The initiative to amend the Law on Business Companies, adopted by the Governing Board of the Union of Municipalities of Montenegro, has been submitted to the Ministry of Economic Development, in order to extend the deadline for harmonizing the organization and operations with its provisions until the end of September of this year, that is, until the adoption of a special law on the management of companies in state and municipal ownership, which is already in the draft stage.
The current deadline for compliance with the Law on Business Companies expires at the end of March, and local enterprises, due to their specific legal status in relation to other business companies, are not in a position to complete all prescribed obligations by that date. An even greater problem is the fact that the statutes of local enterprises cannot be harmonized with the new law without simultaneously causing a violation of the systemic Law on Local Self-Government, as well as other laws that apply to them, such as the Law on Financing Local Self-Government, the Law on State Property, the Law on Communal Activities, the Labour Law, the Law on Prevention of Corruption, and others. At the same time, harmonizing the statutes with the local self-government system automatically entails a violation of the provisions of the Law on Business Companies.
The way out of this situation, in the assessment of the Union of Municipalities, is precisely to postpone harmonization with the existing law until the adoption of the new law being prepared by the Ministry of Finance, which will recognize the specific characteristics of companies in state and municipal ownership and the necessity of regulating certain issues in a different manner compared to other business companies.
The initiative of the Union of Municipalities also sets out concrete examples of the impossibility for municipal enterprises to align their operations simultaneously with the Law on Business Companies and the other legal regulations applicable to them. If municipalities, for example, were to decide to have a board of directors, which they already have as a necessary operational body of the company, that board would appoint a director who would have a dual role — as director, and at the same time as a member of the board of directors, as prescribed by the Law on Business Companies. Such a solution is in direct conflict with the systemic Law on Local Self-Government, according to which the director, as the governing body of the municipal company, is appointed by the Municipal Assembly and not by the board of directors. In addition, his appointment must be preceded by the publication of a public competition, which the Municipal Assembly is obliged to conduct under the Labour Law. The solution under which the director is simultaneously a member of the board of directors is also in direct conflict with the Law on Prevention of Corruption.
If municipalities were to opt for the second governance model, i.e. only an assembly and a director, without a board of directors, this would mean granting enormous powers to the director, thereby directly endangering the public interest. The alternative would be to reduce those powers to a reasonable level, in which case they would be exercised directly by the Municipal Assembly, which, however, by its nature is not an operational body capable of making the necessary decisions efficiently and quickly. This could lead to various consequences for operations, and ultimately for municipal budgets.
In addition, for the Municipal Assembly to adopt the statute of a single-member LLC, terminate the mandates of the existing governing bodies in accordance with it, and appoint new ones — with a previously announced and conducted public competition for the director — that statute must first enter into force in accordance with the Constitution of Montenegro. This means that at least three Assembly sessions are required, that is, at least four months for all legal and procedural steps, which still do not eliminate the above-mentioned unacceptable violations of the law and the associated risks.
The solution proposed by the Union of Municipalities will provide the necessary time for the adoption of a special law through which the operations of municipal and state-owned companies will be harmonized in a lawful manner, thereby creating the conditions for the uninterrupted provision of their services, some of which constitute a basic human right.
