Montenegro is moving towards revising its shareholder voting regulations in response to governance deadlocks observed at several significant companies, which have revealed a broader risk for investors. The current system allows minority shareholders to effectively obstruct crucial corporate decisions simply by choosing not to participate in votes.
The Economy Ministry is currently awaiting feedback from the European Commission regarding proposed changes to the Law on Business Organisations. These amendments aim to alter the method of calculating the required two-thirds majority for changes to company statutes.
Presently, amendments necessitate support from two-thirds of all voting shares, including those held by shareholders who do not take part in the voting process. The proposed adjustment would require a two-thirds majority of only the votes cast, contingent upon shareholders present, represented, or voting remotely exceeding 50% of total voting capital.
This reform could significantly impact companies such as Barska plovidba, Budvanska rivijera, and Port of Adria, where fragmented ownership and low levels of shareholder engagement complicate governance, restructuring, and compliance decisions.
At Barska plovidba, attempts to approve a new statute have repeatedly failed despite a simple majority of participants. In one instance, shareholders representing approximately 62.4% of the company’s capital were present, yet the proposal did not meet the existing threshold.
The implications for Montenegro’s capital market extend beyond procedural concerns. Companies unable to secure approval for fundamental governance changes face increased execution risks that deter strategic investors, lenders, and potential acquirers. Essential decisions regarding board structures, recapitalization, asset sales, or partnerships may become protracted and unpredictable.
This uncertainty can adversely affect asset valuations. A strategic investor contemplating a stake in a Montenegrin firm may devalue an asset if control over capital does not ensure reliable influence over corporate actions.
This concern is particularly pertinent for firms where the state holds a substantial share alongside institutional and dispersed minority investors. For instance, Budvanska rivijera and Barska plovidba exemplify assets whose long-term worth is contingent on shareholders’ ability to implement necessary changes in governance or attract investment when needed.
The situation is similar for port infrastructure projects. At Port of Adria, shareholder approval for corporate modifications is critical for future investments and financing arrangements within a sector reliant on infrastructure concessions and long-term financial commitments.
The proposed regulatory reform aims to preserve minority rights concerning meeting notifications, voting, appointing representatives, and contesting decisions while preventing non-participation from acting as an automatic veto when shareholders representing over half of the voting capital are involved.
This change is significant as Montenegro seeks to enhance its investment environment and align its corporate law with European Union standards. While robust protections for minority shareholders can attract foreign investment, overly complex rules governing essential corporate decisions may deter potential investors due to heightened transaction risks.
The upcoming opinion from the European Commission will be closely monitored as it pertains not only to legal alignment related to EU accession but also as an indicator of Montenegro’s approach to balancing shareholder rights with investment appeal.
The core issue for the market remains clear: if an investor acquires a majority stake yet cannot reliably amend a company’s statute or governance due to absent shareholders counting against the required threshold, that majority stake diminishes in value.
Montenegro’s proposed legislative amendment represents an effort to eliminate this valuation discount without compromising genuine protections for minority shareholders.
