Investing In... 2021

Last Updated January 18, 2021

Montenegro

Law and Practice

Authors



Radonjic/Associates is a leading Montenegrin full-service law firm, providing its clients with integrated legal advice on complex transactions. As a premier business law firm whose practice covers a broad spectrum of transactional and regulatory matters, Radonjic Associates enjoys an international reputation and is the preferred local partner to many international law firms, financial institutions and embassies. The firm’s client base is a diverse range of large international corporations, leading energy and construction companies in Europe, and some of the wealthiest individuals investing in Montenegro. Radonjic Associates has a particularly strong focus on the corporate and commercial, energy, banking and finance, foreign direct investment, real estate and construction sectors.

In accordance with relevant theories on the division of legal systems, Montenegrin law is classified as civil law. This legal concept envisages that all regulations in Montenegrin law proceed from abstract legal acts (laws) containing general norms and principles related to the subject matter of the regulation. Among these acts, sources of substantive legal norms and procedural norms are clearly distinguished, with a tendency of the lawmaker to enact codifications in certain subgroups of legal matter (eg, the Criminal Code is the main codification and source of substantive norms in criminal law, while the Criminal Process Code is the main codification and source of procedural norms in criminal proceedings). 

Crucial characteristics of contemporary civil law are also present in the Montenegrin legal system, which hold case law and judicial activity subordinate to written laws and codifications. The conclusions of the highest judicial authorities may be regarded as a source of law only to a certain extent, and only based on the authority of higher court instances towards lower instances, with the logical aim of avoidance of substantial discrepancies in legal and judicial practice, and providing authentic interpretation and the proper application of ambiguous or disputable written norms.

The legal framework for businesses and investments in Montenegro is based on several laws containing general provisions and principles for this particular matter.

The Law on Foreign Investments

The Montenegrin Law on Foreign Investments defines the national treatment of foreign investors as a general legal principle. In accordance with this basic rule, foreign investors are allowed to incorporate companies in Montenegro and invest in Montenegrin-based companies, in a way and under conditions which are applied to company incorporation and investing performed by Montenegrin companies and individuals.

An explicit exception to this general principle is envisaged for companies involved in the production and trading of weapons and military equipment. Foreign investors may invest funds in a Montenegrin-based company or establish a new company for this business activity only upon obtaining the approval of the ministry in charge of foreign trade matters. Before issuing approval, the ministry must obtain the opinion of the Ministry of Defence and the Ministry of Internal Affairs. Companies engaged in the production and trading of weapons and military equipment cannot negotiate any arrangement within the scope of their main business activity before obtaining the approval of the ministry.

Apart from the Law on Foreign Investments, which contains only general principles on foreign investments, additional provisions are set forth in laws specialised for certain areas of business.

The Insurance Law

The Insurance Law provides rules on the procedure for issuance of a licence, which is necessary in order to conduct activities in the field of insurance. This licence is issued by the Insurance Supervision Agency. This agency issues licences for the performance of activities in all insurance matters, as well as for other activities related to insurance, and supervises the performance of insurance activities.

The Law on Banks

The Law on Banks establishes general prohibition of the performance of any banking activity or transaction by companies or individuals without prior approval. This approval is issued in the form of a special licence from the Central Bank of Montenegro, which is also responsible for supervising the performance of banking activities on the Montenegrin market.

Based on the preliminary report of the Central Bank of Montenegro, the total inflow of foreign direct investments for the period January to September 2020 in Montenegro amounted to EUR506.8 million, which indicates a decrease of 14.4% in comparison with 2019. This is a direct consequence of the decrease in equity investments.

Considering the recent developments, the following circumstances will undoubtedly have a negative impact on foreign direct investment in Montenegro.

  • By its nature and structure, the Montenegrin economy has largely relied upon net inflow from foreign direct investments in tourism and the real estate market. A significant decrease of investments in this regard is evident for 2020, mainly due to the severe impact of restrictive measures imposed by the government for the purpose of suppressing COVID-19.
  • As a consequence of the decrease of foreign direct investment in vital sectors of the Montenegrin economy, the number of non-performing loans will inevitably increase, potentially leading to instability of the banking system and causing a decrease in the state credit rating and a recession.
  • The monetary system of Montenegro is also a potential source of instability. Namely, since the introduction of the euro as the national currency, the Central Bank of Montenegro is not allowed to independently act as the supreme credit institution and therefore cannot significantly mitigate stressful and sudden negative impacts on the national economy through direct monetary interventions.
  • During the autumn of 2020, the Montenegrin parliamentary system entered a new phase as the President of Montenegro and the newly elected government members are not politically aligned. It is yet to be seen whether this precedent in the Montenegrin parliamentary system will function in favour of the national economy in 2021 or not. The new government and assembly are expected to work closely together with the main goal of effectively tackling economic challenges and hits on the budget. The greatest challenge in the execution of the economic policy will be to reduce expenditure and to maintain incentives that have been introduced, as well as to simultaneously decrease the budget deficit.
  • Attracting the traditional sources of inflow back into Montenegro for 2021 will prove to be a generally tough task for the government, taking into account the various economic, epidemiological and political circumstances which appeared in Montenegro during 2020.
  • Global financial tendencies related to EMDE and COVID-19 will not bypass the Montenegrin economy. In the current global situation, the redirection of financial flows to more stable economies is expected, due to the increased risk attached to investing in less developed economies.
  • Apart from the risks related to less developed economies, the negative impact will also stem from the general unpredictability caused, inter alia, by uncertainty in calculations and predictions on the potential subsidence of the pandemic by mid-2021.

The Central Bank of Montenegro has implemented a new approach, based on the recent practice of other European monetary institutions, whereby supreme monetary institutions refuse to disclose precise and definite calculations on FDI changes. The data is kept by these institutions for the purpose of internal evidence and correct projections. General predictions indicate the possible re-establishing of traditional FDI inflows in tourism for 2021, conditional on the successful suppression of the global pandemic.

In accordance with the Montenegrin Law on Foreign Investments, foreign investors may be involved in the following transactions (types of investments):

  • company incorporation;
  • incorporation of a branch of a foreign company;
  • acquiring of share capital in a company; and
  • purchase of a company.

Company incorporation and the acquisition of share capital are the most common modalities used by foreign investors, both for the full acquisition of a business and for minority investments. Apart from general key factors which are usually taken into consideration by investors (eg, existing obligations and claims of the company, pre-emption rights, tax considerations, company assets, ongoing legal procedures or disputes in which the company is involved), the legal framework also plays a significant role for investors. Considering the provisions of the Montenegrin Company Law on limited liability companies, particularly the ease-of-incorporation procedure of this entity and the option to initiate the business with start-up capital of only one euro, it is obvious that these are key factors for foreign investors opting for this type of inbound investment.

By acquisition of share capital, a foreign investor acquires all the rights and obligations arising from ownership of shares in a company. Unlike acquisition in the case of the purchase of a company, the foreign investor purchases the assets of the target company. Depending on the complexity of the share capital structure, the total value of the transaction and the overall property of the target company, a foreign investor may decide to engage legal, tax or investment banking experts for the performance of due diligence or the in-depth analysis of the anticipated transaction and its implications.

Upon realisation of any type of FDI, the foreign investor directly (by company or company/branch incorporation) or indirectly (by share capital ownership in a Montenegrin-based company), enters the Montenegrin market and must comply with the local laws which regulate matters related to mergers and acquisitions.

General provisions in this matter are contained in the Company Law. These provisions envisage the following types of company restructuring:

  • change of company form (eg, transformation of a limited liability company into a joint stock company and vice versa);
  • merger (two or more companies merge by forming a new company and by transferring all the assets and obligations to that company, whereby the merging companies dissolve);
  • acquisition (one or more companies are acquired by another company by transferring all the assets and obligations to that company, whereby the acquired company dissolves);
  • division (a company is divided by simultaneous transfer of all of its assets and obligations to two or more newly incorporated or existing companies); or
  • spin-off (a company divides itself by transferring a part of its assets and obligations to one or more newly incorporated or existing companies).

The regulatory and supervisory role for all types of restructuring is vested in the Capital Market Commission of Montenegro. This body has public authorities and acts as an independent regulator of the capital market. Emission and cancellation of shares during the restructuring procedure are performed under the supervision of this Commission. 

Special provisions on the acquisition of joint stock companies are contained in the Law on Takeover of Joint Stock Companies. By virtue of this law, the public emission of shares is supervised and regulated by the Securities Commission and Central Depositary Agency.

The Law on Business Organisations is the main source of corporate governance in Montenegro. All incorporated entities must comply with the provisions of this law, as well as its by-laws, which thoroughly regulate the management bodies of companies, their structure and functions. Among other laws which regulate corporate governance matters, one of the most important sources of special provisions in this regard is the Law on Capital Markets.

Joint stock companies may also decide to adopt an additional act of corporate governance – the Code of Corporate Governance of the Montenegrin Stock Exchange. Implementation of this act is not compulsory for joint stock companies. However, if a joint stock company opts for adoption of this code, its implementation is also on a voluntary basis. Therefore, a company may decide to partially implement the Code by adopting only certain provisions, which are found to be convenient for the corporate governance of the company in question.

Investors must comply with special provisions related to companies involved in activities of public interest. Key corporate governance provisions for these companies envisage the following:

  • a limited liability company involved in an activity of public interest must adopt a more complex management structure, which is normally used by joint stock companies;
  • companies with a single-tier management system, engaged in activities of public interest, must have at least five members on the board of directors;
  • in companies engaged in activities of public interest, at least two fifths of the members of the board of directors must meet the criteria for independent directors;
  • in companies engaged in activities of public interest, at least two fifths of the members of the supervisory board must meet the criteria for independent directors;
  • the board of directors of companies engaged in activities of public interest must form the Audit Committee (this is an exception to the general rule on the formation of internal committees on a voluntary basis); and
  • remunerations of the management members/directors must be disclosed in the annual financial reports of joint stock companies involved in activities of public interest.

On the other hand, the general corporate governance framework for limited liability companies has been simplified, and implementation of most of the provisions is set forth on a voluntary basis. This provides significant autonomy for company owners and investors to define the corporate governance structure and their internal relations within the company, as well as their relations with the company itself. The direct consequence of this autonomy allows owners of share capital in limited liability companies to introduce a management structure which is envisaged and normally used by joint stock companies.

Therefore, the general conclusion arising from the regulatory framework and practice indicates that private companies are mostly incorporated in the form of a limited liability company, while the incorporation of joint stock companies is reserved for involvement in a business of public interest, as well as for banks, insurance and investment companies. When investing in a business which is not regarded as an activity of public interest, a foreign investor should consider all the key factors for investment, especially the regime of corporate autonomy set forth by provisions of the Law on Business Organisations which regulate limited liability companies. Dispersion and the value of share capital, besides the easier procedure for incorporation of a limited liability company, should also be considered as key factors for the final decision on the legal form of a new company.

In accordance with the Law on Takeover of Joint Stock Companies, the takeover procedure must be based on the principles of protection of minority shareholders, if the acquirer gains control over the issuer of shares. A natural person or an entity that independently or with a related person, directly or indirectly, acquires shares (which give voting rights), so that together with the shares already owned, the natural person or entity owns more than 30% of the total number of shares with the voting rights of the issuer, is obliged to publish an offer to take over the shares of that issuer.

Other principles of protection are reserved for those who are considered to be minority shareholders in the moment of takeover.

If the acquirer and related persons acquire at least 95% of the issuer's voting shares upon the public takeover bid, the acquirer has the right to transfer voting shares owned by minority shareholders (and vice versa: minority shareholders are entitled to request the sale of their shares and to bring legal action for protection of this right) for a price not lower than the price from the public takeover bid. If the acquirer exercises this right, they are obliged to purchase all the remaining shares of the same class owned by minority shareholders and to pay the price for the purchased shares in cash. The acquirer is required to submit to the competent authority a request for the forced sale of shares of minority shareholders and inform shareholders of the submitted request, by publishing a notice in at least two media which are distributed throughout Montenegro. The acquirer is also obliged to depose funds or submit a bank guarantee in favour of minority shareholders.

In private companies, acquiring of share capital may be performed on the basis of agreement on share transfer, with eventual restrictions only related to protective clauses of statutory company acts or exercising of pre-emption rights.

In publicly traded companies and for the purpose of registration of shares of shareholders, a money contribution is obligatory.

Obligation under the Law on Capital Markets

Additionally, the Law on Capital Markets provides an obligation for shareholders to inform the issuer of securities on reaching, exceeding or dropping below 5%, 10%, 15%, 20%, 25%, 30%, 50% and 75% of total shareholder voting power, as a result of acquiring or disposing of the issuer’s shares.

Obligation under the Audit Law

In accordance with the Audit Law, a mandatory external audit is envisaged for several types of entities, including entities of public interest, investment companies, investment funds, etc. These entities are required to appoint an Audit Committee.

Registration

Any performed change in a joint stock company (such as data and content of statutory acts, data on appointed officers/directors, representatives, etc) as well as the liquidation procedure and financial reports must be registered with the Central Register of Business Entities. Registered data is also published in the Official Gazette of Montenegro. This rule on publication and reporting is applied mutatis mutandis on limited liability companies.

The Law on Capital Markets in Montenegro regulates the following key topics:

  • conditions for establishing a capital market;
  • types of financial instruments;
  • issuance of securities;
  • organisation and functioning of investment companies;
  • regulated capital market;
  • secondary securities trading;
  • registration of financial instruments, clearing, and registration of transactions with financial instruments;
  • publishing financial and other data and reporting to issuers and other participants in the capital market; and
  • prohibition of abuse on the capital market.

As a result of foreign investment, a foreign investor may, through a newly incorporated entity, decide to enter the capital market for the purpose of realisation of transactions which involve securities and financial instruments. In this regard, a company must comply with the procedures regulated by the Law on Capital Markets. One of the main procedures prior to inclusion of securities on financial markets is the creation and publication of the prospect. The prospect must be approved by the Montenegrin Commission for Capital Markets.

The Law on Foreign Investments does not contain special provisions on investment funds acting in the capacity of investors in Montenegro. However, the Law on Investment Funds sets forth a general principle on freedom of establishment and the freedom of a foreign company to manage investment funds to provide services in Montenegro.

A company established for the management of investment funds which has obtained the necessary licence for its activity from the competent authority of its home country may perform such activity in Montenegro either through a branch, or directly. Furthermore, an open investment fund established in Montenegro can be managed by a company for the management of investment funds which is licensed by a competent authority of its home country, provided that the management company meets the conditions set out in the Montenegrin Law on Investment Funds.

The merger control regime is regulated under the Law on Protection of Competition.

There are no special rules and conditions for FDI, but the implementation of any concentration requires the prior approval of the Agency for the Protection of Competition, except in the following situations:

  • a bank or other financial institution temporarily acquires shares or other securities, provided that it sells these shares or securities no later than 12 months from the date of acquisition, without using the right of ownership to influence the business decisions of the participants in their behaviour towards competitors, and without using the right of ownership with the intention of preparing the sale of these securities or assets;
  • a person performing the function of bankruptcy or liquidation trustee acquires control over a market participant in accordance with the law determining bankruptcy or liquidation; or
  • the joint venture aims at co-ordinating market activities between two or more participants that have retained their independence.

The procedure for issuing the approval begins with the submission of an application within 15 days from the date of concluding the agreement or contract, or publishing the public invitation, ie offer, closing the public offer or acquiring control. Earlier submission of a request is possible when the participants show serious intent to conclude a contract, by signing a letter of intent, by announcing the intention to make an offer, or in another way that precedes the conclusion of the agreement or contract.

The Agency may:

  • reject the request if the conditions are not met, and issue a decision within 25 working days from the date of submission of the request;
  • suspend the procedure if the applicant withdraws the request and issue a decision within 25 working days from the date of withdrawal of the request;
  • approve the concentration where the criteria are met, ie, if the Agency determines that the concentration does not significantly prevent, restrict or distort effective competition, primarily by creating or strengthening a dominant position in the market, and it reaches a decisionwithin 105 working days from the date of submission of a proper application;
  • approve the concentration with the imposition of additional measures, conditions and obligations that the participants in the concentration must perform before or after the implementation of the concentration, and it reaches a decision within 125 working days from the date of submission of a proper request;
  • reject the request if it is determined that the concentration would distort competition in the market, and it issues a decision within 130 working days from the date of submission of a proper request.

It is obligatory to stop the implementation of the concentration until the decision of the Agency is made. The Agency may annul the decision if it finds that the decision was made on the basis of incorrect or untrue data and facts.

A request shall be submitted to the Agency when the total annual income of at least two participants in the concentration on the market of Montenegro is higher than EUR5 million in the previous financial year, or the total annual income of the participants realised on the world market in the previous financial year is higher than EUR20 million, if at least one of the participants in the concentration in that period earned EUR1 million in the territory of Montenegro. However, if the combined market share in the relevant market of Montenegro is higher than 60%, the Agency will instruct the participants to submit a request, and in the case of initiatives, information and other data due to the Agency, indicating a violation of competition, the Agency initiates proceedings ex officio.

If the Agency determines that the implementation of the concentration distorts competition in the market, it will inform the applicant of the facts and conclusions on which the decision is based, and the applicant then has the opportunity to propose measures that can be implemented to avoid distortion of competition. If the Agency determines that the implementation of the proposed measures does not violate the concentration, it will conditionally approve the concentration, order the implementation of measures and deadlines for their implementation, as well as the method of control over the implementation of these measures.

In the event of a concentration without approval, the Agency may order the alienation of acquired shares or stakes in the company, prohibit or restrict voting rights, and order the cessation of control over the joint venture or other forms of acquisition of control that led to the prohibited concentration.

An administrative dispute may be initiated before the Administrative Court of Montenegro against the decision made by the Agency.

This is not applicable in Montenegro.

This is not applicable in Montenegro.

This is not applicable in Montenegro.

This is not applicable in Montenegro.

Property Law

Key restrictions are laid down in the Property Law, namely:

A foreign person may not have the right of ownership over natural wealth, goods in general use, agricultural land, forest and forest land, a cultural monument of exceptional and special importance, immovable property in the land-border area at a depth of 1 km, and islands or immovable property which is located in an area which, in order to protect the interests and security of the country, has been declared by law an area in which a foreign person cannot have the right of ownership.

A foreign natural personmay acquire the right of ownership of agricultural land, forests and forest land of up to 5,000 m² only if the subject of the alienation agreement (purchase, gift, exchange, etc) is a residential building located on that land. A foreign person, as well as a domestic person, may have the right to long-term lease, concession and other arrangements of public-private partnership, in the mainland border area at a distance of 1 km or over from the border, and on the islands at a distance of 1 km or over from the coast.

Law on Foreign Current and Capital Transactions

In addition, the Law on Foreign Current and Capital Transactions regulates the performance of payment transactions between residents and non-residents in euro and non-euro currency, the manner of transferring assets to and from Montenegro, as well as the resident's right to own means of payment in non-euro currency. Unless otherwise provided by law, it is free to perform current and capital operations and to transfer property abroad from Montenegro and from abroad to Montenegro. Residents and non-residents are free to own, dispose of funds and make payment transactions in a currency other than the euro.

Key taxes imposed on companies operating in Montenegro are corporate income tax and value added tax.

Income Tax

Taxpayers are obliged to pay income tax, ie, resident and non-resident legal entities that perform activities for profit. Taxes are the same for all companies, residents and non-residents, regardless of the form of economic activity. A resident is a legal entity established in Montenegro or having a seat of administration and control in the territory of Montenegro, while a non-resident is a person not established in Montenegro and not having a seat of actual administration and control in Montenegro, which conducts its business through permanent business units.

The income tax rate is proportional and amounts to 9% of the tax base. The income tax base is the taxable profit of the taxpayer, which is determined by adjusting the profit shown in the income statement. To determine taxable profit, expenses are recognised in the amounts determined in the income statement. The tax period for which income tax is calculated is a financial year that is generally equal to a calendar year. The taxpayer is obliged to submit a tax return to the competent authority for the period for which the profit tax is calculated, no later than three months from the end of the period for which the tax is calculated. Taxes are paid within the same deadline. The application is accompanied by an income statement and balance sheet, prepared in accordance with the law governing accounting.

Value Added Tax

In addition to corporate income tax, legal entities are required to pay value added tax (VAT), the subject of which is the taxation of sales of products and sales of services that the service provider performs in the course of its activities for a fee, as well as imports of products to Montenegro.

VAT is calculated according to where the products were supplied or the services performed at the time of delivery of the product or service.

The right to exemption from VAT on the supply of products or services for the construction and equipping of a catering facility of five or more stars, an energy facility for the production of electricity with an installed capacity of more than 10 MW, and capacity for food production classified within sector C group 10 of the Law on Classification of Activities, whose investment value exceeds EUR500,000, ie, products and services delivered in accordance with an international loan agreement, ie, a loan concluded between Montenegro and an international financial organisation, ie, another state or third party in which Montenegro appears as a guarantor, in the part financed by the received funds, if this contract stipulates that the received funds will not be used to pay tax costs, as well as when importing products and delivering products or services in the country, in cases when it is provided by an international agreement. In this case, the investor submits a request to the tax authority that issues the decision.

The Law on Corporate Income Tax prescribes the obligation to pay withholding tax for received services, ie, on fees received by non-resident legal entities/service providers from resident persons. Withholding tax is paid at a rate of 9% on the basis of the amount of gross income. The taxpayer is obliged to calculate, suspend and pay withholding tax on income paid on the basis of dividends and profit shares paid to resident and non-resident legal and natural persons, as well as on interest paid to a non-resident legal entity.

When calculating withholding tax on income paid to a non-resident legal entity, the income payer shall apply the provisions of a double-taxation agreement, provided that the non-resident can prove they have the status of a resident of a state with which Montenegro has concluded a double-taxation agreement and the non-resident is the beneficial owner. This status must be proved by the non-resident to the payer of income by means of a certificate or other appropriate document certified by the competent authority of the other contracting state of which the person is a resident.

If the payer of income applies the provisions of the contract on avoidance of double taxation, and these conditions are not met, which results in less tax being paid, the payer of income is obliged to pay the difference between the paid tax and debt tax, according to this law.

Withholding tax on income earned by a non-resident legal entity from another non-resident legal entity and a resident or non-resident natural person in the territory of Montenegro shall be calculated and paid at the rate of 9% on the basis of capital gains, unless otherwise stipulated by the double-taxation agreement.

Punctual Payment

A legal entity that pays the calculated income tax within the deadline may exercise the right to a reduction of the tax liability by 6% of the calculated and paid income tax. This right is exercised on the basis of a request submitted to the competent tax authority within 15 days from the date of payment of the tax liability.

Parent Companies

A parent company that is a resident taxpayer in Montenegro may have its income tax reduced by the amount paid by its non-resident branch in another country, to dividends that are included in the income of the parent company. This tax credit can be used to reduce the calculated tax of the parent company, up to the amount of tax that would be calculated on profit or dividend according to the provisions of this law, and the unused part of the tax credit can be transferred to the tax account of the parent company for future accounting periods, but not longer than five years. Dividend income from the non-resident branch is included in the income of the resident parent company in the amount increased by the tax paid after deduction of paid dividends.

The right to a tax credit under this law belongs to a parent company that has continuously owned 10% or more shares, ie, shares of a non-resident branch, for a period of at least one year, prior to the submission of the tax return. This resident taxpayer in Montenegro is obliged to submit to the competent tax authority evidence of the size of their share in the capital of the non-resident branch, the duration of their participation and the tax paid by the branch in another country, together with its income statement.

Capital gains from the sale or other disposition of FDI represent taxable profit, and therefore a tax base that is not exempt from taxation. The tax base of capital gains is determined according to the difference between the sale and purchase price. If this difference is negative, there is a capital loss that can be offset with a capital gain, and if a loss occurs even then, it can be transferred to the account of future capital gains in the next five years.

This is not applicable in Montenegro.

The Labour Law

The Labour Law is the main source of provisions on the rights and obligations of employers and employees arising from employment. This law contains provisions on the procedures for exercising such rights and obligations, and also determines that collective agreements and employment agreements shall be used as sources of regulation, subordinate to provisions of the Labour Law.

General Collective Agreement

Employers and employees are free to establish associations of employers and trade unions and become members of those organisations at their own discretion, without previous approval, under the conditions defined by the statute and rules of those organisations. Collective bargaining has resulted in the passing of the General Collective Agreement, which regulates relations and questions arising from the scope of the Labour Law in a more thorough manner.

Branch collective agreements

Apart from the General Collective Agreement, a significant number of branch collective agreements are concluded by branch representatives of employers and employees for various industrial sectors. These agreements provide a more detailed approach in the regulation of certain labour issues, adapted specifically to the nature and requirements of labour in the respective industrial sector.

Other Legal Provisions

Other relevant legal provisions related to employment are envisaged, inter alia, in the Law on Foreigners, the Law on Peaceful Settlement of Labour Disputes, the Law on Protection and Health at Work, the Law on Prohibition of Harassment at Work, the Bankruptcy Law, the Law on Strikes and other relevant laws related to compulsory social insurance.

The Labour Law contains explicit provisions on the payment of salaries and salary compensation in money, to the account of the employee. This is also applicable to payment of all constitutive elements of the salary ("gross salary"): salary earned for the work performed and time spent at work (which consists of basic salary, special part of the salary and wage increment), salary compensation and other allowances defined in the collective agreement and the employment agreement.

A special type of employment agreement for carrying out household work may include a provision on payment of a portion of the salary in kind.

If, due to a status change or performed transaction, an employer or part of the employer changes, the successor employer is obliged to take over the employees from the predecessor while respecting all rights and obligations of the employees arising from the employment agreements in force on the day of transfer, as well as to enable the continuity of the trade union action. This change of employer cannot be a reason for termination of employment.

If the employer-transferor is the subject of bankruptcy or insolvency proceedings, the rights that are transferred to the successor employer can only be reduced in accordance with a special law, a collective agreement, or an agreement concluded between the trade union and the employer.

The predecessor employer is obliged to inform the employee in writing about the takeover, no later than 15 days prior to the takeover. An employee who opposes the takeover of their employment agreement is entitled to severance pay.

The successor employer has an obligation to conclude employment agreements with the employees within five days from the takeover. These agreements cannot guarantee a lesser scope of rights for the employees than the rights determined by the predecessor. The predecessor employer may terminate the employment of an employee who refuses to conclude an employment agreement with the successor employer within the above-mentioned deadline of five days.

If any employment agreement is terminated because the transfer causes a substantial change in working conditions to the detriment of the employee, the employer shall be regarded as responsible for such termination.

The successor employer has an obligation to apply the collective agreement of the predecessor for at least one year from the date of change of the employer, respecting the same terms applicable to the predecessor employer. However, this rule is not applied if a new collective agreement is concluded with the successor employer, or in the event of expiration of the period for which the collective agreement with the predecessor employer was signed.

The predecessor employer and the successor employer are obliged to inform the representative of the employees of the employer of the date, reasons and effects (legal, economic and social) of the change on the employees, as well as of any measures envisaged in relation to the employees.

This is not applicable in Montenegro.

This is not applicable in Montenegro.

Legislation

The Law on Personal Data Protection and the Law on Data Secrecy are the relevant laws for data protection and privacy. Data protection is provided to every person, regardless of nationality. This law does not apply to the processing of personal data for the needs of defence and national security, and to the processing of data by a natural person for their own needs. The processing of personal data requires the consent of the person whose data is being processed. The Law on Data Secrecy outlines a unique system for determining the secrecy and protection of data and records.

Collection managers who process personal data in the territory of Montenegro or outside Montenegro, where the regulations of Montenegro are applied under international law, are obliged to act in accordance with this law. A collection manager established outside Montenegro or one who does not reside in Montenegro shall apply this law if the personal data processing equipment is located in Montenegro, unless that equipment is only used for the transfer of personal data through the territory of Montenegro.

Personal data may be taken from Montenegro to another country or given for use to an international organisation which applies adequate protection measures as prescribed by this law.

Protection of Rights

A request for protection of rights may be submitted to the supervisory body by a person who considers that their rights as prescribed by the law on personal data protection have been violated, and the supervisory body must decide on this request by a decision within 60 days from the date of submission. The Agency for Personal Data Protection supervises through controllers, ie, employees of that body, who have the right to access personal data, as well as the right to access files and other documentation related to the processing of personal data.

Fines

In case of violation of this law, the fine for a legal entity ranges from EUR500 to EUR20,000; for a responsible person in a legal entity, in a state authority and a natural person, it ranges from EUR150 to EUR2,000; and for an entrepreneur, it ranges from EUR150 to EUR6,000.

There are no other significant issues at the present time.

Radonjic/Associates

Bulevar Dzordza Vasingtona 108/a36
Capital Plaza
81000 Podgorica
Montenegro

+382 20 620 312

+382 20 620 313

info@radonjic-associates.com www.radonjic-associates.com
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Law and Practice

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Radonjic/Associates is a leading Montenegrin full-service law firm, providing its clients with integrated legal advice on complex transactions. As a premier business law firm whose practice covers a broad spectrum of transactional and regulatory matters, Radonjic Associates enjoys an international reputation and is the preferred local partner to many international law firms, financial institutions and embassies. The firm’s client base is a diverse range of large international corporations, leading energy and construction companies in Europe, and some of the wealthiest individuals investing in Montenegro. Radonjic Associates has a particularly strong focus on the corporate and commercial, energy, banking and finance, foreign direct investment, real estate and construction sectors.

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