In Serbian corporate and commercial law, two key agreements play a crucial role in share transfer transactions.

While they may seem similar at first glance, their legal functions and consequences differ significantly. Understanding these differences, along with the specifics of their application, is essential for successfully executing a transaction.

SPA vs. STA: What’s the Difference?

1. Share Purchase Agreement (SPA)

• An SPA is a contractual document between the seller and the buyer that defines the terms of the share sale.
• It includes key elements such as the purchase price, conditions precedent (“CPs”), warranties, representations, indemnities, and closing mechanisms.
• The SPA is the primary negotiation document that specifies how and when the share transfer will take place.
• However, signing the SPA does not automatically transfer ownership – it merely establishes the legal framework for completing the transaction.

2. Share Transfer Agreement (STA)

• The STA is an operational document that effectuates the actual transfer of shares.
• Unlike the SPA, the STA is much simpler and more limited in scope, focusing solely on the act of transferring share ownership.
• It is a necessary document for filing a registration application with the Serbian Business Registers Agency (“BRA”), where registration constitutes the formal acquisition of shareholder status.
• Signing the STA is typically a condition for closing the transaction under the SPA.

Key Aspects of Serbian Law

1. Registration with the BRA

• Under Serbian law, a share transfer is not legally valid until it is officially registered with the BRA.
• The buyer usually submits the registration application to the BRA, along with the STA and other supporting documents.
• The BRA has a statutory deadline of five business days to issue a decision, although in practice, this often happens sooner.
• Unlike other jurisdictions, shares cannot be transferred via a notary public or an escrow agent, as Serbian law does not recognize such mechanisms.

2. Timing of Payment and Registration

• One of the main challenges in share transactions is coordinating payment and share transfer registration.
• It is not possible to simultaneously transfer the purchase price and share ownership. Therefore, it is crucial to carefully structure the payment of the purchase price.
• Clearly defining the key stages of the transaction and linking them to partial payments is essential.

What to Consider When Planning a Transaction

1. Clearly Defining CPs in the SPA

• Before signing the STA, all CPs, such as regulatory approvals or third-party consents, must be fulfilled.
• As proof of fulfillment, the parties typically sign a statement on the fulfillment of CPs, accompanied by supporting documentation before executing the STA.

2. Structuring and Securing the Purchase Price Payment

• Since the purchase price payment and share transfer registration cannot occur simultaneously, it is crucial to define the timing and conditions for payment precisely.
• Parties often agree on security measures to ensure the payment of the purchase price and increase transaction certainty.

3. Approval from the Commission for Protection of Competition

• If the transaction requires approval from the antitrust authority (Commission for Protection of Competition), failure to obtain it constitutes a deal-breaker, resulting in the automatic termination of the SPA.

4. Share Transfer Restrictions

• It is important to verify whether the company’s founding documents include a right of first refusal. If such a right exists, additional consents must be obtained.

Conclusion

Although both the SPA and STA are essential documents in the share transfer process, their legal purposes differ. The SPA sets out the framework and commercial terms of the transaction, while the STA effectuates the actual transfer. Carefully structuring the terms in these documents can help avoid legal and operational challenges.

This article is to be considered as exclusively informative, with no intention to provide legal advice. If you should need additional information, please contact us directly.