The Law on Sports prescribes that, for the purpose of conducting sports activities and sports-related operations, a sports organization may be established either in the form of an association (sports association) or in the form of a company (sports company). The establishment of sports organizations is primarily governed by the Law on Sports, while for all matters not regulated by the Law on Sports, the relevant provisions on associations or companies apply. 

We have written about the establishment of a sports association in this article: How to establish a sports association? 

Conditions for establishing a sports company 

Article 92 of the Law on Sports provides that a sports company may be established by natural and/or legal persons in the form of a limited liability company or a joint-stock company. A sports company may carry out sports activities and operations if it meets the requirements set out in Article 35 of the Law on Sports and if such activities and operations are carried out as the predominant activity of the sports company. 

Article 35 of the Law on Sports lists six conditions under which a sports organization (association or company) may conduct sports activities and operations, namely if it has enrolled or contractually engaged athletes; engaged sports professionals depending on the type of activity; has secured appropriate premises (sports facilities and equipment); has an appropriate internal organization and financial resources (if it participates in sports competitions); has ensured the safety of athletes and other participants in the conduct of sports activities and operations; and has an appropriate number of animals in sports in which animals participate. 

For sports companies, it is important to note that the Law on Sports stipulates that at least 70% of the net profit generated by the company in a given year must be reinvested into the sports operations of the company. 

The name of the sports company (the distinctive part of the business name by which the company is distinguished from other companies) must not be misleading regarding the branch or area of sports to which the sports company belongs. 

Which laws apply to sports companies? 

As already mentioned, the primary law is the Law on Sports. For all matters not regulated by the Law on Sports, the Law on Companies applies. 

The Law on Sports explicitly provides that, in the event of competition violations during the conduct of sports operations, the regulations governing competition protection shall apply accordingly, unless contrary to the very nature of sports activities and operations. 

Furthermore, in resolving disputes arising in connection with the conduct of sports activities and operations of the sports company with other participants in the sports system, the provisions of the Law on Sports regarding sports arbitration apply. 

When it comes to the engagement of athletes or sports professionals, in addition to the Law on Sports, the provisions of the Labor Law also apply. 

How can a sports company engage athletes and sports professionals? 

Article 92 of the Law on Sports stipulates that a sports company may engage or register athletes and sports professionals based on a concluded contract in accordance with Articles 10 and 31 of the Law. 

Article 10 distinguishes between a contract concluded between an amateur athlete and a sports organization and an employment contract between a professional athlete and a sports organization. If the athlete is an amateur receiving monetary compensation, this involves either a contract on sports engagement or a scholarship agreement for a minor athlete for sports development. This article also states that this constitutes work outside of an employment relationship. 

In the case of a professional athlete, an employment contract is concluded between the athlete and the sports organization. A minor athlete, upon the conclusion and execution of an employment contract with a sports organization, enjoys special protection prescribed by the law regulating the conditions for establishing an employment relationship and the work of persons under 18 years of age. 

If the contract is concluded contrary to the provisions of the Law on Sports, such a contract is null and void. 

With regard to sports professionals, Article 31 of the Law on Sports stipulates that a sports professional may conclude either an employment contract or a professional engagement contract (work outside of an employment relationship). An employment contract may be concluded for an indefinite period or a fixed term not exceeding five years. 

If the sports professional is a foreign national, in addition to the conditions prescribed by the Law on Sports, they must also meet the other regulations governing the employment of foreign nationals. 

Are there restrictions regarding stakes/shares? 

Since this concerns a sports company primarily governed by the Law on Sports, there are certain restrictions inherent to this form. 

The same person may not directly, indirectly, or through related parties (related parties are defined by the Law on Companies) own or hold stakes/shares in more than one sports company within the same level of competition. Within the same sports branch, they may hold stakes/shares representing no more than 5% of the base capital of a sports company in only one additional sports company. 

Furthermore, persons whose jobs and activities may directly influence competition in a particular branch of sport or level of competition (e.g., sports referees, sports intermediaries, sports coaches), as well as owners and employees of sports betting companies, may not directly, indirectly, or through related parties own stakes/shares. 

What happens if stakes/shares are acquired contrary to these provisions? 

If a person acquires stakes/shares contrary to the relevant provisions, they are obliged to dispose of the stakes/shares without delay; until this is done, they cannot exercise the rights arising from the acquired stakes/shares in any sports organization. Until the stakes/shares are disposed of, the rights arising from them are exercised by a trustee appointed by the competent national sports federation. 

There is another situation in which the stakes/shares must be transferred—if a person holding stakes/shares in a sports company is elected to a public office or to a function in a political party body, they must, within 30 days from the date of election/appointment, transfer their management rights based on stakes/shares to a legal or natural person who is not a related party; that person shall perform the rights in their own name and on behalf of the officeholder until the office ends. 

When can the word “club” be used in the name? 

Article 35 of the Law on Sports stipulates that a sports organization may not use the word “club” at the time of establishment. That word may be added only if the sports organization (association or company) participates in sports competitions within the framework of the competent national sports federation, based on a certificate issued by the federation. 

If the sports organization participates in sports competitions, its name must contain the name of the sport branch or discipline in which it competes before the word “club,” and if it participates in multiple sports branches or disciplines, it must contain the words “sports club.” 

Article 95 of the Law on Sports stipulates that legal and natural persons who do not participate in sports competitions within the framework of the competent national sports federation and whose predominant activity is the provision of expert services in sports (e.g., football schools, tennis schools, fitness centers, sports centers, camps) may perform sports activities only in the form of a company (or in an appropriate form of entrepreneurship) and may not have the words “club,” “association,” or “sports club” in their name.

Can the form of a sports organization be changed? 

Yes – pursuant to Article 71, paragraph 3 of the Law on Sports, a sports association may change its legal form into a sports company by adopting a decision on organization as a limited liability company and transferring founding rights to the unit of local self-government in whose territory it has its seat, with prior consent of that local self-government unit. 

The company, which is the legal successor of the association, assumes the assets, rights, and obligations of the sports association, as well as its employees. 

It is important to note that the company formed by the change of form is required to carry out the same sports activity and operations as the previous sports association. Prior to the decision to change form, the value of assets and capital must be determined through an assessment. 

On the day of registration of the sports company, the sports association is deleted from the Register. 

If you are interested in more texts in the field of sports law, you can read the expert article by the founder of the law office, attorney Lucija Vranešević Grbić, published in the journal Branič: Article published in the journal Branič – Advokat Lucija Vranešević Grbić Beograd 

Note: This text does not constitute legal advice and reflects the personal opinion of the author.