Corporate Governance in Kosovo

By Vigan Rogova – Legal expert

The corporate governance in Kosovo has had a gradual but genuine development since the post-war period. The development and improvement of the business environment and the legal infrastructure for enterprises is also reflected in the rankings of the World Bank project “Doing Business”. In the 2020 ranking, Kosovo is ranked 57th out of 190 countries in the world for the ease of doing business, while it is recognized as one of the Top 20 reformers.

The legal infrastructure has significantly improved in May 2018 with the entry into force of the new Law on Business Organizations, which has brought many new amendments in terms of corporate governance. Kosovo legislation recognizes five types of business entities of which only limited liability companies and joint stock companies have legal personality.

Corporate governance entails the internal system by which companies or corporations are governed and controlled. Sound governance ensures corporate transparency and consequently a strong and balanced economic development. At the same time, good corporate governance ensures that the interests and rights of corporate shareholders, whether majority or minority, are protected.

The central role of corporate governance in corporations is played by the Board of Directors. The board of directors as the sole responsible body for the governance and control of the company, are deemed necessary in joint stock companies. While according to the law on companies, in limited liability companies this body is optional. In the absence of a board of directors, the responsibilities are divided between the shareholders assembly and the director of the company.

The economic activity of the joint stock company is managed by the Board of Directors. The competencies of the board of directors include making decisions on all matters of the company, including the approval of the company’s strategic business plans, internal controls, auditing, risk management procedures, approval of annual reports, etc. Kosovo legislation has made significant progress in defining the obligations of board members for independence and loyalty to society.

One of the novelties of the new law on business organizations is the gradual introduction of the principle of gender equality in the membership of boards of directors. The implementation of the quota of ‘40% women’ onboard was foreseen to be implemented within the first six months from the entry into force of the law while, after two years, the mandatory quota is expected to be 50% women. This standard is equivalent to the Nordic countries.

In the coming years, an increase is expected in terms of the level of transparency in the publication of internal documents of companies in Kosovo. The Kosovo Business Registration Agency, which offers its services electronically, currently allows access to basic information on businesses in Kosovo, such as the amount of the company’s capital, the names of shareholders and senior officials, the ownership structure of the company, etc. Publication of internal documents such as company statute and internal regulations would increase the transparency of the company and corporate governance. A sound corporate governance of societies is the basis for their development and the economy in general.

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