Director of an LLC in BiH: Rights, Legal Obligations, and Liabilities Under the Law

Rights and Powers of an LLC Director

The director is the legal representative of the company registered in the court registry and possesses key operational rights:

• Representation of the Company: Independent or collective signing of contracts, representation before banks, courts, and inspection authorities.

• Business Management: Making daily business and operational decisions, approving procurement, and managing assets within the limits set by the Articles of Association.

• HR / Personnel Powers: Executing employment contracts, hiring, assigning, and terminating employees.

• Right to Remuneration: Contracting salary through an employment agreement or compensation through a Management Agreement (contract on the rights and duties of a director).

Labor-Law Status: Director as an Employee vs. Non-Employee

In the Federation of BiH and Republika Srpska, a director can be engaged under two models:

1. Director with Employment Status: A standard employment relationship is established with full-time hours, an employment contract, regular registration with the Tax Administration, payment of salary, and contribution payments.

2. Director under a Management Agreement (Non-Employee): Applied when the individual is already employed full-time elsewhere or for foreign nationals under specific conditions, subject to obligatory taxes and contributions on the management fee.

Key Statutory Duties and Responsibilities of a Director

A director is obligated to act with the care of a prudent businessman and in the best interest of the company:

• Legality of Cash and Non-Cash Transactions:

  • The director is directly liable for the purposeful expenditure of company funds.

  • Strict application of the cash payment limit up to 200 BAM according to the Regulation on Cash Payments, adoption of the Decision on Petty Cash Maximum, and prohibition of paying dividends/profits in cash.

• Tax Obligations and Deadlines:

  • Timely submission of monthly VAT returns by the 10th of each month.

  • Submission of annual financial statements and tax returns.

  • Regular calculation and payment of salaries, taxes, and contributions for employees.

• Bookkeeping and Archiving:

  • Ensuring business records are maintained according to valid accounting standards (IFRS) by engaging a qualified and licensed accountant.

  • Retaining authentic accounting documentation within prescribed legal deadlines.

• Duty to Act in Case of Insolvency (Bankruptcy Law):

  • If the company becomes insolvent, the director has a legal duty to propose the initiation of bankruptcy proceedings within the prescribed timeframe. Delaying this step incurs direct personal liability for newly created debts toward creditors.

When is a Director Personally Liable with Their Own Assets?

Although an LLC is primarily liable for its obligations only up to its corporate capital, a director may be held personally liable with their own private assets in the following cases:

• Piercing the Corporate Veil: Misusing the company for personal gain, diverting company funds for personal needs without legal basis, or concealing actual assets.

• Damages / Indemnification: Intentionally or through gross negligence causing damage to the company or third parties (e.g., signing harmful contracts without shareholder approval).

• Misdemeanor Liability: Almost every regulation in BiH prescribes dual fines—a fine for the legal entity (the LLC) and a fine for the responsible person (the director), which is forcibly collected from their personal bank account.

How to Ensure Peaceful Operations with the "All Under One Roof" Concept

The directorial function requires a solid foundation in administrative and legal processes. Agencija Poslovnost d.o.o. Sarajevo, through an integrated approach in collaboration with attorneys, auditors, IT and software firms, and authorized fiscalization providers, protects the director and the company from regulatory non-compliance:

• Accounting and Bookkeeping Services: Up-to-date record keeping, preparation and review of balance sheets, cash flow control, and tax deadline compliance.

• Tax Advisory: Tax optimization, safe profit distribution, and legal structuring of management agreements.

• Legal Services and Attorneys: Drafting internal rules, decisions on petty cash maximums, alignment of management agreements, and representation before regulatory authorities.

Focus on the strategic development of your company and leave operational and regulatory security to experts.

Contact us for a free initial consultation or visit us in Sarajevo. Hand over the administration to professionals!

🏢Agencija Poslovnost d.o.o.
📧info@poslovnost.ba
📞033/246-421
📍Kotromanića 48, Sarajevo