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On its way to becoming an EU Member State, Serbia is harmonising its law with the EU acquis.  As one step forward to opening the Chapter 9 - Financial services, the Serbian Government is currently preparing the Alternative Investment Funds Bill (“Bill”) which implements the Directive 2011/61/EU on Alternative Investment Fund Managers (“Directive”) in national legislation.
As expected, the Serbian Parliament will adopt the Bill in the second quarter of 2019.


The Bill will introduce all legal institutions defined under the Directive and hopefully harmonise its legislation with the Directive completely.  However, it is expected that some provisions will come into force after Serbia becomes an EU Member State.  For example, in the beginning, only banks will be entitled to perform depositary activities and other credit institutions will be entitled to perform such activities after Serbia joins EU; retail (individual) investors will not be allowed to invest in alternative investment funds; and AIFMs will be authorised to perform most of the cross-border activities after Serbia becomes an EU Member State among others.

Harmonisation of Serbian law with EU legislation is not the only aim of the Bill. Namely, it is expected that the Bill will also have a positive influence on the Serbian financial market and development of micro, small, and medium-sized businesses (“MSMEs”), most of which primarily make up the Serbian economy.

One of the main challenges that MSMEs face is access to affordable financial and business development services. Difficulties in obtaining these services have diminished this sector’s contribution to Serbia’s economic growth, and many of the MSMEs are not capable to meet commercial banks’ demands for loans. Therefore, the MSMEs current contribution to GDP stands at 32%, which is low when compared to neighbouring countries – for example 60% in Bulgaria, 50.2% in Hungary, and 51.6% in Croatia.

When compared to the other countries in the region, equity related financing and the investment fund industry in Serbia are much less developed and it is not capable to provide sufficient equity financing in the market. The cause of such a lack of development in the investment funds industry may actually be the fact that this field is currently inappropriately regulated.

It is primarily, The Investment Funds Act which currently regulates the operation of investment funds in Serbia. According to this Act, establishing a private equity fund in Serbia requires a well-capitalised management company, strict organisational and operational standards as well as regular reporting to the Serbian Securities Exchange Commission.

As expected, the Bill will harmonise Serbian law with the Directive and improve access to finance for MSMEs through the establishment of a healthy financial market, and by broadening the range of finance available, especially with equity-based financing such as venture capital, private equity, and the other alternative investment funds.   EG

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