|
Company Law
Company law plays a crucial role in market economies by providing the legal environment for the formation and operation of businesses. Company law encourages entrepreneurship by setting limits on the liability of investors. Specifically, owners or shareholders are normally at risk only to the extent that they have invested in a company, rather than having their personal assets at risk to satisfy the debts and other obligations of the business.
The purpose of company law also is to set forth basic principles of corporate governance – that is, the rules that outline the division of roles and responsibilities between company management, boards of directors and supervisory boards, investors or shareholders, employees, and outside stakeholders. Corporate governance entails disclosure and transparency requirements regarding the type of information that companies must report to their investors and, in many cases, to the public. Good corporate governance practices provide proper incentives for company boards and management to pursue objectives that are in the interests of the company and shareholders and should facilitate effective monitoring, thereby encouraging firms to use resources more efficiently.
As detailed in this chapter, although the existing company law in Kosovo is sound for the time-being, an updated version that reflects modern, market-oriented principles – including an improved foundation for corporate governance – should be given urgent priority. The draft law that was rejected by the Assembly in 2004 was a backward-looking non-starter. In addition, significant work needs to be done with respect to advising growing businesses about the advantages of limited liability – most companies in Kosovo, even large ones, are currently registered as personal business enterprises and are therefore missing out on certain advantages of incorporation. Also, there is a strong need in Kosovo to help incorporated enterprises implement the principles of sound corporate governance.
|
