Bosnian Law: Insights on Corporate Law and Civil Procedure in Bosnia and Herzegovina
Discover the nuances of corporate liability under the Federation of Bosnia and Herzegovina Company Act. Learn how shareholders may be held accountable for company debts if engaged in activities like using the company for personal goals, managing assets as their own, committing fraud, or causing harm to creditors. Bosnian legal counsel emphasizes that courts have yet to extend liability to shareholders, providing clarity on the scope of corporate responsibility.
I. Piercing the Corporate Veil
Bosnian Law – According to the provisions of the Federation of Bosnia and Herzegovina Company Act, a company in Bosnia is generally held responsible for its liabilities, with shareholders exempted from direct responsibility. However, shareholders can be held liable if they engage in activities such as using the company for personal goals conflicting with the company’s objectives, managing company assets as their own, committing fraud, causing harm to creditors, or causing losses for personal gain.
Bosnian legal counsel asserts that, to date, courts have not extended liability for a company’s debts to its shareholders. In essence, the legal advice emphasizes that liability does not ascend ‘up the corporate ladder’ to involve legal entities and individuals.
II. Bosnian Law – Service of Process in Bosnia & Bosnian Courts’ Jurisdiction
In cases against corporate defendants, the manner of service of process varies for Bosnian and foreign entities. Bosnian entities are served directly at their registered address, following domestic law. Foreign entities, however, are served in accordance with the Hague Convention on the Service Abroad of Judicial and Extra-Judicial Documents in Civil and Commercial Matters.
Before serving process on a foreign defendant, Bosnian courts must establish jurisdiction based on the facts alleged in the complaint. In civil matters, Bosnian courts exercise jurisdiction based on territoriality, with jurisdiction over corporate defendants in Bosnia if they are incorporated, have a business seat, or own property there.
While Bosnian courts may exercise jurisdiction over co-defendants in certain circumstances, Bosnian legal counsel suggests that the likelihood of Upstream Entities constituting material co-litigants is slim. The legal theory for potential co-litigants is not the same, as liabilities may arise from different legal bases.
Bosnian law allows defendants to challenge jurisdiction through a special or conditional appearance. Foreign defendants must raise their challenge within 30 days of being served, with the opportunity to repeat it during a preliminary hearing. If the court rejects the jurisdictional claim, the case proceeds to the merits, as Bosnian law does not permit interlocutory appeals for jurisdictional challenges. Jurisdictional arguments may be raised again on appeal after the trial court decides on the merits.