Foreign owners of Montenegrin companies tend to discover the size classification in one of two ways. Either the accountant mentions, in March, that the statements now have to be audited and the engagement should have been signed by the end of October. Or a buyer's adviser asks for three years of audited accounts and there are none.
Both problems come from the same place: a single self-assessment that the company is required to make, record in a formal decision, and disclose in the notes — and which most owners have never been shown.
On 31 July 2025 Montenegro passed a new Accounting Act and a new Audit Act on the same day, in the same issue of the Official Gazette. One sets the size. The other attaches the consequences.
Sources, checked on 20 September 2026: Zakon o računovodstvu, "Sl. list CG" 084/25 of 31 July 2025, registarski broj 1096, shown as in force — Articles 7, 8 and 42, read from the consolidated text published by the Central Bank of Montenegro. Zakon o reviziji, "Sl. list CG" 084/25 of 31 July 2025 — Articles 1, 2, 5, 35, 36 and 37, from the same source. This page states Montenegrin law. Whether your home jurisdiction requires an audit of the same entity is a separate question for counsel there.
The four sizes, and how the test works
Article 7 of the Accounting Act classifies legal persons as micro, small, medium or large, on criteria measured on the last day of the business year preceding the one for which the annual statements are drawn up. Three criteria: average number of employees during the year, total annual revenue, and total assets.
| Category | Employees | Annual revenue | Total assets |
|---|---|---|---|
| Micro — not exceeding two of three | up to 10 | up to €900,000 | up to €450,000 |
| Small — not exceeding two of three | up to 50 | up to €10,000,000 | up to €5,000,000 |
| Medium — not micro or small, not exceeding two of three | up to 250 | up to €50,000,000 | up to €25,000,000 |
| Large | exceeds two of the three medium criteria |
Four details in the same article change the answer more often than the numbers do.
- You classify yourself, on the day the financial statements are drawn up, and the result is used for the following business year.
- A newly established company classifies on the current year's data and the number of months it has operated, and that result serves the current and the next year.
- The average number of employees is the total headcount at the end of each month — including employees abroad — divided by the number of months in the business year.
- A company must adopt a formal Decision on classification and disclose it in the notes to the annual statements.
And the switch rule: where, on the balance sheet date, the thresholds for two of the three criteria are exceeded in two consecutive financial years, the company must reclassify itself for the following business year. One good year does not move you; two do.
Article 8 runs a parallel classification for groups — small, medium or large — on the same kind of criteria measured across the group.
Who has to be audited
Article 35 of the Audit Act is the operative list. A statutory audit is mandatory for:
- public interest entities;
- medium legal persons;
- parent companies which, together with their subsidiaries, meet the conditions for a medium group;
- parent companies which, together with their subsidiaries, meet the conditions for a large group;
- investment firms;
- investment funds;
- investment fund management companies;
- voluntary pension funds;
- management companies of voluntary investment funds;
- other collective investment schemes.
And Article 35(2) defines the public interest entities: issuers of securities and other financial instruments traded on an organised market; credit and other financial institutions; insurance companies; legal persons classified as large under the Accounting Act; and companies whose founder or majority owner is the state or a local self-government unit and which are classified as large or medium.
Read the two limbs together and the line falls in a simple place:
- micro and small — no statutory audit;
- medium — audited, by Article 35(1)(2);
- large — audited, because a large legal person is a public interest entity under Article 35(2)(4).
Article 35(3) adds that a statutory audit of consolidated statements is mandatory for parent companies that prepare them, and Article 35(4) confirms that the classification is done under the Accounting Act — the two statutes are one mechanism.
Two deadlines that are easy to miss
31 October. Article 36 of the Audit Act requires the audited entity to conclude the engagement contract with the audit firm no later than 31 October of the business year the audit relates to, on the basis of a decision of the assembly or another competent body designated by the entity's own general act. For a consolidated audit the deadline may be extended to 30 November.
That is a deadline inside the year being audited, not after it. A company that crosses a threshold and only notices in the spring has already missed it.
31 March. Article 42 of the Accounting Act requires financial statements, the management report and other reports to be filed with the Tax Administration, in writing and electronically, by 31 March for the previous year. Consolidated statements and the corporate tax information report go by 31 May. On a status change, bankruptcy or voluntary liquidation, statements must be filed within 90 days from the day preceding that event — the provision that catches owners closing a company down, as dormant company liquidation sets out.
Article 42(7) lightens the load at the bottom: micro and small legal persons file a balance sheet, an income statement, simplified notes and the statistical annex.
And then it is published
Article 42(6) is one sentence and it is the one with consequences beyond compliance:
The Tax Administration is obliged to publish the reports of legal persons on its website.
Your financial statements are not a private filing. They are a public document, published by the state, indexed and searchable — which is why a counterparty's accounts are a first-order diligence source in Montenegro rather than something you have to ask for. The wider set of registry checks is in share deal diligence and the company search page.
It also means the absence of filings is itself a finding. Two consecutive years without them is a compulsory liquidation trigger under the Companies Act.
The rotation rule, for anyone who has had the same auditor for years
Article 35(5) of the Audit Act requires audit firms and licensed auditors to replace the signing auditor or key audit partner at the latest in every seventh year from the start of auditing that legal person's statements, unless a special law provides otherwise. Article 35(6) then imposes a cooling-off: that auditor or key partner may audit the same legal person again only after three years from the date of signing the last audit report.
It is the partner who rotates, not necessarily the firm.
Article 37 adds the form: the audit engagement must be in writing, and a separate contract must be concluded for each engagement of the audit firm.
What this changes for a foreign owner
Three practical consequences.
- The classification is an action, not a status. Article 7 requires a Decision on classification and disclosure in the notes. A company that has never adopted one has a gap that shows up precisely when a buyer or a bank looks.
- Growth has a lead time. Crossing into medium in two consecutive years means an audit for the following year — and an engagement letter signed by 31 October of that following year. Plan the auditor before the accounts, not after.
- Employees abroad count. The average-headcount formula includes them, which matters for a Montenegrin holding company with staff in other countries.
Where the company is being brought into line with the 2026 companies legislation at the same time, the harmonisation sequence is covered in company law harmonisation and AML; the tax filing layer sits alongside it in the tax and accounting guide.
What this page does not decide
Whether a particular revenue figure falls inside the threshold is an accounting question, not a legal one, and the criteria are measured on the preceding year's closing position. Nor does this page cover the internal audit function and audit committee duties that Article 35's public interest entities carry, the auditor's independence rules, or the content of the audit report. The penalty provisions of both acts are outside it as well.
Who we act for
We act for one side and we say which. On a transaction the buyer's and the seller's interest in the audit history are opposed, and we do not hold both. Fees are fixed and published, and a first consultation is charged and credited against the engagement if it proceeds.
Before the year closes
Send the last two years of statements, the headcount by month including any staff abroad, and the company's general act naming the body competent to choose the auditor. We come back with a written note: which category Article 7 puts you in for next year, whether Article 35 makes an audit mandatory, when the Article 36 engagement has to be signed, and what the classification decision in your notes should actually say.
