Expert legal guidance for investors and entrepreneurs in Albania

Navigating Business Structures in Albania: A Legal Deep Dive (Sh.p.k, Sh.a.)

Lareda Zenunaj

4/10/20254 min read


1. Limited Liability Company (Sh.p.k): The Foundation for SMEs

  • Key Features: The Sh.p.k (Shoqëri me Përgjegjësi të Kufizuar) remains the de facto choice for small and medium-sized enterprises (SMEs) in Albania. It’s governed primarily by Law No. 9901/2008 “On Entrepreneurs and Companies,” as amended.

  • Liability: Offers limited liability protection, shielding personal assets from business debts and legal obligations. Shareholders are liable only to the extent of their capital contribution. Important Update: Recent amendments to the law have clarified the liability of administrators, emphasizing their fiduciary duty to the company and stakeholders.

  • Capital Requirements: The minimum share capital remains relatively low (currently 100 Lek, equivalent to less than €1), making it highly accessible for startups. However, practical advice: While the legal minimum is low, undercapitalization can hinder your business’s credibility with banks and suppliers.

  • Management: Can be managed by one or more administrators (known as Administrator or Administratorë). The Sh.p.k offers flexibility in organizational structure.

  • Legal Implications: Detailed discussion of Albanian law pertaining to the formation, operation, and dissolution of a Sh.p.k, including shareholder rights (outlined in the company’s statute), director duties (fiduciary duty, duty of care, duty of loyalty), reporting requirements (annual financial statements), and recent legal changes impacting beneficial ownership disclosure.

  • Practical Tip: Anti-Money Laundering regulations require all Albanian companies, including Sh.p.k’s, to disclose their beneficial owners to the National Business Center (NBC). Failure to comply can result in significant penalties.

  • When to Choose: Ideal for businesses with lower capital, limited risk appetite, and a desire for a straightforward legal framework. Particularly well-suited for service-based businesses, consulting firms, small retail operations, and online ventures.


2. Joint Stock Company (Sh.a): Scaling Up and Attracting Investment

  • Key Features: The Sh.a (Shoqëri Anonime) is designed for larger enterprises seeking to raise capital through the issuance of shares. It’s governed by the same Law No. 9901/2008, but with more stringent requirements.

  • Liability: Offers limited liability to shareholders, but with more complex governance requirements and greater regulatory scrutiny.

  • Capital Requirements: Higher minimum share capital requirements compared to the Sh.p.k (currently ALL 3.5 million (approximately €30,000) for privately held JSCs and ALL 10 million (approximately €85,000) for publicly traded JSCs.

  • Management: Requires a board of directors (known as Bordi i Drejtorëve), which is responsible for the strategic oversight and management of the company. Practical Consideration: Independent directors are increasingly recommended for Sh.a companies to improve corporate governance and attract international investment.

  • Legal Implications: Thorough analysis of Albanian legal regulations governing Sh.a companies, including shareholder rights (voting rights, dividend rights), board responsibilities (fiduciary duty, strategic decision-making), auditing requirements (mandatory annual audits by certified auditors), and Albanian securities regulations regarding the issuance of shares (governed by the Financial Supervisory Authority). Practical Tip: Before issuing shares, consult with a legal expert to ensure compliance with all applicable securities laws and regulations. Non-compliance can lead to severe penalties.

  • When to Choose: Suitable for businesses with significant capital needs, plans for expansion through public offerings (initial public offering, or IPO), and a sophisticated management structure. Often used for large-scale manufacturing, infrastructure projects, and financial institutions.


3. Branch Office: Expanding Your Existing Operations - Navigating Albanian Regulations

  • Key Features: A branch office allows an established foreign company to conduct business in Albania without creating a separate legal entity. It operates as an extension of the foreign company.

  • Liability: The foreign company retains full liability for the actions and obligations of the branch office. Crucial Consideration: Ensure adequate insurance coverage to protect against potential liabilities arising from the branch’s operations.

  • Registration Requirements: Requires registration with the Albanian authorities (National Business Center) and compliance with local regulations (including tax registration). Practical Update: The registration process requires certified translations of key documents from the foreign company.

  • Permanent Establishment (PE) Risk: Detailed discussion of the legal implications of establishing a branch office, including the potential creation of a permanent establishment and the associated tax liabilities. Remember to factor in VAT implications when registering. You may become eligible to pay VAT .

  • Legal Implications: Examination of the legal framework for establishing and operating a branch office, including registration procedures (outlined in Law No. 9723/2007), reporting requirements (financial statements), and compliance with Albanian labor and tax laws.

  • When to Choose: Suitable for foreign companies seeking to expand their presence in Albania while retaining full control and responsibility for their operations. Ideal for market testing, establishing a sales presence, or providing specific services.


Conclusion: Strategic Choice for Albanian Businesses

Understanding the nuances of Albanian business structures is paramount for a successful entry into the market. As of 2024, it’s even more important to stay updated on all legal changes since the Albanian law is under constant updates. Carefully evaluate your business needs, risk profile, and capital requirements to select the structure that best aligns with your long-term objectives. Consult with legal professionals familiar with the latest Albanian legal developments to ensure compliance with all applicable laws and regulations and to navigate the complexities of the Albanian business environment.

Disclaimer: This article provides general information for educational purposes only and does not constitute legal advice. Always consult with a qualified legal professional for advice tailored to your specific circumstances. We recommend verifying all legal updates with official government sources and seeking professional counsel before making any business decisions