On May 2, 2023, CEE Legal Matters reported that Zivkovic Samardzic had advised Fifth Quarter Ventures on the legal process for becoming an alternative investment fund in Serbia. CEELM reached out to Zivkovic Samardzic Partner Igor Zivkovski to learn more about the matter.
CEELM: At what stage did Zivkovic Samardzic become involved in the project?
Zivkovski: Zivkovic Samardzic was involved in this project from the very beginning and it continues to support Fifth Quarter Ventures in all aspects of establishing and developing the fourth alternative investment fund in the Republic of Serbia. We are very glad to be a part of this project, having in mind that the evolution and growth of the investment funds in Serbia has been a hot topic in recent years, and its regulatory development has been long awaited by the entire Serbian capital market. Although this is a challenging procedure, we are very proud to be one of the first law firms in Serbia to gain first-hand experience in this area and we are delighted that FQV has put their trust in our team – which includes Partner Sava Pavlovic, Associate Ana Grebo, and myself – giving us an exciting opportunity to observe how this procedure will unfold in the near future.
CEELM: And what, specifically, was the firm’s mandate?
Zivkovski: Our team’s mandate implied involvement from day one: the establishment of the limited liability company, Fifth Quarter Ventures doo Novi Sad; assistance in FQV’s participation in the public call published within the Serbia Ventures Serbian Innovation Fund Program, which resulted in FQV being selected among the funds in which the Serbia Innovation Fund intends to invest EUR 5 million; and concluding the first framework investment agreement between the two parties involved.
For FQV to receive the investment mentioned above, it must be transformed and established as an alternative investment fund according to the Serbian legal framework. Logically, for FQV and for us as their legal advisors, the next steps are solely directed at the establishment of the alternative investment fund before the Securities Commission.
CEELM: What did the process of becoming an alternative investment fund in Serbia entail?
Zivkovski: The procedure of establishing an alternative investment fund, according to the Serbian regulatory framework, is led before the Securities Commission of the Republic of Serbia and entails a two-step procedure: first, the establishment of the management company of alternative investment funds (AIFM), which was successfully finalized in April 2023; and second, the establishment of the alternative investment fund (AIF), which is currently in progress.
The first part of the procedure, the establishment of the AIFM, required the founders to submit the necessary documentation to the Securities Commission, in order to receive the most important permit, which enables the AIFM to establish an AIF in the Republic of Serbia.
For the founders to be fully prepared every step of the way, the Zivkovic Samardzic team supported them throughout this operation and performed the necessary extensive legal analysis of the regulatory framework, assisted in obtaining the majority of the mandatory documentation, and drafted numerous legal documents, as well as continuously communicated with the authorities, stakeholders, banks, and other parties involved.
Further, as we are in the midst of the final second phase – the establishment of the alternative investment fund – our team is preparing and putting together the necessary documentation for submission to the Securities Commission, and we are hoping that, in the near future, FQV will be able to share the good news, once the Securities Commission issues the second, final, permit that will enable the establishment of the AIF.
CEELM: What would you say was the most complicated aspect of the project?
Zivkovski: As already mentioned, the regulatory framework concerning alternative investment funds has been developed and adopted somewhat recently, which means there is a lack of practice in this area for every party involved in the procedure (founders, legal practitioners, and authorities), making the entire process time consuming and, in some respects, contradictory with certain question still left up for debate. Nonetheless, we are sure that the procedure will get more efficient and that all questions and doubts will be solved over time as the practice develops, and the Serbian capital market becomes richer with more funds and investors.
CEELM: In contrast, what do you believe went particularly smoothly?
Zivkovski: Given that FQV was an established and duly registered limited liability company before starting the procedure of establishing the AIFM and AIF before the Securities Commission, and that we transformed an already existing limited liability company into an AIFM, to a certain extent, made the procedure a bit easier, especially when it came to the administrative procedures before the Serbian Business Registers Agency. In all other aspects, considering the above, we had our work cut out for us.
