1. PRESENTATION OF MONTENEGRO
Negotiating Team for the Accession of Montenegro to the European Union
Working Group for Chapter 6 – Company Law
Bilateral screening: Chapter 6
PRESENTATION OF MONTENEGRO
Brussels, 22 November 2012

2. Working Group for Chapter 6 – Company Law
MONTENEGRO
Negotiating Team for the Accession of Montenegro to the European Union
Working Group for Chapter 6 – Company Law
Bilateral screening: Chapter 6
Presentation of Montenegro
Brussels, 22 November 2012
Chapter 6:
Company Law

3. IV EU Directive (78/660/EEC) Igor Pavicevic
Chapter 6: Company Law
IV EU Directive
(78/660/EEC)
Igor Pavicevic
Secretary General Institute of Certified Accountants of Montenegro – IFAC member
MONTENEGRO
Negotiating Team for the Accession of Montenegro to the European Union
Chapter 6:
Company Law

4. Directive 78/660/EEC vs relevant laws in Montenegro
Chapter 6: Company Law
Directive 78/660/EEC vs relevant laws in Montenegro
I REGULATION
- Law on Accounting and Auditing (Official Gazzette of MNE No.32/11)
Secondary legislation:
Decree on Entrusting of Affairs of Public Administration Bodies Competent for Accounting and Auditing (Official Gazzette of MNE No.44/07)
Rulebook on financial statements (Official Gazzette of MNE No.05/11)
II HARMONISATION WITH DIRECTIVE
III EXPECTATIONS FOR FUTURE AMENDMENDS TO LAW
MONTENEGRO
Negotiating Team for the Accession of Montenegro to the European Union
Chapter 6:
Company Law

5. II HARMONISATION WITH DIRECTIVE
Chapter 6: Company Law
II HARMONISATION WITH DIRECTIVE
Out of 51 Articles of the Directive (excluding final provisions), the Law on Accounting and Auditing is:
Fully harmonised with 49 Articles
Partly harmonised with 2 Articles
Non harmonised – not exist
Partial harmonisation relates to:
Article 46 of the Directive, under which financial statements are required to provide information on
the going concern principle, as well as research and development activities. In our law, this is not explicitly stated, but the law refers to ISA, IAS/IFRS, and the Law (Article 6,
paragraph 3) states that Statistical Annex shall be submitted as well, where issues relating to
investment in research and development are discussed.
Article 47 of the Directive, according to which transparent disclosure of financial statements and audit
reports is required. The Directive also allows reports not to be published, but in this case interested
users shall be provided with, without charge, a copy of part or entire report. Such an explicit attitude does not exist in our law. However, the Law on NGOs (Article 37) implies
that NGOs whose annual income is > 10,000 must publish financial statements on their website.
MONTENEGRO
Negotiating Team for the Accession of Montenegro to the European Union
Chapter 6:
Company Law

6. Full harmonisation Chapter 6: Company Law
Article 2 of the Directive requires the true and fair presentation of financial reports, which
shall include: Balance Sheet, Income Statement and Notes, as well as additional information. The Law on Accounting and Auditing, in Article 2, refers to the full application of IAS/IFRS,
and IAS-1 meets the requirement of this Directive.
Article 3 of the Directive requires that the form of patterns of financial statements must
not be changed each year, except in exceptional circumstances. Given that IAS/IFRS were amended in 2009, to which the Law refers, the Institute of
Certified Accountants has, in accordance with the public authorizations (according to the
Decree) proposed, and Ministry of Finance adopted, new Rulebook on financial
statements, harmonized with amendments to the IAS/IFRS.
Article 4 of the Directive requires respect for the principles of transparency, comparability
of data, sequence of items, introduction of column for the previous year, etc. The Rulebook of financial statements meets these requirements.
MONTENEGRO
Negotiating Team for the Accession of Montenegro to the European Union
Chapter 6:
Company Law

7. Full harmonisation Chapter 6: Company Law
Article 5 of the Directive requires specific forms for investment companies and financial
holding companies.
The Commission for Securities, together with the Institute of Certified Accountants, have
proposed, and Ministry of Finance adopted, the Rulebook on financial statements of
investment funds. Articles 6-8 of the Directive require adherence to the basic accounting principles, distribution
of profit and loss coverage, as well as a model of one or two forms of balance.
Our Law on Accounting and Auditing implies the full application of IAS/IFRS and the
Company Law provides clear guidance on the allocation of the profit or loss coverage.
The Rulebook on financial statements prescribed a model of forms of financial statements.
Article 9 of the Directive requires that the item "Unpaid registered capital" to be seen in
two ways, as short- and long-term.
The Rulebook on the financial statements specifically singles out this item because of its
two-sided treatment.
MONTENEGRO
Negotiating Team for the Accession of Montenegro to the European Union
Chapter 6:
Company Law

8. Full harmonisation Chapter 6: Company Law
Articles of the Directive request existence of possibility that small legal entities
(assets up to €1,000,000, revenue up to 2,000,000, employed up to 50) have summarized
financial statements.
The Rulebook on financial statements prescribed only one form of patterns, because the
Directive is not explicit in this regard.
Articles 13 – 26 of the Directive relate to the content of Notes, Balance Sheet and Income
Statement.
IAS/IFRS define the content, and Law on Accounting and Auditing requires their full
implementation, so the Rulebook on financial statements is harmonized with that.
Article 27 of the Directive requires that medium-size legal entities that have revenue up to
, incomes up to , and employees up to 250, can make different patterns.
The Rulebook of financial statements prescribed only one form of pattern, because the
MONTENEGRO
Negotiating Team for the Accession of Montenegro to the European Union
Chapter 6:
Company Law

9. Full harmonisation Chapter 6: Company Law
Articles of the Directive require proper positioning of revenue and results, as well as
assessment of balance sheet positions.
IAS/IFRS define content, and the Law on Accounting and Auditing requires their full
application, so the Rulebook on financial statements is harmonized with that.
Articles of the Directive require content of Notes. IAS/IFRS define content, and the Law on Accounting and Auditing requires their full
application.
Articles of the Directive require that audit reports, whether they relate to full
or partial financial reports, shall contain the auditor’s opinion, as well as an indication if
that are full or partial reports. Annual financial statements must show proposed distribution
of profit or treatment of loss, if these items are not covered by the financial statements. The Law on Accounting and Auditing (Article 3) refers to the full implementation of the
International Auditing Standards and, according to the Rulebook, distribution of profit and
treatment of loss shall be stated in financial statements.
MONTENEGRO
Negotiating Team for the Accession of Montenegro to the European Union
Chapter 6:
Company Law

10. III EXPECTATIONS FOR FUTURE AMENDMENDS TO LAW
Chapter 6: Company Law
III EXPECTATIONS FOR FUTURE AMENDMENDS TO LAW
that medium-size legal entities are subject to compulsory audit,
that classification of legal entities (according to the current Law, Article 3, paragraphs 1-3) shall be harmonized with this Directive, as current classification is not harmonized with the EU,
according to our Law, medium-size legal entities shall meet 2 of 3 listed criteria: 1) that average number of employees during the year for which annual financial report is submitted amounts from 50 to 250 employees; 2) that total revenue at annual level amounts from € to € ; 3) that total assets amount from € to € We request these positions to be harmonized with the Directive and to meet the following criteria: 1) that average number of employees during the year for which annual financial report is submitted amounts from 50 to 250 employees; 2) that total revenue at annual level amounts from € to € ; 3) that total assets amount from € to €
that signatories of financial statements shall possess a certificate in accordance with the National Education Accounting Standard (CORS-1) and IFAC International Education Standards (IES).
In the opinion of the EU, is this a business barrier? If so, what is more important for the EU: the truth, objectivity and quality of the financial statements or business barriers?
MONTENEGRO
Negotiating Team for the Accession of Montenegro to the European Union
Chapter 6:
Company Law

11. Thank you for your attention!
QUESTIONS