MONTENEGRO Law and Practice Contributed by: Milan Keker, Aleksandra Bujkovic, Ivan Pejovic and Iva Rolovic, Keker, Bujkovic & Pejovic
• mortgage on real estate, as the primary form of security. This is the most common and legally rec - ognised method of securing a loan with real estate; and • pledge over movable property, shares or stakes in the company, bank accounts or monetary claims. 3.3 Restrictions on Granting Security Over Real Estate to Foreign Lenders In principle, there are no prohibitions on granting secu - rity over real estate in favour of foreign lenders, nor are there restrictions on making repayments to foreign lenders under a security document or loan agreement. This is permitted provided that the foreign lender does not engage in regulated banking or investment activi - ties in Montenegro without the required licence or authorisation. 3.4 Taxes or Fees Relating to the Granting and Enforcement of Security Taxes are not levied on the granting of security over real estate in Montenegro; however, certain admin - istrative costs apply. These include notary fees for notarising the mortgage agreement and registration fees for recording the mortgage with the real estate cadastre. If the documentation is in a foreign language, a certified translation into Montenegrin is required. No VAT or real estate transfer tax applies, as a mortgage does not involve a change of ownership. Enforcement may occur via out-of-court public auc - tion or judicial sale. Out-of-court sales are managed by a designated enforcer (eg, lawyer, public bailiff or real estate agent), who is entitled to a fee. Judicial sales incur court fees. Once the debt is repaid, the mortgage is deleted from the cadastre, with only nom - inal administrative fees for the deletion. 3.5 Legal Requirements Before an Entity Can Give Valid Security A company must have the proper corporate authority to grant security over its assets. This typically involves obtaining approval from the shareholders or the board of directors, depending on the company’s internal regulations and the value or nature of the transaction. Furthermore, the principle of corporate benefit is a key consideration. When a company provides security
– particularly to guarantee the obligations of a third party, such as a parent, subsidiary or shareholder – it must ensure that the transaction serves the corporate interest. The arrangement should align with the com - pany’s stated business purpose and must not com - promise its financial stability or the rights of its share - holders and creditors. Financial assistance restrictions must also be acknowledged; a company is prohibited from directly or indirectly providing financial support – including loans, guarantees, or other security – for the purpose of acquiring its own shares, unless all company members unanimously agree. If a company grants security shortly before entering insolvency, it may be challenged or invalidated as a preferential or fraudulent transaction under Montenegrin insolvency law, which provides for specific clawback periods. 3.6 Formalities When a Borrower Is in Default Upon a borrower’s default under a secured loan agreement, a lender may enforce its real estate secu - rity but must first comply with formalities prescribed under law. Typically, enforcement may proceed either judicially or extra-judicially, depending on the nature of the security agreement and the lender’s chosen course. In extra-judicial proceedings, the lender must file a notice of foreclosure with the real estate cadastre and provide the borrower with a minimum statutory cure period (usually 15 days). Should the borrower fail to cure the default, the lender may proceed with the sale of the encumbered property, subject to public noti - fication requirements and observance of procedural timeframes. In judicial enforcement, the process is generally more protracted, subject to court availability, evidentiary review, and potential appellate delay. Priority among competing creditors is governed strictly by the order of registration in the real estate cadastre – earlier reg - istered interests take precedence unless otherwise contractually subordinated. The duration of foreclosure proceedings can vary sig - nificantly based on several factors, including the com - plexity of the case, the responsiveness of the borrow - er, and the efficiency of the enforcement officer. While some cases may be resolved within a few months,
469 CHAMBERS.COM
Powered by FlippingBook