning Withdrawal of Expulsion of a Member 176 Withdrawal of a Member for Justified Reasons 177 Expulsion of a Member 178 Consequences of Termination of Membership Dissolution of a Company 6

179 Events Causing Dissolution 180 Dissolution of a Single-Member Company 181 Dissolution and Other Remedies by a Court on Motion of Members CHAPTER 5. JOINT STOCK COMPANY General Provisions 182 Definition and Liability Principles 183 Articles of Association 184 By-Laws 185 Relationship of Articles of Association and By-laws 186 Special Benefits 187 Founding Costs 188 Nature of Contributions; Loans to Acquire Shares Prohibited 189 Valuation of Contributions 190 Payment of Contributions Closed and Open Companies 191 General Provisions Concerning Closed and open Companies 192 Closed Company 193 Transfer of Shares of a Closed Company 194 Open Company 195 Founding Offering of Shares of an Open Company 196 Convening the Assembly 197 Procedures at the Founding Assembly 198 Consequences of Failing to Hold the Founding Assembly 199 Presiding and Minutes at the Founding Assembly 200 Matters to be Decided at the Founding Assembly 201 Voting at the Founding Assembly 202 Ordinary and Preferred Shares 203 Authorized and Issued Shares 204 Registration of Issuance and Ownership 205 Effect of Registration Shares and Other Securities of a Company Shares and Other Securities of a Company 206 Rights of Holders of Ordinary Shares 207 Rights of Holders of Preferred Shares 208 Securities Other Than Shares; Convertible Securities, Options and Bonds 209 Dividend and Voting Rights of Partly-Paid Shares 210 Amount of Consideration for Shares 211 Preemptive Rights to Acquire New Shares 212 Co-ownership of a Share 213 Questionnaire 214 Duty to Respond to Questions on Real Interest 215 Report of Questionnaire Results 216 Sanctions 217 Investigation by Competent Authority 218 General Provisions Concerning Dividends 219 Dividends Payable in Money, Shares or Other Property 7

220 Restriction on Payment of Interim Dividends by an Open Company 221 Record Date for Dividends and Other Distributions 222 Procedures for Authorization and Payment of Dividends Dividends and Other Distributions to Shareholders 223 Subscription to a Company s Own Shares or Parent s Shares Prohibited 224 General Provisions for a Company s Acquisition of its Own Shares 225 Procedures for Company s Acquisition of its Own Shares 226 Procedures for Acquisition of Shares Pro Rata From All Shareholders 227 Status of Reacquired Shares 228 Pledge of Own Shares Prohibited 229 Registration of Acquisition or Pledge 230 Grounds for Redemption and Annulment 231 Price for Redemption 232 Registration of Redemption 233 Restrictions on Payment of Dividends and Other Distributions 234 Personal Liability for Prohibited Distributions 235 Certain Loans for Capital to be Subordinated 236 Minimum Initial Capital 237 Minimum Nominal Value of Shares 238 Consolidation and Distribution of Shares 239 Maintenance of Initial Capital of an Open Company 240 Decision Capital of a Company 241 Method of Increase 242 Closed and Open Issuance 243 Value of Shares from New Issue 244 Increase of Initial Capital with Contributions in Money and/or in Kind 245 Entering the Decision into Registry and Publishing 246 Subscription of New Shares 247 Reporting to the Securities Committee and Recording into the Registry 248 Acquisition of Shares and Confirmation 249 Entry into Registry, Publication and Effect 250 Assumptions 251 Content of the Decision 252 Entry into Registry, Publishing and Effect 253 Statement on Exercising the Right of Registration and Conversion 254 Informing the Securities Commission and Entry into the Central Registry 255 Acquisition and Confirmation of Shares 256 Entering Increase into Registry and Publishing 257 Assumptions 258 Holders of Rights Arising from an Increase in Initial Capital from the Company s Assets 259 Fractional Shares 260 The Right to Dividend and to a Share in the Assets of a Company in Liquidation 261 Notification of the Securities Commission and Entry into Central Registry 262 Acquisition of Shares and Share Certificates 263 Registration, Publication and Effectiveness of the Decision 264 Decision 265 Type of Reduction 266 Methods 267 Withdrawal and Cancellation of Shares 268 Relevance 269 Principle of Equality 270 Filing with the Registry and Public Notice 8

271 Notice of Resolution and Protection of Creditors Rights 272 Filing with the Central Securities Registry 273 Filing with the Registry, Public Notice and Effective Date 274 Principle 275 Limit 276 Instruction 277 The Lowest Amount of Decrease (Reduction) Shareholders Assembly 278 Exercising Shareholders Rights 279 Annual Assembly 280 Extraordinary Assembly and Convening by Minority Shareholders 281 Court-Ordered Assembly 282 Extraordinary Assembly of Closed Company 283 Extraordinary Assembly in Financial Crisis 284 Regulations 285 Waiver of Notice in Writing 286 Waiver by Attendance 287 Agenda for an Assembly 288 Chairman at an Assembly 289 Record Date 290 Voting in Person or by Proxy 291 Verification 292 Right of Shareholders to Information at Assembly 293 Competence of the Assembly 294 Approval of Financial Statements by the Shareholders Assembly 295 Quorum Required for a Vote 296 Vote Required for a Decision; Definition of Qualified Majority Vote 297 Voting Rights of a Share 298 Certain Voting Agreements Prohibited 299 Meeting by Conference Telephone 300 Voting in Open and by Secret Ballot 301 Voting Rights of Specific Types of Shareholders 302 Effective Date of Assembly Decisions 303 Disqualification to vote in Certain Cases 304 Record of an Assembly 305 Invalidity Grounds 306 Invalidity of Election of Board Members 307 Invalidity of Decision on Adoption of Annual Financial Reports 308 Exceptions 309 Charges and the Procedure for Establishing Invalidity Board of Directors, Management Body and Supervisory Bodies 310 Obligations 311 Number of Directors 312 Election of Directors and Cumulative Voting 313 Independent and Non-Executive Directors 314 Term of Office of Directors 315 Filling of Vacancies 316 Chairman of the Board 317 Competence of the Board 318 Meetings of the Board 319 Meeting by Conference Telephone and Actions Without a Meeting 320 Committees of the Board 9

321 Corporate Governance Guidelines 322 Quorum and Vote Required for Decisions 323 Disqualification to Vote in Certain Cases 324 Records of Meetings 325 Definition 326 President of the Management Body and Representation of the Company 327 Reporting by the Board to the Shareholders Assembly and by the Management Body to the Board 328 Remuneration Principles 329 Resignation of a Director 330 Removal of a Director 331 Personal Liability Cases 332 Supervisory Board, Internal Auditor or Audit Committee 333 Membership, Election and Removal of Supervisory Board 334 Membership, Election and Removal of Internal Auditor and Audit Committee 335 Competence and Method of Work 336 Auditor 337 Appointment of Fiduciary Agent-Expert 338 Authorization of Fiduciary Agent-Expert 339 Report of Fiduciary Agent-Expert 340 Corporate Secretary Amendment of the Articles of Association 341 Amendment by the Board of Directors 342 Amendment by the Board and the Shareholders Assembly 343 Separate Group Voting by a Type or Class of Shares 344 Registration and Effective Time of an Amendment Company Documents and Information 345 Retention of Company Documents and Information 346 Access to Records and Information 347 Access by Court Order Dissolution of a Company 348 Events Causing Dissolution 349 Dissolution and Other Remedies by a Court on Motion of Shareholders PART THREE LIQUIDATION OF A COMPANY CHAPTER 6. LIQUIDATION OF A COMPANY 350 General Provision Concerning Liquidation 351 Decision to Liquidate 352 Entry into the Registry and Publication 353 Individual Notice to Known Creditors 354 Published Notice to All Creditors 355 Activity of a Company During Liquidation 356 The Liquidators 357 Removal of Liquidators 358 Entry of the Appointment and Removal of Liquidators into the Registry 359 Activities of the Liquidators 360 Liquidation Balance Sheet 10

361 Termination of Liquidation and Commencement of Bankruptcy 362 Report Following Settlement With Creditors 363 Distribution to Partners, Members or Shareholders 364 Remuneration of Liquidators 365 Finalization 366 Accountability of Liquidators for Damage 367 Notifying the Tax Administration PART FOUR LINKING BUSINESS COMPANIES AND PERSONS CHAPTER 7. LINKED COMPANIES AND PERSONS 368 Definition and Types of Linked Companies 369 Control by Share in Capital 370 Acting in Concert 371 Special Provisions for Companies Linked by Capital Share 372 Entry into Registry 373 Business Name 374 Liability of Controlling Company and Directors 375 Reports to Members or Shareholders of a Dependent Company 376 Contract on Management and/or Transfer of Profit 377 Contents of and Liabilities Under the Contract 378 Required Approval of the Contract 379 Termination and Registration of Termination PART FIVE REORGANIZATION AND MAJOR TRANSACTIONS OF A COMPANY CHAPTER 8. STATUS CHANGES Merger 380 Definition and Types of Status Changes 381 Prohibition of Certain Status Changes 382 Settlement Account 383 Status Change During Liquidation 384 Plan of Merger By Acquisition 385 Board of Directors Report 386 Auditors Report 387 Supervisory Board Report 388 Announcement of Plan (Notifying Shareholders) 389 Examination of Documents 390 Shareholders Assembly Approval 391 Merger Without Decision of the Acquiring Company s Assembly 392 Capital Increase 393 Prohibition of Creating Phantom Capital 394 Acquiring Company s Initial Value 395 Protection of Creditors Right to Guarantees and Payment 396 Protection of Bondholders 397 Protection of Holders of Securities Other Than Shares 398 Registration 399 Publication 400 Effect of Merger 11

401 Simplified Merger by Acquisition 402 Merger With a Wholly-Owned Company 403 Merger by Acquisition of Limited Liability Companies 404 Preparation for Members Meeting 405 Merger by Acquisition of Joint Stock Company and Limited Liability Company 406 Joint Stock Company as the Company to be Acquired 407 Limited Liability Company as the Company to be Acquired 408 Merger of Joint Stock Companies by Formation of a New Company 409 Merger of Limited Liability Companies by Formation of a New Company 410 Merger of Joint Stock Companies and Limited Liability Companies by Formation of a New Company Division and Separation 411 Applicability of Other Articles 412 Draft Plan of Division by Acquisition 413 Unallocated Assets and Liabilities 414 Shareholders Assembly Approval 415 Division Without Decision of a Recipient Company 416 Share Exchange 417 Protection of Creditors 418 Registration 419 Publication 420 Effect of Division 421 Division by Formation of a New Company 422 Separation Applicability of Other Articles 423 Division and Separation of Limited Liability Company 424 Division and Separation of Joint Stock Company and Limited Liability Company 425 Status Changes Involving General or Limited Partnership CHAPTER 9. CONVERSION 426 Definition 427 Conversion and Liquidation 428 Registration and Publication 429 Exemption from Court Annulment 430 Conversion of Joint Stock Company into Limited Liability Company 431 Contents of the Conversion Plan 432 Registration and Coming into Force 433 Legal Effect of Conversion 434 Conversion of a Joint Stock Company into a Partnership or Limited Partnership 435 Effect of Registration and Publication 436 Conversion of Limited Liability Company into Joint Stock Company 437 Registration and Appointment of the Bodies 438 Conversion of Contributions into Shares 439 Conversion of Limited Liability Company into General or Limited Partnership 440 Conversion of General or Limited Partnership into Joint Stock Company or Limited Liability Comapany 441 Conversion of General into Limited Partnership and Vice Versa CHAPTER 10. OTHER MAJOR TRANSACTIONS 442 Definition of Major Transactions 443 Procedure for Approval of Major Transaction CHAPTER 11. RIGHT TO DISSENT AND RECEIVE PAYMENT FOR SHARES 12

444 Mandatory Right of Shareholders of a Joint Stock Company 445 Determining Full Value 446 Optional Right of Members of a Limited Liability Company or Partners in a Partnership PART SIX TRANSITIONAL AND FINAL PROVISIONS CHAPTER 12. TRANSITIONAL AND FINAL PROVISIONS General 447 Continued Work of Enterprises and Duty to Harmonize With This Law 448 Institution of Proceedings Transitional Status of Companies With Socially Owned Capital 449 Socially Owned Capital 450 A Company With Majority Owned Capital and a Socially Owned Company 451 Use of the Rights Contained in Shares on the Basis of Socially Owned Capital by Employees 452 Use of the Rights Contained in Shares of Socially Owned Capital by the State 453 Privatization and Termination of Socially Owned Capital 454 Controlling Company and Subordinate Company With Socially Owned Capital 455 Expiration of Privatization Terms Transitional Status of a Public Company 456 Appraisal of Capital and Entry into the Registry 457 Change of Name, Bodies and Founding Acts 458 Corporatization 459 Limitations on Founders, Etc. 460 Cessation of Existing Law 461 Entry into Force of This Law Limitations on Founding of Companies Final Transitional Provisions 13

(17 December 2003) LAW ON BUSINESS COMPANIES (DRAFT) (SERBIA) PART ONE Chapter 1 GENERAL PROVISIONS Title 1 Scope and Certain Basic Principles Article 1 Scope of This Law This Law shall regulate the founding, the managing, the rights and obligations of founders, partners, members and shareholders, the reorganization (changes of status and legal form), and the termination through voluntary liquidation, of business companies. Article 2 Use and Definitions of Terms In this Law, unless the context requires otherwise: 1) the singular includes the plural and the plural includes the singular; 2) the use of any gender refers to all genders; 3) company means a business company regulated by this Law; 4) director means and includes the director, a member of a company s board of directors, supervisory board or management body; 5) person means an individual or an entity. 6) knowledge, known to and similar words with respect to a person and a fact or circumstance means that the person: 1) actually knows the fact or circumstance; 2) has received notice of the fact or circumstance, whether or not the person actually knows the fact or circumstance; or 3) should have known the fact or circumstance from all other facts and circumstances known to the person at the time. Notwithstanding the foregoing, Article 10 of this Law shall apply concerning a person s knowledge of information registered or published as stated in that Article; and 7) distribution means a transfer by a company of money or other property (except its own shares) to its partners, members or shareholders with reapect to their partnership interests or shares in the 14

company. A distribution may be in the form of a distribution of profit or other dividend; an acquisition by the company of its own interests or shares by purchase, redemption or otherwise; a distribution in liquidation of the company; or otherwise. Article 3 Forms of Companies The forms of companies are general partnership, limited partnership, limited liability company and joint stock company. Article 4 Branches of a Company (1) A company, domestic or foreign, may establish one or more branches. (2) A branch is a place of business of a company which does not have legal personality or legal existence separate from that of the company. A branch may have a degree of permanence and a management and may transact business with third parties in the name of and on behalf of the company. (3) A branch of a company must be registered as required by the Law on Registration. Article 5 Duration of a Company The duration of a company is perpetual unless a shorter time period is specified in its Articles of Association, in which case the duration of the company is that shorter time period. A company s Articles of Association may state that its duration shall end upon the occurrence of a particular event or accomplishment of a particular purpose. Article 6 Purposes of a Company A company may engage in any lawful activity subject, however, to obtaining permits or approvals that are required for specific activities, and subject to any law that states that a company which conducts specified activities must be organized in a particular form. Title 2 Matters Concerning Founding of a Company Article 7 Articles of Association (1) The founding document of a company is its Articles of Association. (2) The persons who are responsible for founding a company are herein called the company s founders. All of the founders of a company must sign its initial Articles of Association. (3) The signatures of the founders on the Articles of Association must be certified. (4) A company s Articles of Association must include the contents which are required by this Law for the form of that company. (5) If a permit is required from a competent body for conducting a company s business, that is deemed separate from the Articles of Association. 15

Title 3 Registration and Publication Article 8 When a Company Begins its Existence A company begins its existence as a legal entity upon its registration in the Registry as prescribed in the Law on Registration. Article 9 Registration and Publication (1) The Law on Registration shall regulate the registration and publication procedure and the filing of documents required for the founding of a company. (2) Information which is required to be registered in the Registry may also be published on the website of the Registry or in the Official Gazette. Article 10 Effects of Registration and Publication Against Third Parties (1) Third parties shall be deemed to have knowledge of registered documents and information regarding the company after such documents or information has been published either in full or partial text or by means of a reference to the registered document. Third parties shall also be deemed to have such knowledge whenever they have actual knowledge thereof, but the company shall have the burden of proving that they have actual knowledge. However, with regard to transactions taking place before the sixteenth day following the publication, the documents and particulars shall not be relied on as against third parties who prove that it was impossible for them to have had knowledge thereof. (2) If information published by a company is inconsistent with information filed by the company in the Registry, the company may not rely on the former as against third parties. Third parties may, however, rely thereon, unless the company proves that they had knowledge of the information filed in the Registry. (3) Third parties may, moreover, always rely on any documents and particulars in respect of which the disclosure formalities have not yet been completed, except where non-disclosure causes them not to have effect. Article 11 Action for Nullity of a Limited Liability Company or a Joint Stock Company (1) If the Articles of Association of a limited liability company or a joint stock company does not state the amount of the company s initial capital or the business purpose of the company or if such Articles of Association state a business purpose which is illegal, any member, shareholder or director of the company may file a complaint in court requesting that the company s registration be declared invalid. (2) If the basis for requesting nullity can be remedied, the competent court may set a deadline for such remedying which shall be not later than 90 days after the complaint is filed. (3) If such a company s registration is declared a nullity, the company shall be liquidated in accordance with this Law. (4) Nullity of a company s registration shall have no adverse effect on transactions of the company concluded with third parties. (5) Nullity of a company s registration shall have no effect of the obligation of partners, members or shareholders to make agreed contributions to capital, to the extent that such contributions are necessary to satisfy creditors. (6) A company shall without delay submit to the Registry a certified copy of any complaint requesting nullity, for the purpose of giving notice of the complaint and request. The competent court shall without delay submit to the Registry any decision regarding nullity, for the purpose of registering the nullity or the purpose of deleting the previous notice of the complaint, as the case may be. Title 4 16

Liability of Founders and Other Persons Article 12 Liability for Obligations Incurred Before Registration (1) If action is taken by founders or other persons before a company s legal existence has begun, the persons who acted shall be personally liable therefor (and persons who acted jointly shall be liable jointly and severally therefor) unless otherwise agreed with third parties who have a claim for such obligations. (2) A company shall be jointly and severally liable for such obligations if it assumes them after registration in accordance with this Law. Article 13 Liability for Contributions to Capital (1) A partner, member or shareholder of a company is obligated to the company to pay in full all contributions to capital in money or in kind when due as required by the company s Articles of Association and by any other agreement of that person. If such person s interest in a company is transferred to another person, the transferor and the transferee shall be jointly and severally liable for the transferor s obligations prior to the time of transfer to make contributions. (2) A person who fails to comply with his obligations to a company with respect to the company s founding shall be liable to the company for any damages resulting from such failure. (3) The Law on Obligations as well as this Law shall apply with respect to a company enforcement of an obligation to make a contribution to capital. (4) If a person does not make a contribution that is to be made in kind, he is obligated at the company s option to contribute cash equal to the value of the contribution in kind that has not been made. (5) All contributions which have been made to a company are the property of the company and may not be used by partners, members or shareholders as their personal property. (6) A company may not release or reduce its claims under this Article except with the consent of such creditors. (7) A person shall not be entitled to refund of or payment of interest on a contribution that has been made. A company s payment of a distribution or acquisition of a share in accordance with Articles 131, or 233shall not be considered a refund or a payment of interest for this purpose. (8) A claim by or on behalf of a company under this Article may be brought by a legal representative of the company or, in case of the latter s failure to do so, by one or more partners, members or shareholders who represent 5% or more of the company s capital. Article 14 Valuation of Contributions in Kind (1) The value of contributions in kind to a general partnership, a limited partnership, a limited liability company or a closed joint stock company whose Articles of Association does not provide otherwise under Article 189 of this Law shall be determined by agreement of the partners, members or shareholders in accordance with any applicable provisions of the Articles of Association. As used in this Law, contributions in kind means non-monetary contributions to a company s capital, including contributions which consist of property, rights, labor or services (when contributions of labor or services are permitted) and shares of another company. (2) If partners, members or shareholders referred to in paragraph (1) of this Article do not agree on the value of a contribution in kind they may request the competent court to appoint a valuation expert for that purpose and they may agree to submit that determination to such a valuation expert or to another third party. (3) The value of contributions in kind to an open joint stock company shall be determined by an authorized independent appraiser appointed by the founders of the board of directors from the list approved by the competent court. If there is disagreement on the appointment the court may appoint the appraiser in a noncontentious proceeding. 17

(3) The value of contributions in kind shall in all cases be determined in accordance with any applicable provisions of the Law on Accounting and audit. The same applies with respect to the liability of authorized independent appraisers. Article 15 Liability for Wrongful Abuse of Legal Form (1) A limited partner of a limited partnership, a member of a limited liability company, and a shareholder of a joint stock company may be held personally liable for obligations of the company if he knowingly and wrongfully abuses the company form for illegal or fraudulent purposes or by treating the assets of the company as though they were his personal assets and as though the company did not exist. (2) In cases referred to in paragraph (1) of this Article, such person shall be jointly and severally liable with the company. (3) Such a holding may be made only by a competent court in consideration of all the circumstances. In making its determination the court shall consider the general policy that the principle of limited liability should be respected except in exceptional cases. Title 5 Registered Office and Name Article 16 Registered Office (1) The registered office of a company means the company s registered office at the address stated in the company s Articles of Association. (2) The registered office of a company shall be the principal location from which the company s business is conducted. (3) All notices, demands, correspondence and mail to a company, including documents beginning or concerning litigation against the company, may be delivered to the company s registered office and when so delivered during regular business hours shall be considered received by the company. Article 17 Registered Name (1) A company shall use its registered name in communications with other parties and shall display its registered name in its registered office and in every branch office. (2) A company's registered name must be clearly distinguishable from the name of any other company. (3) A company's registered name may not contain any information capable of misleading the public with respect to the business of the company. Article 18 Required Contents of Name (1) The registered name of a general partnership must include the word "partnership" or the abbreviations "o.d." or»od«in capital or lower case letters. (2) The registered name of a limited partnership must include the words "limited partnership" or the abbreviations "k.d." or»kd«in capital or lower case letters. (3) The registered name of a limited liability company must include the words»limited liability company«or the abbreviations»d.o.o.«or»doo«in capital or lower case letters. (4) The registered name of a joint stock company must include the words "limited liability company«or the abbreviations "a.d." or»ad«in capital or lower case letters. (5) The registered name of a company in liquidation must include the words»in liquidation«. Article 19 Abbreviated or Modified Name 18

A company may do business using one or more abbreviated or modified versions of its name if such abbreviated or modified name is stated in its Articles of Association and also complies with the requirements of Articles 18-22 of this Law. Article 20 Restrictions on Use of National and Official Names (1) The registered name of a company may include a name of a home country or territorial unit or its coat of arms, flag or other state logo or mark, but only with any required consent of the competent governmental authority of that country or territorial unit. (2) The registered name of a company may include the name or symbols of a foreign state or an international organisation only if permitted under the laws or regulations of that foreign state or organisation. (3) The registered name of a company may not include or imitate official marks used for quality control or product warranty. Article 21 Restrictions on Use of Personal Names (1) The registered name of a company may include the name-, of a natural person only with his consent or, in the case of a deceased person, only with the consent of all immediate heirs of such person. (2) If a person's name is used in violation of paragraph (1) of this Article, that person's name shall be deleted from the company's name in the Registry upon the request of that person or, if applicable, his heirs. Article 22 Use of Registered Name in Documents (1) Letters and forms addressed to third parties by a company, including those in electronic form, shall provide the following information: registered name of the company, registered office of the company, Registry where the company is registered and number of the company's file, registered name and registered office of an institution where the company has its priincipal bank account, and bank account number and tax number of the company. (2) Such letters and forms of a limited liability company and of a closed or open joint stock company shall also state the amount of subscribed and paid-in capital of the company. Article 23 Language of a Registered Name (1) The registered name of a company shall be in the Serbian language and in the alphabet officially used. (2) Notwithstanding the foregoing, the registered name of a company may include foreign words if they are in the company s trade or service mark registered in Serbia, or if it is a name commonly used in the Serbian language, if there is no adequate word for it in Serbian language, or in the case of a word from a dead language. Article 24 Restriction on Transfer of Registered Name The registered name of a company may be transferred to another person only if that person is a successor to all or substantially all of the transferor s business, assets and liabilities. Title 6 Representatives and Representation Article 25 Representatives and Their Authority (1) Partners in a general partnership and general partners in a limited partnership shall represent the partnership as provided in Articles 69 and 88, paragraph (2) of this Law and in any applicable provisions of the partnership s Articles of Association. A limited liability company and a joint stock company shall be represented by one or more directors as provided in Articles 151 paragraph (1), 155 paragraph (1) point 19

11), 157 paragraph (1) and 326 paragraph (4) of this Law and any applicable provisions of the company s Articles of Association. Such representation shall apply in any kind of judicial or non-judicial transaction. (2) A representative of a company has a duty to the company to observe and act in compliance with any limitations on his authority which are stated in the company s Articles of Association, company agreement, by-laws or any decision of the company. A representative of a company who knowingly exceeds such limitations shall be personally liable for damages caused thereby to the company and to any third party with whom he has dealt. However, a company may not rely on such limitations against a third party unless the third party knew or under the circumstances should have known of the limitations. (3) An act of a representative of a company shall be binding on the company even if the act is outside the business purpose of the company stated in its Articles of Association, unless the act exceeds the powers that the law confers on the company or allows to be conferred on the company. (4) Completion of the formalities of disclosure of the particulars concerning persons who are authorized to represent a company shall constitute a bar to any irregularity in their appointment being relied on by the company as against third parties, unless the company proves that the third parties had knowledge thereof. Article 26 General Provisions Concerning Procura (1) Procura is a form of power of attorney in which a company authorizes one or more named persons to conduct any kind of legal transaction, judicial or extra judicial, on behalf of the company. (2) If the procura does not state explicitly that it is issued for a particular branch of a company, it shall be deemed issued for the entire company. (3) Procuration shall not authorize the entering into of contracts involving the transfer or charging of immovables, unless such authorization was explicitly granted in the procura. (4) Duties which the law has imposed on directors of a company may not be delegated to a procurator. (5) Limitation of procuration has no legal effect as against third parties unless the company proves that the third party knew of the limitation or could not in view of evident circumstances have been unaware of it. Article 27 Issuance and Types of Procura (1) Procuration may be issued by a company, to one person, to two or more persons separately, or to two or more persons jointly. (2) If procuration is issued to two or more persons separately, each procurator shall have all authority of the procuracy under this Law. (3) If procuration is issued to two or more person jointly, the legal validity of transactions shall be subjected to joint declaration of will. Declarations of third parties made to one of the procurators shall be deemed made to all procurators. (4) Procuration is not transferable. (5) Procura must be given in written form. (6) Procura may be given only to natural persons Article 28 Procurator's Signature A procurator shall sign a company under his name and surname, with an indication which clearly states his positions as a procura or by the mark "p.p.". Article 29 Termination of Procuration (1) Procuration may be revoked by a company at any time. (2) A provision of a contract under which a company waives of its right to revoke a procuration, as well as a provision under which a right on revoke of a proxy is bound to a term or a condition is null and void. (3) If procuration is revoked, the procurator may exercise towards the company those rights which stem from the legal relationship on the basis of which procuration was issued. (4) Procuration shall not be terminated by death or loss of capacity to act of a member or shareholder who issued the procuration. Article 30 20

Registration of Procura (1) The entrepreneur or the legal representative must report issuance or revocation of procuration in the Register. (2) When applying for registration, the procurator shall deposit his signature and a supplement indicating his function with the Registry Title 7 Duties to a Company Article 31 General Principles (1) When exercising their rights and performing their duties, general partners in a general or a limited partnership, directors, controlling members or shareholders in a limited liability company or a joint stock company, and representatives and liquidators in any company, are obligated to adequately take into consideration the interests of the company and of the other partners or members. Such persons are further defined in Articles 38 and 371 of this Law. (2) The obligation referred to in paragraph (1) of this Article includes the duties that are specifically described in Articles 32, 33, 36 and 37 of this Law. (3) Unless otherwise provided by this Law, a company s Articles of Association or an agreement of the persons affected, partners, members and shareholders of a company have the same rights and duties under the same circumstances and shall be treated equally. Article 32 Duty of Care and Business Judgment Rule (1) A partner in a general partnership, a general partner in a limited partnership, a director in a limited liability company or a joint stock company, and a representative or liquidator of any company, has a duty to perform his functions in that capacity in good faith, in the reasonable belief that he is acting in the company s best interests, and with the care of a good businessman. (2) In performing that duty a person may rely on information, opinions or reports issued by directors or employees of the company, independent legal counsel or auditors for the company, and other persons who he believes are reliable and competent to offer such information, opinions or reports. (3) A person who has acted as described in paragraphs (1) and (2) of this Article fulfils this duty, and will not be liable for damages for making a business judgment, if: 1) he does not have a personal interest (as defined in Article 34 of this Law) in the subject of the judgment; 2) he is fully informed on that subject to the extent appropriate under the circumstances; and 3) he honestly believes when the judgment is made that it is in the best interest of the company. Article 33 Duty of Loyalty and Conflicts of Interest A partner in a general partnership, a general partner in a limited partnership, a director, controlling member or shareholder of a limited liability company or a joint stock company, and a representative or liquidator of any company, who has a personal interest in a matter affecting the company, has a duty to act fairly and loyally to the company regarding that matter. This includes but is not limited to a duty not to use property of the company for his own needs as though it was his property, not to use confidential information of the company for the purpose of gaining personal profit, not to abuse his position in the company for the purpose of personal enrichment to the damage of the company, not to take business opportunities of the company for himself, and otherwise to serve only the company s interest in all acts or transactions in which he has a personal interest. Article 34 Personal Interest in an Act or Transaction (1) A person has a personal interest in an act or transaction if: 1) he or a family member is a party to the act or transaction or has a financial interest in the act or transaction; 21

2) he has a financial or family member relationship with a party to the act or transaction, or with a person who has a financial interest in the act or transaction, that could reasonably be expected to affect his judgment adversely to the company; or 3) he is under the controlling influence of a party to the act or transaction, or of a person who has a financial interest in the act or transaction, that could reasonably be expected to affect his judgment adversely to the company. (2) A family member of a person includes: 1) the person s spouse, or a parent, brother or sister of the person s spouse; 2) the person's parent, child, grandchild, brother or sister, or a spouse of any of the foregoing; and 3) an individual having the same home as the person. Article 35 Action and Remedies Regarding Conflict of Interest Transactions (1) A person who enters into a contract or transaction with the company has not violated Article 33 of this Law, and will not be liable for damages arising from his conflict of interest, if the contract or transaction is authorized in good faith by either: 1) all partners who do not have a personal interest (in the case of a general partnership or a limited partnership), unless the Articles of Association or partnership agreement provides for such authorization to be given by a lesser vote but not less than a majority; 2) a majority vote of the members or shareholders who do not have a personal interest given at a members' or shareholders' meeting (in the case of a limited liability company or joint stock company); or 3) a majority of the members of the board of directors who do not have a personal interest in the case of a joint stock company; provided that all material facts regarding the personal interest have been disclosed or are known to such authorizing persons. (2) The person who enters into a contract or transaction with the company has not violated Article 33 of this Law, and will not be liable for damages arising from his conflict of interest, if he proves that the contract or transaction was fair to the company when it was made or entered into. (3) Any authorization, contract or transaction referred to in paragraph (1), point 3) of this Article shall be reported to the first shareholders' assembly next following. (4) A contract or transaction which violates Article 33 of this Law shall be voidable at the option of the company. Alternatively, a company may assert and the competent court shall have power to order other remedies including remedies of the kind referred to in paragraph (3) of Article 36 of this Law. Article 36 Duty Not to Compete With the Company (1) A general partner in a general partnership, a general partner in a limited partnership, a director, controlling member or shareholder of a limited liability company or a joint stock company, or a representative or liquidator of any company, may not directly or indirectly engage in business competition with the company unless the competition is authorized by majority vote of persons referred to in paragraph (1) of Article 35 in accordance with the standards of Article 35. Such competition shall be deemed to include but not be limited to being employed in, or being a general partner, director, or controlling member or shareholder in another company pursuing the same or a competing business or an entrepreneur engaging in such. (2) A company s Articles of Association may provide that the prohibition referred to in paragraph (1) of this Article shall remain in force after the loss of the status referred to in that paragraph, but for no longer than two years. (3) If a person referred to in paragraph (1) is in breach of this Article the company may seek damages and, without limiting its right to damages, may assert the right to: 1) accept transactions made by such person on its own account as being transactions made on account of the company; 2) transfer to the company any benefits resulting from transactions made on such person s account; or 22