3 – Regulatory framework

Receivables become non-performing only after particular conditions have been met. As such, there needs to be consideration of when a receivable becomes non-performing, and, once it does, what legal avenues the creditor has recourse to. This introductory chapter will first review the statutory framework governing payment periods and timely payment in commercial transactions. Serbia has largely aligned its regulatory environment with the EU Late Payment Directive, but numerous problems persist, both with the actual legal instrument and with its implementation in practice. Thereafter, key aspects of the legal framework regulating the assignment of accounts receivable for consideration, or sale of accounts receivable.[1] The Serbian legal system regulates in detail the practice of assignment of accounts receivable, envisaging how these legal transactions are entered into, what consequences they have, and how this option is used for collection of assigned accounts receivable. Apart from reviewing the key sources of law regulating this area, this report will indicate the current limitations of and costs generated by the Serbian legal system that can adversely affect entry into and closure of assignment transactions from the side of both the assignor (the initial creditor, or seller of the account receivable) and the assignee (the new creditor, or purchaser of the account receivable). Finally, the incentives provided by the legal framework in this regard should also be discussed. As such, the next chapter will consider the issue of how assignment of receivables is treated for tax purposes.




Late payment of accounts receivable threatens the liquidity and solvency of businesses, creates the need for additional finance, and may jeopardise operations and, consequently, have an adverse impact on the economy as a whole. The negative effects of late payment are particularly pronounced where debtors use their market position to impose unfavourable payment terms. This section will discuss application of the Late Payment Law, its alignment with the EU Late Payment Directive, and possible changes that could make the Law more effective in terms of ensuring compliance with statutory payment periods, primarily in transactions between businesses (B2B transactions).[2]

The Serbian Late Payment Law is largely based on the EU Late Payment Directive. The major shortcomings of the initial legislative framework concerned its enforcement. According to the current rules, transactions where the debtor is a public-sector entity are supervised by the Budget Inspection of the Ministry of Finance, whilst B2B transactions are controlled by the Tax Administration.[3] Fines depend on the type of debtor and range from RSD 100,000 to 2 million for legal entities, from RSD 10,000 to 500,000 for sole traders, and from RSD 10,000 to 150,000 for natural persons who own registered farms. Inspection oversight of the Late Payment Law is subject to the relevant provisions of the Law on Tax Procedure and Tax Administration.[4]

Amendments to the Late Payment Law have failed to comprehensively address issues with its enforcement. One pressing problem is the lack of capacity of the Tax Administration to effectively enforce the statutory rules in commercial transactions given its limited resources. Ever since 2015, the Tax Administration has been undergoing a comprehensive business process reengineering exercise regulated by the Tax Administration Transformation Programme, 2015-2020[5] and the Action Plan for the Tax Administration Transformation Programme, 2018-2023.[6] The Transformation Programme and the Transformation Action Plan envisage consolidation of the Tax Administration’s operations by redistributing responsibility for its non-core activities to other institutions, and enforcement of the Late Payment Law has been identified as one of these non-core (non-tax) activities.[7] As such, re-allocating this activity to a different government body would also help achieve one of the strategic objectives of the Transformation Programme.



The European Union took the first step towards addressing the consequences of late payment by adopting Directive 2000/35/EC on combating late payment in commercial transactions.  Preventing late payment was motivated by the need to provide legal safeguards to MSMEs against unduly long payment periods that could seriously threaten their liquidity and potentially cause insolvency. The Directive applied to both B2B and PA2B transactions and regulated issues of payment and minimum interest rate. The regulatory framework established by Directive 2000/35/EC failed to eliminate delays in payment or promote shorter payment terms.  These challenges led to the adoption of the new Directive 2011/7/EU on combating late payment in commercial transactions, which also aims at providing relief to MSMEs by preventing late payments. Its key features are (1) limitations as to payment periods that can be contracted in commercial transactions subject to the Directive, and (2) guarantees of creditors’ rights in the event of late payment.

The first group of provisions govern how payment periods are contracted. The restrictions here depend on whether the commercial transaction is contracted between two businesses or a business and a public authority. In the former case, the maximum payment period that can be contracted is 60 calendar days, except where otherwise stipulated in the contract and provided this is not grossly unfair to the creditor. Where a public authority is the debtor, the maximum payment period allowed to be contracted is 30 days, which may be extended to 60 days for special categories of public authorities.

The Directive gives creditors three primary options for compensation in the event of a debtor being delinquent: a one-off fixed sum of 40 euros, reasonable compensation for any recovery costs exceeding this fixed sum, and interest (either contractual or statutory). The freedom of a public-sector debtor to contract penalty interest is also limited, as the interest rate may not be lower than the statutory rate (which is the key policy rate of the European Central Bank, or the national central bank for non-euro countries, plus at least 8 percentage points). Directive 2011/7/EU applies to all commercial transactions, regardless of whether the debtor is a business or a public authority, but EU Member States may exempt businesses that are subject to insolvency proceedings.


A public authority may not pay an invoice that is not registered in the electronic invoice register. Once an invoice is registered, the debtor has an eight-day window to either accept or decline the invoice. It is worth mentioning that the exercise of rights extended by the Late Payment Law depends on the willingness of creditors to use them, even though public authorities act sua sponte to enforce the Law.[8]


Shortcomings of the Late Payment Law

Any comparison between Directive 2011/7/EU and the Serbian Late Payment Law patterned after it must take into account the departures in the Serbian law from the legal framework established by the Directive. Unlike EU Member States, when it transposed the Directive into national law, Serbia did not conform to the principle of freedom of contract. The primary shortcomings of the Late Payment Law identified in literature are: significant extension of the mandatory payment period relative to general contract law and limited freedom of parties to contract a payment period longer than the allowed maximum, with a number of statutory exceptions.[9] When transposing the Directive the Member States generally deviated on the side of creditors, allowing them greater safeguards. Even though the primary objective of the Directive was to establish a framework for payments in commercial transactions, its intent was not to create a rigid system that would constrain freedom of contract. As such, the Late Payment Law is peculiar in that it diverges from the spirit of the Directive. Apart from this substantive deviation, the Serbian framework can be examined from the perspective of each of its features:[10]

1. Payment periods for B2B transactions are more restrictive than laid down in the Directive. The Directive envisages a maximum payment period of 60 days, which may be extended in the contract if not grossly unfair to the creditor. The Late Payment Law provides three exceptions and does not allow the parties to contract other periods. The difference here is one of approach. The Directive lists situations in which a contractual term may be considered grossly unfair (gross deviation from good commercial practice, nature of the product of service, whether there is an objective reason that justifies longer payment terms), whilst the decision in the matter is itself left to the courts. By contrast, the Late Payment Law identifies qualifying exemptions for both types of transactions in advance and does not allow the courts to assess whether a longer contractual payment period is allowed. The exceptions envisaged for B2B transactions are: 1) where payment is made in instalments, in which case a 90-day period may be contracted, on condition that at least 50 percent of the monetary obligation must be paid at the latest on the expiry of one-half of this period, with the remainder to be paid at the end of this period; 2) where collateral is provided in the form of a bank guarantee that contains clauses to the effect that it is ‘irrevocable’, ‘unconditional’, or ‘payable at first demand without objection’, or a guaranteed bill of exchange issued by a bank in an amount not lower than the monetary obligation or invoiced value of the service or good provided; and 3) where the debtor is the owner of a registered farm or a farming co-operative purchasing raw materials. In PA2B transactions there is only one exception to the maximum payment period (of 45 days), which applies where the debtor is the National Health Insurance Fund or a beneficiary of the National Health Insurance Fund: here the maximum period is 90 days. According to Radović (2013), the legal consequences of the Late Payment Directive have not been transposed appropriately into Serbian law, as the Late Payment Law does not recognise the legal standard of ‘grossly unfair’ payment terms.[11]

2. The Law provides for longer statutory payment periods in PA2B transactions than the Directive. This holds true for both maximum payment periods and exceptions to that rule. The Directive requires payment to be made within 30 days, except where the debtor is a public authority which carries out economic activities of an industrial or commercial nature by offering goods or services on the market (i.e. a statutory corporation), or a public entity providing healthcare, in both of which cases the period may be extended to up to 60 days. The Law stipulates a maximum period of 45 days in where the debtor is a public authority, whilst exemptions can extend this period to 90 days.

3. Inadequate enforcement of the Law for B2B transactions. Even though Member States have not applied a universal approach in designating an authority to enforce the transposed rules, the current Serbian solution is not appropriate. In Serbia, responsibility for enforcement of the Law in B2B transactions resides with the Tax Administration, whilst the Budget Inspection is charged with enforcement for transactions involving public authorities. Member States have also introduced other types of enforcement. For instance, Spain and Poland require reporting on payment practices and publication of indicators of late payment and payment periods in commercial transactions.

4. The Late Payment Law mandates fixed compensation for late payment of RSD 20,000. This amount does not differ significantly from that envisaged in the Directive (40 EUR minimum), but it does not distinguish between the amount owed or the sector in which the transaction takes place.

It seems that the Late Payment Law has failed to have preventive effects, and that it has not significantly affected the behaviour of businesses. Even though the Law does foresee fines for violations of its provisions fixing maximum payment periods, businesses generally believe it is highly unlikely that any such fines will actually be imposed in practice.

Businesses’ limited awareness of the options at their disposal in the event of late payments is another issue, and one that is also present in EU countries. The 2017 Intrum Justitia report revealed relatively little familiarity amongst businesses with the Late Payment Law.[12] Moreover, an SCC survey found that under one-third (32 percent) of all firms were familiar with the Law at all, and that as few as 11 percent had ever demanded compensation for late payment.

Choosing to exercise rights under the Law also depends on the commercial relationship between creditor and debtor, or, more precisely, on their relative negotiating powers and the impact that any enforced collection could have on their relations. This was also revealed after the Directive had been transposed into national law by EU Member States, showing that a piece of legislation cannot alter asymmetrical business relationships in isolation, without appropriate enforcement mechanisms. Practical experience with the Directive has shown that small and medium-sized companies are half as likely as large companies to assert their right to compensation or interest for late payment.[13]




Assignment of receivables for consideration

Assignment, the most common option for transferring an account receivable from one entity to another, can be based on various types of nominate and innominate contracts. These contracts can be both gratuitous and onerous. For instance, receivables can be assigned by means of: (1) contracts of sale; (2) factoring contracts; (3) contract of gift; and (4) contract of exchange.

The sale of an account receivable is formally the legal transaction of contractual assignment of an account receivable (cession) governed by the LCT. The LCT regulates such assignment in detail, including its effects between the parties and towards the debtor, guarantees in connection with the assignment, types of assignment, and other issues of relevance for the assignment transaction. Sale is the most common reason for assignment of an account receivable.[14]

Sale of accounts receivable is also at the heart of factoring contracts.[15] Factoring is a subset of the sale of accounts receivable. Whilst any matured accounts receivable can be sold, as can accounts receivable that have not yet matured and future accounts receivable, factoring deals only with current accounts receivable that have not become due and future short-term monetary claims arising from agreements on the supply of goods and/or services domestically or internationally. The relationship between assignment, sale, and factoring is shown in Figure 6.


Figure 6. Relationship between assignment of accounts receivable, sale of accounts receivable, and factoring


Accounts receivable are assigned pursuant to assignment contracts (contracts on the sale or purchase of accounts receivable), as governed by Articles 454 to 551 of the LCT. Of particular significance is Article 461 LCT, which stipulates that a contested right may be subject to a contract of sale, since accounts receivable commonly constitute creditors’ rights to payment of a particular sum of money that can be contested. For the same reason, another set of important provisions concerns liability for legal deficiencies and protection against forfeiture (Articles 508 to 515 LCT). Where a receivable is subject to a contract of sale, the seller guarantees the existence of such receivable and the absence of any legal impediments for its performance (Article 508[2] LCT). The procedure for assigning an account receivable is governed by Chapter VI, Section 1 of the LCT, ‘Yielding of claims by contract (Assignment or cession)’. Articles 436 to 445 LCT contain: (1) general rules for assignment (which receivables can be assigned, extent of assignment, notification of debtor, and multiple assignment); (2) relationship between assignee and debtor; (3) relationship between assignor and assignee (transfer of instruments substantiating the account receivable, responsibility for existence of the account receivable, responsibility for collectability), as well as specific cases of assignment in lieu of performance or to ensure performance.

An assignor may enter into a contract with a third party to assign to such third party an account receivable claimed by such assignor, excepting only accounts receivable that may not be transferred by virtue of statute, or that are restricted to the person of the assignor, or whose very nature is incompatible with being transferred (Article 436[1] LCT). A contract of assignment is not binding on the debtor if the contract between the debtor and the creditor prohibits the transfer of the receivable altogether or without the consent of the debtor.

Accessory rights are transferred to the assignee together with the receivable; this includes the right of preferential payment, mortgage, security, rights arising from contracts with guarantors, rights to interest, to liquidate damages, and the like (Article 437[1] LCT). Paragraph [3] of this Article introduces the presumption that due and outstanding interest is assigned (ceded) together with the principal account receivable. For accounting purposes and to ascertain the balance of the debt at the time of its transfer to the assignee, it is common business practice to define assignment date in the assignment contract, and this is usually a date prior to entry into the contract. This date is also significant in that any and all payments made to the assignor before assignment date accrue to the assignee.

Assignment does not require consent of the debtor, but the assignor is required to notify the debtor of having assigned an account receivable. Where an assignor has assigned the same account receivable to (multiple) different parties, the account receivable shall attach to the assignee first notified as such by the assignor or to the assignee that first contacted the debtor (Article 439 LCT). Additionally, the assignee has the same rights with regard to the debtor as the assignor did prior to assignment. Lastly, in addition to any objections the debtor may raise with the assignee, the debtor may also raise with the assignee any objections the debtor had been entitled to raise with the assignor until such time as the debtor was notified of the assignment (Article 440 LCT).

The assignor is required to present to the assignee a debenture bond or other debt instrument, if any, together with any other proof of the account receivable assigned and of the accessory rights (Article 441 LCT). Table 7 shows the key instruments for assignment of accounts receivable between legal persons.


Table 7.  Key instruments for assignment of accounts receivable

Instrument Description Form of presentation Significance Comment
Contract (basis of account receivable) Generally, a supply of goods and/or services agreement Presentation Proves the existence of the account receivable and its subject matter, maturity, amount, etc. /
Accounting record Accounting record of debt as of date of assignment Presentation Proves amount of account receivable Accounting record displays all changes to debt occurring due to repayment, interest accrual, and the like
Invoice Creditor’s invoice with delivery note (for goods contracts) or other written proof that the debtor has been notified of the obligation Presentation Proves existence of account receivable and its subject matter, maturity, amount, etc.


Constitutes an ‘authentic title’ for purposes of enforcement procedure (Art. 52[2]3) LES)

Since commercial contracts may be entered into orally, invoices are significant for proving the existence of accounts receivable
Bill of exchange Blank bill of exchange registered with the NBS Register of Bills of Exchange (in most cases)

Guarantor’s bill of exchange

Presentation and endorsement Collateral (especially when issued by a guarantor or giver of collateral promise)


Means of out-of-court enforced collection on bank accounts (Art. 47, Payment Operations Law)


Constitutes an ‘authentic title’ for purposes of enforcement procedure (Art. 52[2]1) LES)

Bills of exchange do not play a major role in proving accounts receivable, since they are generally issued blank


Conversely, since bills of exchange are assumed to be correct in proceedings to contest bills of exchange in any civil dispute, their role is not negligible in this regard

Guarantee or collateral promise contract / Presentation Collateral These two types of contracts have similar effects in commercial transactions


The assignor is responsible for the existence of an account receivable at the time it is assigned (Article 442 LCT). However, the assignor guarantees the collectability of an account receivable only where this is explicitly stipulated in the assignment contract, and only up to the amount received from the assignee. The imperative provision of the LCT (Art. 443[2] LCT) prevents contracting of greater liability of an assignor acting in good faith.

As demonstrated above, the LCT provides liberal rules for assignment of accounts receivable. For instance, there is no prescribed format of assignment contract; in other words, from a strictly formal perspective, an assignment contract may also be entered into orally. The usual practice in business transactions, however, is for these contracts to be entered into in writing as this facilitates proving assignment and complies with the requirements of current Serbian accounting regulations.

Some formalities are regulated by other laws. These provisions generally do not concern the legal validity of the assignment as such, but rather govern how the assignee can achieve particular effects by means of the assignment, such as, for instance, initiating or intervening in an enforcement procedure. In addition, in insolvency proceedings, signatures on an assignment contract must be notarised for some options to be available, including substituting the assignor in the case (Article 117a, Bankruptcy Law[16]). However, a specific form of assignment contract may be required. For instance, Article 19 of the Factoring Law[17] requires a written or electronic assignment contract.

The sole formal requirement for assignment envisaged by the LCT is for the assignor to notify the debtor of the assignment (Art. 438 LCT). This notice need not be made in writing either, but, for evidentiary purposes, it is desirable for the notice to be sent by registered mail with acknowledgment of receipt, since major legal consequences apply according to the LCT from the time the debtor is notified.

If the assignor fails to comply with this requirement, any performance made to the assignor will be valid only if the debtor was not aware of the assignment. In this case, the debtor is released from any further obligation, whilst, from a formal legal perspective, the assignor would not be entitled to such performance and would have to transfer it to the assignee. By contrast, this provision could have major consequences for the assignee in the event the assignor was insolvent, subject to an account freeze, or generally in financial distress. Here, if the assignee does not hold a secured claim against the assignor on these grounds, the assignee will have to seek collection as any other creditor of the assignor, whilst the debtor would no longer be liable for performance of the obligation. The assignee could evade this provision if it provided separate notice to the debtor of the assignment and invited the debtor to continue performance to the benefit of the assignee, which would eliminate the threat of the debtor becoming released from its obligation by providing performance to the assignor.

Where an account receivable is secured by a bill of exchange, which is frequently the case, the rule is that the bill of exchange also be transferred to the assignee. Bills of exchange are transferred by endorsement, which may be in favour of the bearer, in full, or blank (Arts. 11 and 12, Law on Bills of Exchange).[18] Once a bill of exchange is transferred as described above, the assignee may use the bill of exchange as collateral for collection of the assigned account receivable. These benefits of bills of exchange remain effective so long as the debtor is solvent, since a bill of exchange confers no priority in collection on the creditor, except for any priority acquired in enforced collection of the bill of exchange. Where the debtor’s account is frozen, priority is determined with reference to the time the bill of exchange was received for collection, or the time of adoption of an enforcement ruling based on the bill of exchange. These qualities make bills of exchange important instruments in assignment situations. For a detailed discussion of collection using bills of exchange, see the section on out-of-court enforced collection of bills of exchange.



Factoring operations are a subset of assignment. Factoring is a financial service involving the purchase of an existing account receivable that has not become due or a short-term future account receivable arising from an agreement on the supply of goods and/or services domestically or internationally (Art. 2[1]1) FL). Until the FL was adopted in 2013, factoring operations in Serbia were contracted pursuant to the LCT.

According to the FL, a business registered for the performance of factoring activities (‘factoring business’) can engage in factoring operations if it meets the requirements of the FL in terms of capital and if it holds approval for factoring operations. The factoring business must hold and maintain capital stock amounting to no less than RSD 40 million (Art. 6 FL). In addition to factoring companies, banks can also engage in factoring; a separate piece of legislation also governs the Serbian Export Credit and Insurance Agency, which engages in export factoring to promote exports.[19] Lastly, if they are natural persons, the owners, and the responsible officers of a factoring business, are debarred form holding this office if they have been sentenced to a term of imprisonment of more than six months for a criminal offence, if they are under criminal investigation, or if they are debarred from practising any profession or holding any other office. Legal persons may not own a factoring business if they have been finally convicted of a criminal offence or are under criminal investigation (Art. 7[2]1) and 4) FL).

The FL permits the following types of factoring operations: (1) domestic factoring; (2) international factoring; (3) non-recourse factoring; (4) recourse factoring; and (5) reverse factoring.

Article 5 FL stipulates that a factoring company may only engage in factoring operations and related or ancillary operations. The usual interpretation is that these operations include the purchase of other types of accounts receivable, not just those subject to factoring, and that factoring companies are permitted to purchase non-performing receivables. To remove any regulatory risk and make it easier for factoring companies to access the non-performing receivables market, there ought to be legislative intervention to clarify whether factoring firms can engage in these transactions.

Even though factoring may not involve recourse, a key right of the factor relative to the assignee of the receivable is the right to recourse from the assignor in the event the receivable cannot be collected. These rights matter because, under the LCT, an assignor acting in good faith is liable for the collectability of an account receivable only up to the value of the consideration made for the assignment. Recourse factoring means that the assignor is liable to the factor for the collectability of the account receivable as of the day it becomes due (Art. 16[1] FL).

Recourse factoring will be deemed to be contracted in the event of any confusion as to the type of factoring (Article 16 FL). Where recourse factoring is contracted, the factor is entitled to demand performance from the debtor, assignor, or both at the same time, within the limits of liability of the debtor and assignor, if not otherwise contracted. Having exercised recourse against the assignor, the factor is required to return the receivable to the assignor (Article 16[4] FL).

The factor is not entirely free to manage an assigned receivable if recourse factoring has been contracted, in contrast to the assignee. Since the factor has the right to recourse, the factor also has an obligation that the assignee, as a rule, does not, namely, to exercise due diligence and act in good faith in managing the purchased receivable.

Unlike in assignment, the contractual prohibition of transferring the receivable is not binding on the factor, meaning that a receivable can be sold to the factor even if the assignor and the debtor have agreed this prohibition, except where otherwise provided for by an international treaty (Art. 30 FL).

Reverse factoring is particularly important for preventing a receivable from becoming uncollectable. This is a special type of factoring where the receivables are not assigned. In reverse factoring, the factor undertakes the obligation to pay the debtor’s invoices (debts) and is able to collect these amounts from the debtor within periods of time stipulated in goods and/or services supply contracts (Art. 18 FL). Since this is an assignment of debt, in reverse factoring it is not sufficient to only notify the creditor, but the creditor must also agree to this. It is in the creditor’s interest to agree to the cession because this guarantees its invoices will be paid once they become due.



One important issue to consider in assignment of receivables for consideration is that of the rights and obligations of the assignee in enforced collection procedures previously initiated by the assignor. These efforts will often have been launched by the assignor before the account receivable is assigned in an attempt to collect it.

Two procedural aspects of assignment are of relevance to the assignee (purchaser) of the receivable: (1) the assignee ought to have at its disposal some sort of procedure to enforce the receivable; and (2) if a proceeding has been launched before assignment, the assignee should also be able to intervene in this ongoing proceeding.

Both the assignee and the assignor have recourse to the following methods of enforced collection: (1) out-of-court enforced collection of bills of exchange; (2) enforcement; (3) civil proceedings (primarily in continuation of enforcement proceedings); and (4) bankruptcy proceedings (proceedings in which all creditors to collectively recover their debts from an insolvent debtor).


Out-of-court enforced collection of bills of exchange

Out-of-court enforced collection of bills of exchange is important for receivables accompanied by formally correct bills issued by the debtor. This is a significant means of out-of-court enforced collection given the widespread issuance of bills of exchange by Serbian businesses. By endorsing a bill of exchange, the assignee becomes a bill of exchange creditor, and as such may seek out-of-court enforced collection of that bill to recover the assigned debt. One specific benefit offered by bills of exchange in the Serbian economy is the ability to have it collected by debiting the bank account of the debtor, in accordance with the central bank’s Decision on enforced collection by debiting of clients’ bank accounts.[20] This option is available provided the bill is registered with the Central Register of Bills of Exchange maintained by the NBS. Before issuing the bill of exchange, the debtor has its commercial bank register the instrument.

Assuming a bill of exchange is properly assigned, the assignor can use it without any further formalities, such as notifying the commercial bank or the NBS of the substitution of creditor, since, according to the Law on Bills of Exchange,[21] these instruments are subject to the ‘principle of incorporation’, meaning that all rights arising from the bill of exchange are determined solely on the basis of that bill. The bill must be appropriately completed and assigned pursuant to the LBE for the debtor’s bank to be able to freeze the account (Art. 7, Decision on enforced collection by debiting of clients’ bank accounts).

The efficiency of out-of-court collection of bills of exchange depends on the solvency of the debtor. In the event that the debtor’s accounts are not frozen and contain sufficient funds, the actual collection procedure is highly efficient and can be completed within hours after the bill is presented for payment. With an insolvent debtor, collection can take more time and effort, but out-of-court collection can still be used as an effective option for collecting relatively easily and putting pressure on the debtor to pay voluntarily. If the debtor has already had its account frozen, a bill presented for payment will take its order in the queue with other instruments based on the time of its receipt.

Bills of exchange have a lower priority than other instruments, as shown in Table 8.


Table 8.  Various grounds for collection and priority in payment

Grounds for collection Order of priority Typical instrument
Enforceable orders issued by tax, customs, and other authorities – by time of receipt 1 Order for enforced collection of tax
Enforceable court rulings, other enforceable titles, statutory authorisations – by time of receipt 2 Enforcement ruling
Creditors’ orders based on matured securities, bills of exchange, or authorisations issued by debtors to their banks and creditors – by time of receipt 3 Bill of exchange


Collection of a bill of exchange will be suspended if a higher-priority instrument is received until that higher-priority claim is paid. In such cases, out-of-court collection against bank accounts is often launched simultaneously with enforcement proceedings. Here, bills of exchange are first presented for payment, to ensure the account is quickly frozen and collect whatever funds may be available before other creditors proceed with their enforced collection efforts. Since it generally takes longer to collect from a bank account, enforcement under the LES is initiated in parallel to secure higher priority in collection and permit the creditor to go after any other assets held by the enforcement debtor. As such, the process of out-of-court enforced collection of bills of exchange as described above works best for solvent debtors. It is less effective for debtors that are already in financial distress. Since bills confer no priority for collection in bankruptcy, they are not particularly important in insolvency cases.

A receivable on sale may already have attached to it bills of exchange presented for enforced collection. This conclusion is supported by the data cited above which show that, in 2018, Serbian firms were the least likely in Europe to engage collection agencies, on average doing so only after an account receivable was 264 days past due, whilst the European average was 82 days.[22] This finding was confirmed in semi-structured interviews with industry representatives.

One possible issue with the current regulatory arrangement is that it offers no option for the assignee to intervene in the proceedings if there are bills of exchange pending collection. If collection of those bills is effected after assignment, the funds will be transferred to the assignor, which ought to remit them to the assignee. Since one of the assignor’s aims is to reduce the administrative burden of managing its non-performing receivables, this is not an acceptable solution. A second option would be to recall the payment orders, which is, conversely, not acceptable to the assignee. This is not a major problem in practice since receivables are generally sold at more advanced stages where higher-priority instruments are commonly used, such as enforceable court or tax orders for enforced collection.


Civil proceedings

Civil proceedings are typically used to collect assigned receivables. This type of proceeding is initiated by bringing a civil action, but, in practice, collection of receivables usually leads to lawsuits after an enforcement debtor has objected to an enforcement ruling based on an invoice or bill of exchange.

If conditions have not been met for enforcement on the basis of an ‘authentic title’, the assignee can easily launch a civil proceeding by filing a lawsuit with the relevant court. The assignee will demonstrate its standing in the lawsuit itself, which will allow it to litigate. Even though there are no formal impediments, in this case the assignee is at a disadvantage to other creditors, since civil proceedings generally require more time and cost than enforcement proceedings.

Receivables that are already subject to litigation may be sold because, prior to the sale, a creditor may have launched enforcement proceedings to which the debtor objected, resulting in a court case. Assignment does not automatically mean the assignee substitutes for the plaintiff; rather, the assignee must make a formal motion to intervene, for which it needs the written consent of the assignor (Art. 204[2] CPL). This rule was introduced to make it easier for assignees to intervene in ongoing litigation.[23] Prior to this change, intervention required consent from both parties, and defendants rarely felt this was in their interest. The assignee’s intervention is formally allowed by a ruling of the court. Since the debtor is no longer able to obstruct the proceedings by withholding consent, this amendment has certainly made it easier to assign receivables in situations where litigation is ongoing.


Enforcement proceedings

Of relevance for this study is enforcement based on invoices and bills of exchange, which are both deemed to be ‘authentic titles’. The principle of strict formal legality applies in enforcement proceedings, unlike in civil cases. Enforcement is initiated only and exclusively to the benefit of the person indicated as the creditor in an enforceable title or authentic title (Art. 53 LES). For instance, an assignor (the erstwhile creditor) will have issued the debtor the invoice, so that the assignee may not enforce solely on the basis of the invoice, since – regardless of the assignment – the invoice is not in its name. Bills of exchange face significantly fewer issues, because once the bill is endorsed to the assignee, the assignee becomes the bill of exchange creditor, at which point all formal requirements of the LES will be met and the assignee will be able to enforce the bill of exchange.

Another situation that may appear with assignment during enforcement proceedings is intervention in an ongoing enforcement case. Before the 2016 Law on Enforcement and Security, an assignee could initiate enforcement only based on an enforceable title (judgment, court settlement, payment order, final enforcement ruling pursuant to an authentic title, and the like), even where it was not named as the enforcement creditor in the enforceable title, on condition that it submitted a public instrument or instrument notarised in accordance with law proving that the receivable from the enforceable title was assigned or otherwise transferred to it. If such proof was not available, evidence of assignment or transfer was required in the form of a final or enforceable decision rendered in civil, misdemeanour, or administrative proceedings.[24] The new LES extended this option to enforcement of authentic titles, such as bills of exchange and invoices.

For an assignee to initiate an enforcement proceeding, the assignment must have been made pursuant to a duly notarised contract between the creditor and the debtor. Failing that, the assignee would have to pursue a special proceeding to determine the fact that the receivable had been transferred to it. This rule is not much of an issue when it comes to assignment of one claim or a handful of receivables, or a portfolio consisting of separate high-value claims. However, if an entire portfolio of small account receivable is assigned, costs of enforcement proceedings may increase significantly, since the sale contracts can run to the hundreds of pages. Each time it commences an enforcement proceeding, the assignee must provide notarised copies of the agreements, and the costs of notarisation depend on the number of physical pages. Moreover, for the assignor to be freed of any and all burdens in connection with the assigned receivables, sale agreements often explicitly require the assignee to intervene in all proceedings in connection with the receivables that are ongoing at the time of the assignment. If the number of assigned receivables is high, this requirement may pose a substantial procedural cost to the assignee. Lastly, the high procedural costs could drive down the price of the assigned receivables, which could depress the supply of MSMEs’ receivables.

The assignee also faces additional costs when intervening in enforcement proceedings. Item 2 of the EOTF requires a fee to be paid to the enforcement officer for issuing a procedural decision permitting the assignee to intervene in a proceeding, as referred to in Article 48 LES. The fee amounts to 20 percent of the fee for preparing, managing, and archiving a case, and, given the likely intended disincentivising effect on low-value proceedings, represents a large percentage of the nominal value for smaller claims. For instance, the fee for an account receivable worth RSD 100,000 is about 1 percent of its nominal value, dropping significantly for receivables valued at RSD 1,000,000, where it stands at some 0.3 percent of the nominal value. Since MSMEs generally hold lower-value receivables in their portfolios, the current fee has the effect of significantly increasing the cost of selling accounts receivable for these businesses.

Intervention by the assignee in an enforcement proceeding initiated by the assignor may have a wealth of positive effects, since the assignor has already paid the initial costs of enforcement and the assignee enters the proceeding at a later stage. The assignee has thus avoided the risk associated with opening an enforcement case by skipping the most critical stage of the proceedings where the motion to enforce may be rejected and where the debtor may object. Moreover, the debtor also stands to benefit from an intervention as opposed to initiation: (1) since the proceeding has already begun, it will be shorter and, as such, more efficient from the standpoint of the assignee; (2) if information on the assets of the enforcement debtor has been obtained; (3) if enforcement is already in progress; and (4) if key enforcement actions have already been taken that usually require more time, such as a scheduled sale of real estate or movable items.


Bankruptcy proceedings

Bankruptcy proceedings, in which all creditors collectively seek to recover their claims from a debtor, are overly complex and differ greatly from other options available to the assignee. The stages of bankruptcy relevant for assignment of receivables are: (1) opening a bankruptcy proceeding; (2) filing claims; (3) intervening in a bankruptcy proceeding; (4) management and decision-making in bankruptcy; and (5) position of the assignee in pre-packaged plans of reorganisation (‘PPRs’).

To open a bankruptcy proceeding, the assignee is not required to meet any formal requirements different from those applicable to other creditors. Similarly to civil cases, in its motion to open the bankruptcy proceeding the assignee must submit evidence to prove its standing in the case. Opening bankruptcies is somewhat of an issue given the lack of interest on the part of MSMEs to do so, as their claims are generally small and they lack priority in collection from the debtor’s assets, which ultimately means they may not even be able to cover the procedural costs from any funds recovered.

The applicant faces fairly straightforward requirements for filing a claim; it is enough for it to provide evidence, in the filing, to prove its standing as creditor. Moreover, the bankruptcy debtor will often have been made aware of the assignment before the bankruptcy is opened and may have even made the necessary changes to its accounting records that are available to the insolvency office holder (‘bankruptcy administrator’). There are strict time limits, however, for filing claims. Before and during assignment negotiations, therefore, the assignee would do well to determine whether the receivables are owed by debtors in bankruptcy. If this is indeed the case, the assignee should file a claim in bankruptcy in due time after the receivable has been assigned. Notices of open bankruptcy proceedings published in the Official Gazette include time limits for filing claims, so assignees have access to information about the status of claims in bankruptcies.

Admitted and contested claims in bankruptcy proceedings may be assigned after the final list of claims has been determined, but in this case the signatures of the assignor and assignee must be notarised pursuant to law governing notarisation of signatures, manuscripts, and transcripts, and the bankruptcy debtor must be notified in writing of the assignment (Art. 117a BL). An assignee is also entitled to seek correction of the final list of claims. Similarly to enforcement, the assignor and assignee must notarise the assignment contract. Nevertheless, multiple variations are possible depending on the stage of the bankruptcy proceeding at which the assignment takes place, as shown in Table 9 below.


Table 9.  Formal requirements at various stages of bankruptcy proceedings

Time of assignment Intervention Control Form List of admitted and contested claims / PPR
Before bankruptcy is opened Assignee files on its own behalf and is entitled to file motion to open bankruptcy proceeding if other requirements are met. Assignee has complete control over content of claim. Filing of claim Assignee is initially named in list.
After claim is filed by assignor, and before expiry of time limit for filing claims Assignee files on its own behalf but seeks to be awarded rights arising from claim filed by assignor. Assignee has complete control over content of claim. Filing of claim Assignee is initially named in list.
After expiry of time limit for filing claims Pursuant to application for intervention in bankruptcy and amendment of list of admitted and contested claims (possible only if assignor has filed in due time). Assignee is awarded assignor’s rights arising from claim as filed by assignor. Contract on assignment of claim with certified signatures List of admitted and contested claims is amended.
Before filing of motion to open bankruptcy pursuant to PPR Applicant submits PPR and indicates assignee as creditor. Assignee has full control in terms of voting for PPR and other rights regarding adoption of PPR. No specific form envisaged Assignee is initially named in list.
After filing of motion to open bankruptcy pursuant to PPR Pursuant to motion by assignee, applicant amends PPR, substituting assignee for assignor as creditor. Assignee has full control in terms of voting for PPR and other rights regarding adoption of PPR. Motion by assignee to amend list and be included in voting class PPR is amended.
After finality of procedural decision confirming PPR approved by creditors Notice of assignment to debtor. Assignee is substituted for assignor and enjoys rights with regard to claim as indicated in PPR. No intervention in bankruptcy proceeding takes place as proceeding has ended. No specific form envisaged Payments envisaged by PPR are made to assignee according to PPR rules with no formal substitution of creditor.


Issues can arise with the practical interpretation of Article 117a BL when it comes to assignment of claims in bankruptcy. This provision stipulates that only ‘admitted and contested claims’ may be assigned, which can be construed to mean that no transaction can take place until the insolvency office holder has examined the claim (and either admitted or contested it). This interpretation would mean that the creditor is prevented from freely disposing of its claim, a highly controversial position. This section of the law should, therefore, either be deleted or clarified.

As with enforcement, the assignment contract must be notarised for the assignee to intervene in bankruptcy. The problem here is even more pronounced as claims in bankruptcy are non-performing receivables, and, if the assigned receivable is not secured by collateral, likelihood of recovery is relatively low. This issue is mitigated to some extent by the sheer number of situations in which notarisation is not a prerequisite for intervention.

According to the Bankruptcy Supervision Agency (BSA), the average recovery rate in bankruptcies ending in compulsory liquidation is some 4 percent. Even though this rate may seem very low, it is close to levels seen in comparable insolvency systems.

Where the assignor has failed to file a claim in due time (where the preclusive filing period has ended), recovery of the assigned claim may not be sought in bankruptcy proceedings (Art. 111 BL), so the assignee has no option for intervening in a bankruptcy proceeding, which may raise the issue of assignment guarantees. As such, before entering into an assignment contract, the (potential) assignee should ascertain whether the assignor has filed a claim in bankruptcy in due time. This information can be found in the Conclusion on Admitted and Contested Claims for the relevant case, published on the BSA web site, as well as on the Court Case Tracker web site. The assignee may also seek proof that the claim has been filed from the assignor (such as a filing of claim with the court’s incoming registration stamp or proof of the claim having been mailed to the court).

Where a bankruptcy is opened pursuant to a PPR, intervention in the case (or award of rights arising from a final PPR) is much easier. Each PPR must include a clause whereby the claim of a creditor not covered by the PPR are to be paid under the same conditions as claims of other creditors of the same class. As such, even where the assignee has failed to intervene in a case opened under a PPR, the assignee remains authorised to receive payment pursuant to the PPR in lieu of the assignor, based on general rules. The assignee is also entitled to move to open a bankruptcy proceeding where (1) an approved PPR is not complied with; or (2) the PPR has been approved illegally or fraudulently (Art. 173 BL). Since the PPR is also an enforceable title, the only situation in which the assignee could not initiate enforcement proceedings on those grounds is if the assignee is not named in the PPR (Art. 147 BL), or if the claim has not been transferred pursuant to a contract bearing duly notarised signatures in accordance with the rules of enforcement proceedings outlined above.



Judicial efficiency is highly significant for the assignee, as the assignee shares the assignor’s pre-assignment position with regard to initiating and pursuing enforced collection proceedings. A strategic priority of the Judicial Development Strategy, 2020-2025, is to continue enhancing the efficiency of the legal system. Major results have been achieved in recent years in terms of reducing case backlog, especially in enforcement proceedings, as well as reducing court workload by broadening the remits of notaries and enforcement officers.

As of mid-2020, 1,593,185 cases remained outstanding, meaning that 63,460 cases have been resolved since late 2019, including in enforcement proceedings, notwithstanding the period of inactivity during the Covid-19 lockdown. The first half of 2020 saw a decline in outstanding cases in commercial and basic courts, mainly due to the application of the 2019 amendments to the LES and the reduction in enforcement cases. At the beginning of 2020, commercial courts had 10,332 enforcement cases in progress, of which 1,089 remained outstanding in mid-2020. The percentage of ‘old’ bankruptcy cases (outstanding for between 3 and 10 years) stood at 57.15 percent in the first half of 2020.

One objective set in the draft Judicial Development Strategy is to address enforcement and bankruptcy cases by: (1) improving performance of enforcement officers; (2) improving in-court enforcement; and (3) improving court performance with the aim of enhancing the business environment and reducing the number of bankruptcy cases.  Continued improvement to the efficiency of Serbia’s judiciary, in particular enforcement and bankruptcy proceedings, is highly significant for promoting the market for trade in receivables, since assignees should have at their disposal efficient options for enforcement of any receivables assigned.



[1] The expressions ’sale’ and ’assignment’ will be used interchangeably throughout, except where otherwise noted. In addition, for convenience, the expression ‘assignment’ will be construed to mean ‘assignment for consideration’, except where otherwise noted.

[2] This paper will look to a much lesser extent at payment periods in transactions between entities in the public and the private sector (‘public authorities to business’, or ‘PA2B’).

[3] Regulation on enforcement of the Law on Periods of Payment of Monetary Obligations in Commercial Transactions between the public sector and business entities where public sector entities are debtors and between public sector entities, and on the submission of and access to information on commitments undertaken by the public sector for purposes of such enforcement (Official Gazette of the Republic of Serbia, Nos. 88/2015 and 16/2018). Enforcement of this law is also governed by the Regulation on enforcement of the Law on Periods of Payment of Monetary Obligations in Commercial Transactions between business entities (Official Gazette of the Republic of Serbia, No. 54/2016).

[4] Law on Tax Procedure and Tax Administration (Official Gazette of the Republic of Serbia, Nos. 80/2002, 84/2002 – Corrigendum, 23/2003 – Corrigendum., 70/2003, 55/2004, 61/2005, 85/2005 – Other Law, 62/2006 – Other Law, 63/2006 – Other Law, Corrigendum, 61/2007, 20/2009, 72/2009 – Other Law, 53/2010, 101/2011, 2/2012 – Corrigendum, 93/2012, 47/2013, 108/2013, 68/2014, 105/2014, 91/2015 – Authentic Interpretation, 112/2015, 15/2016, 108/2016, 30/2018, 95/2018, and 86/2019), referred to as ‘LTPTA’ throughout.

[5] Ministry of Finance of the Republic of Serbia – Tax Administration, 2015. Tax Administration Transformation Programme, 2015-2020, referred to as ‘Transformation Programme’ throughout.

[6] Ministry of Finance of the Republic of Serbia – Tax Administration, 2017. Action Plan for the Tax Administration Transformation Programme, 2018-2023, referred to as ‘Transformation Action Plan’ throughout.

[7] Ibid, 11.

[8] Opinion of the Ministry of Finance and Economy No. 011-00-00509/2013-16(1) of 24 May 2013.

[9] Radović, M. 2013. Novi pravni režim rokova izmirenja novčanih obaveza iz trgovinskih ugovora. Pravo i privreda, 7–9, 252-254.

[10] See ibid. For a detailed discussion and comparison of the Serbian late payment framework with Directive 2011/7/EU and a comparison of the environment instituted by the Late Payment Law with previous rules of the LCT and the General Customary Practices for Trade in Goods.

[11] Ibid.

[12] Intrum Iustitia, 2017. European Payment Report, p. 40. Available at http://www.intrum.com/media/2634/epr2017.pdf.

[13] Branko Radulović, „Direktiva o restrukturiranju i nesolventnosti: sve će to zakoni pozlatiti“, in: Vuk Radović (ur.), Usklađivanje poslovnog prava Srbije sa pravom Evropske unije (2019), Univerzitet u Beogradu – Pravni fakultet, 2019, pp. 58-80.

[14] Tešić, N. 2012. Prodaja i prenos potraživanja, Pravni fakultet, Univerzitet u Beogradu, 81.

[15] Ibid, 25.

[16] Bankruptcy Law (Official Gazette of the Republic of Serbia, Nos. 104/2009, 99/2011 – Other Law, 71/2012 – Constitutional Court Ruling, 83/2014, 113/2017, 44/2018, and 95/2018), referred to as ‘BL’ throughout.

[17] Factoring Law (Official Gazette of the Republic of Serbia, Nos. 62/2013 and 30/2018), referred to as ‘FL’ throughout.

[18] Law on Bills of Exchange (Official Gazette of the Federal People’s Republic of Yugoslavia, No. 104/46; Official Gazette of the Socialist Federal Republic of Yugoslavia, Nos. 16/65, 54/70, and 57/89; Official Gazette of the Federal Republic of Yugoslavia, No. 46/96; and Official Gazette of Serbia and Montenegro No. 1/2003 – Constitutional Charter), referred to as ‘LBE’ throughout.

[19] Law on the Serbian Export Credit and Insurance Agency (Official Gazette of the Republic of Serbia, Nos 61/2005 and 88/2010).

[20] Decision of the National Bank of Serbia (’NBS’) on enforced collection by debiting of clients’ bank accounts (Official Gazette of the Republic of Serbia, Nos. 14/2014, 76/2016, and 8/2020).

[21] Law on Bills of Exchange Official Gazette of the Federal People’s Republic of Yugoslavia, No. 104/46; Official Gazette of the Socialist Federal Republic of Yugoslavia, Nos. 16/65, 54/70, and 57/89; Official Gazette of the Federal Republic of Yugoslavia, No. 46/96; and Official Gazette of Serbia and Montenegro No. 1/2003 – Constitutional Charter), referred to as ‘LBE’ throughout.

[22] Intrum Iustitia. 2018. European Payment Report, 7. Available at intrum.com/media/3762/european-payment-report-2018.pdf.

[23] Article1, Law Amending the Civil Procedure Law (Official Gazette of the Republic of Serbia, No. 87/2018).

[24] See Article 23 of the previous iteration of the Law on Enforcement and Security (Official Gazette of the Republic of Serbia, Nos 31/2011, 99/2011 – Other Law, 109/2013 – Constitutional Court Ruling, 55/2014, and 139/2014).