The Capital Market Commission has adopted a new Corporate Governance Code (a document aimed at enhancing transparency, accountability, and high ethical standards in the operations of companies on the Montenegrin capital market), marking one of the final steps towards closing Negotiation Chapter 6 – Company Law. The Code will be implemented in Montenegro from 1 January 2026 and will apply to 40 companies.
The Code and the strengthening of the Commission’s administrative capacities were the two objectives of the Twinning Light project worth €150,000, which the institution carried out with the support of the European Union and the Croatian Financial Services Supervisory Agency (HANFA).
The President of the Capital Market Commission, Željko Drinčić, explains that the project lasted nine months, and the Commission also spent that time preparing the documentation: “The project for Montenegro means strengthening investor confidence and harmonization with EU rules, as well as improving the institutional independence of the Commission,” concludes Drinčić.
The new Code, which replaces the 2009 version, states that it is intended for joint-stock companies with boards of directors, headquartered in Montenegro, whose shares with voting rights are listed on the Montenegro Stock Exchange, but also for anyone who wishes to voluntarily apply it. The board of directors is chosen because it is the most commonly applied governance model.
The Code has five chapters, each containing principles, recommendations, and guidelines, and for a company to comply with it, it must adhere to applicable regulations and market rules.
The first reporting of compliance with the Code begins for the financial year starting 1 January 2025. The implementation of the Code is based on the “apply or explain” principle. This principle allows companies to deviate from the Code’s recommendations if alternative approaches achieve the same purpose, providing detailed explanations for the deviation. If a recommendation or guideline is not applied, the company must explain in detail in the compliance questionnaire the reasons for non-implementation and describe the deviation.
The Code also states that companies must annually complete and submit two questionnaires to the Commission, which prescribes them. The Commission will publish an annual report on corporate governance of companies applying the Code, while reporting on corporate governance practices will begin only after EU accession.
Among the governance recommendations, it is stated that boards of directors must have an odd number of members, mostly non-executive directors, with the majority being independent. Neither the chairperson of the board nor the CEO may be the same person, and the guidelines indicate that board chairs must be of professional reputation and integrity.
The board of directors is required to ensure that members of the less represented gender make up at least 40% of all non-executive directors or one-third of all director positions, including executive and non-executive roles. The chairperson of the board must ensure that all members receive initial training for their role upon appointment, as well as continuous training and education. The board must establish nomination, remuneration, and audit committees. Each of these committees must have at least three members, mostly independent, with the chair being an independent non-executive director.
Source: ND Vijesti
Photo: Capital Market Commission