The ordinary life of a foreign-owned Montenegrin company is full of transactions between the company and its owner. The owner lends it working capital instead of subscribing more equity. The owner's apartment becomes the registered office and the company pays rent for it. The parent charges a management fee, or an intra-group loan carries interest. A vehicle is bought from a relative. None of this is unusual and none of it is improper.
All of it sits inside a chapter of the Companies Act that requires written notice before the transaction, an approval by people who are not interested in it, and — where those steps are missed — exposes the transaction to annulment and the interested person to damages, alongside anyone who dealt with them knowing the position.
Article numbers below are from the Zakon o privrednim društvima, published in "Službeni list Crne Gore" br. 90/2025 and 121/2025, read on 5 September 2026. General information about Montenegrin law, not advice on a particular company or transaction.
Who the rules apply to
Article 44(1) lists the persons who owe special duties to the company, and the list reaches well beyond the boardroom:
- partners and general partners;
- members of a limited liability company holding a significant participation, or a controlling member;
- shareholders in the same positions;
- the director and the members of the board of directors, management board and supervisory board;
- persons who perform acts within the competence of those organs without having been appointed to the function — the de facto director;
- persons on whose orders and instructions those persons regularly act over a longer period — the shadow director;
- other representatives under Article 35, and prokuristi;
- the liquidator;
- the company's auditor.
Article 44(2) allows the founding act or the statute to add others.
The second entry is the one foreign owners tend not to expect. An owner who holds a significant participation is inside this regime personally, not merely as the person who appoints the director. Article 45(4) fixes significant participation at more than 20% of voting rights, and Article 45(5) fixes majority participation at more than 50%. Under Article 45(6), a person is a controlling member whenever they hold a majority participation alone or together with related persons.
Who counts as "related"
Article 45(1) defines related persons for a natural person, and the circle is wide: relatives in the direct line regardless of degree; relatives in the collateral line up to the third degree, and the spouses or partners of those relatives; the spouse, unmarried partner or same-sex life partner and their relatives up to the second degree; the adopter or adoptee and the adoptee's descendants; and other persons living in the same household.
Article 45(2) does the same for a legal person: entities in which it holds a significant participation; its subsidiaries; anyone holding a significant participation in it; its controlling member; sister companies under the direct or indirect control of the same third person; and the directors and board members of it or of any of those entities.
Article 45(3) defines control as the right to exercise decisive influence through participation or by contract, and Article 45(7) treats persons acting in concert, by express or tacit agreement, as acting together. The practical effect of Article 45(2) point 5 is that a transaction between two sister subsidiaries of the same parent is a related-party transaction on both sides.
What counts as a personal interest
Article 49(4) identifies three situations:
- the company concludes a transaction with the person or a person related to them;
- the company undertakes a legal act towards that person or a related person — the Act gives waiving a right and taking steps in court or other proceedings as examples;
- the company transacts with, or acts towards, a third party where that third party is in a financial relationship with the person or their related person, and it can be expected that the relationship influences the person's conduct.
Article 49(5) defines those financial relationships as debtor-creditor relationships and other relationships in which a connection of economic interests between the persons can be established.
The third limb catches structures rather than obvious deals: a supplier who is also the director's lender is inside the definition, though no group member is a party to the financing.
The notice, and its timing
Article 49(1) requires the person to notify the company of the existence of their own personal interest or of the interest of a person related to them.
Article 49(3) fixes the timing without qualification: the notice must be delivered to the company before the transaction is concluded or the act undertaken. There is no cure by later disclosure at this stage; a notice given afterwards is a notice that was not given in time.
Article 49(2) sets out what it must contain: the name or business name of the person; the nature of the relationship between the company and that person, with emphasis on the nature and scope of the personal interest; a detailed description of the transaction; its value; the date on which it is planned; and any other information needed to assess whether the transaction is fair and reasonable from the standpoint of the company and of the members who have no personal interest.
That last phrase sets the standard the approving organ applies: not whether the transaction is defensible in the abstract, but whether it is fair and reasonable seen from the position of those who are not on both sides of it.
Who approves it
Article 50(1) allocates approval to the disinterested. In a limited liability company and a joint stock company it is given by a majority of all members of the board of directors or the supervisory board who have no personal interest.
Article 50(2) provides the answer for the situation most small foreign-owned companies are actually in. Where all members of the board have a personal interest, or the number without one is insufficient for a quorum, the approval decision is taken by the general meeting — by a majority of the votes of the present members who have no personal interest.
A company with a single owner-director dealing with that owner will always be in Article 50(2). The approval therefore moves to the meeting, and Article 50(7) provides that in establishing the quorum, the total number of votes counted is the total of the members without a personal interest in the transaction.
Article 50(3) allows the founding act or statute to provide that approval is given exclusively by the general meeting, and Article 50(6) requires a board that gives approval itself to inform the general meeting of its reasons at the first following session, as a separate agenda item.
The rule that prevents slicing
Article 50(8) is the provision that decides whether the thresholds below can be managed around, and it does so plainly.
Several individual transactions or acts concluded or undertaken in a period of 12 months, or during the same financial year, between the company and a person with a personal interest are treated as one transaction for the purposes of the article.
A recurring monthly payment, a facility drawn in tranches, or a series of small purchases from the same related supplier is therefore measured in aggregate. The natural way to structure a shareholder loan or a related-party lease — in instalments — is exactly the arrangement Article 50(8) consolidates.
When approval is not required
Article 51(1) exempts six categories:
| Exemption | Article 51(1) |
|---|---|
| Value is at most 5% of the book value of the company's total assets in the last annual balance sheet | point 1 |
| The transaction falls within the ordinary conduct of the company's business and contains usual market terms — unless the founding act or statute provides otherwise | point 2 |
| The counterparty is a legal person in which the company holds all shares or holdings, directly or indirectly | point 3 |
| Subscription or purchase of holdings or shares under members' pre-emption rights | point 4 |
| The company's acquisition of its own holdings or shares in accordance with the Act | point 5 |
| Transactions offered to all members or shareholders on equal terms | point 6 |
Two of these deserve attention.
The 5% threshold in point 1 is measured against the last annual balance sheet, which means it is a figure that changes once a year and can be established in advance. Read with Article 50(8), it is a 5% test applied to twelve months of dealings with the same person, not to each invoice.
The ordinary course exemption in point 2 is not self-executing. Article 51(2) requires the board of directors or supervisory board to establish an internal procedure for periodically examining whether the conditions for the exemption are met, and Article 51(3) forbids the person with the personal interest from participating in that examination. A company relying on point 2 without that procedure is relying on an exemption whose own condition it has not satisfied.
Joint stock companies carry two further obligations. Under Article 50(4)–(5), where the value is at least 10% of total assets in the last annual balance sheet, the board must assess fairness from the standpoint of the disinterested shareholders and produce a report that reaches the approving organ before the decision. Article 52 requires publication of a notice by the day of the transaction, kept free to any interested person for five years — and Article 52(5) lets a d.o.o. adopt that obligation in its own statute.
What happens if the steps are skipped
Article 53(1) gives the company the right to sue for annulment of the concluded transaction or the act undertaken, and for damages from the person, where that person did not notify the company under Article 49.
Article 53(2) extends the liability, jointly and without limit, to two others: the related person, where it was a party to the transaction or the act was taken towards it; and the third party under Article 49(4) point 3, where that third party knew or ought to have known of the personal interest at the time.
Article 54 provides the defence. If in those proceedings it is established that the transaction was in the company's interest at the time it was concluded, or when the decision to conclude it was made, it is deemed that the disclosure rule was not breached.
Read together, Articles 53 and 54 describe a burden rather than a prohibition. The transaction is not automatically bad; but a person who did not disclose is defending its fairness after the fact, in litigation, instead of having it approved in advance.
The separate duty that approval does not automatically cure
Article 55 imposes a distinct obligation: persons under Article 44 must avoid their personal interest coming into conflict with the interest of the company. Article 55(2) forbids using, for their own interest or that of a related person, the company's property, information obtained in that capacity that is not publicly available, and opportunities to conclude business that arise for the company and are connected with its activities.
Article 55(3) removes the most common answer to a corporate-opportunity allegation: a conflict exists also where the company was not in a position to use that property, information or business itself.
Article 56(2) sets the remedy, and it is wider than damages. The company may claim compensation and the transfer to the company of the benefit which the person or their related person obtained, intentionally or by gross negligence, as a consequence of the breach.
Article 57 connects the two chapters: obtaining prior or subsequent approval under Article 50 means the conflict-avoidance duty is not breached — unless it is established that not all facts material to the approval decision were presented in the approval process. Approval given on a partial account is not approval.
Why this interacts with the duty of care
Article 46(1) requires the persons in Article 44(1) points 4 to 9 to act with the care of a good businessman, in the reasonable belief that they act in the best interest of the company as a whole — measured against a reasonably careful person with the necessary knowledge, skills and experience, with Article 46(3) raising the standard where the individual has specific expertise.
Article 47(1) then provides the business judgment rule: a person is deemed to have acted with due care in making a business decision where the decision was made on information they reasonably believed appropriate, and they reasonably believed it was in the company's best interest — and Article 47(2) removes liability for damage resulting from such decisions.
The first condition in Article 47(1) is the one to notice: the rule applies only where the matter is not a transaction in which that person has a personal interest. Personal interest does not merely add a procedure. It switches off the protection that otherwise stands between a director and a claim under Article 48 for breach of the duty of care.
The practical shape of this
For most foreign-owned Montenegrin companies, the whole chapter reduces to a short annual routine rather than a legal problem.
Identify, once, which arrangements are related-party transactions: shareholder loans and their interest, rent for premises owned by the owner or a family member, management or service fees to the parent or a sister company, and purchases from anyone in the Article 45 circle. Measure each against 5% of total assets in the last annual balance sheet, remembering the 12-month aggregation in Article 50(8). For anything above the line, put the Article 49(2) notice in writing before the transaction, and record the approval by the disinterested — which, in a single-owner company, means the general meeting under Article 50(2). If the company relies on the ordinary-course exemption, adopt the Article 51(2) internal review procedure and keep the interested person out of it.
None of these steps takes long when the arrangement is set up. All are hard to reconstruct two years later, when a buyer's due diligence asks.
If your Montenegrin company deals with you, your family or your group, our corporate law work covers the notices and approvals, and international tax covers the pricing side of the same arrangements.
