Category: North Macedonia

The Company Law in the Republic of North Macedonia has finally introduced a simplified limited liability company.

With the amendment of the Company law published in the Official Gazette no. 215, published on 16.09.2021, among other changes, a new form of Trade Company was introduced, as follows: simplified limited liability company. According to the law, the short designation of this type of Company will be PDOO.

Thus, according to the legal amendment, it is if three founders who are natural persons and have only one manager, can establish a simplified limited liability company.

Based on this, the possibility for establishing a PDOO is not given in conditions when one or more of the founders are legal entities, or there is a need for more than one manager to be appointed in the Company. In addition, this opportunity is given to no more than three founders who are natural persons.

PDOO finds its advantage in the difference of the minimum amount of share capital that has to be paid by the founders. Namely, according to the above-mentioned legal amendment, the minimum amount of the share capital of the simplified limited liability company is 1 euro. On an individual basis, the minimum nominal amount of the business share is 10 cents. The law emphasizes that the share capital and the business share in the company must be expressed in whole numbers in euros. As a measurement date, the founders can also agree on the day of signing the founding act of the company.

It should also be borne in mind that the stakes for the taken-over business shares are paid only in cash.

In addition, unlike the established form of a Limited Liability Company, which provides the opportunity for payment within one year, in PDOO the application for registration of the company in the trade register is submitted only after the deposits for the taken business shares in the company are fully paid.

However, PDOO brings with it an additional obligation related to the mandatory reserve. Namely, according to the Company Law, such a company must have a mandatory reserve, in which ¼ (one quarter) of the company’s profit expressed in the annual financial statements, reduced by the amount of the loss from the previous year, must be entered. The required reserve can be used for 1) increase of the share capital by the distribution of the reserve in the share capital of the company; 2) to cover the loss stated for the year for which the annual financial statements are submitted, if it is not covered by the profit realized in the previous year and 3) to cover the loss expressed for the previous year if it is not covered by the profit expressed in the annual financial statements for the year for which they are submitted.

Regarding the shares and the right deriving from them, the Law stipulates that in this type of company every amount of 10 cents in denar counter value as a nominal amount of the business share, give the right to one vote until the share capital of the company increases.

The manager is obliged to enter in the book of business shares in the registration of each change of the size of the share, the number of votes arising from that share in the meeting of partners, for which at the request of the partner in the company, he will issue a certificate.

It should be added the option to incorporate the company in North Macedonia with EUR 5.000 basic capital, which can be paid within one year, as a standard type of Limited Liability Company remains unchanged. 

By Vedran Lalicic, Partner, and Martin Boskoski, Partner, Lalicic & Boskoski Law Office

Data controllers and data processors had until 24 August 2021 to align with the new Law on Personal Data Protection in North Macedonia (“Law”), which introduced the GDPR in the local legislation at the beginning of 2020. Non-compliance with the new obligations for personal data protection can lead to severe penalties, such as fines of up to 2% and up to 4% of the total annual turnover from the previous financial year, per misdemeanor.

However, according to the latest announcements by the Ministry of Justice, in the next six months the Agency for Personal Data Protection (“Agency”) will assist the companies in the implementation of the new rules through education and corrective measures, rather than directly issue any fines. In case any non-compliance is detected, the Agency will allow the company to rectify the irregularity within a certain deadline. The Agency has already prepared and published to its website a set of guidelines for proper implementation of the Law and is open for communication with all relevant parties regarding the obligations under the Law.

Companies should use this informal six months holiday from the implementation of the severe penalty policy and work on ensuring compliance with the personal data protection regulation. The process can be demanding so companies should address any non-compliance as promptly as possible.

The information in this document does not constitute legal advice on any particular matter and is provided for general informational purposes only.

By Veton Qoku, and Ljupka Noveska Andonova, Independent Attorneys at Law in cooperation with Karanovic & Partners

In August 2021, the Law on Financial Support of Investments (“Law”) in North Macedonia has undergone several amendments. Changes are focused on easing the conditions for application, affecting the balanced regional development, and speeding up the procedures for payment of the granted funds.

These amendments expand the types of financial support granted for technological development and research, offer support for investment projects of significant economic interest, and offer support for taking over companies that are facing difficulties and increasing the competition in the market.

They prescribe changes in the conditions for granting financial support for companies that have been investing during the COVID-19 pandemic with a transitional provision valid in 2021 for allowed revenue decline of up to 15% in 2020.

A change has been made in the scope of companies that will be able to conclude a contract by further adjusting the conditions in the area of ​​license holders, producers of excise goods, performers of public interest activities, dedicated production, etc.

Another important amendment is the regulation of balanced regional development, where companies implementing investment projects in the less developed planning regions will receive additional financial support. The additional assistance will be calculated as a percentage difference between the region with the highest value of GDP per capita and the value of GDP per capita of the region in which the investment is realized.

In order to improve the liquidity of companies, from 2022, the principle of payment in two tranches will be introduced (the first tranche in the amount of 50% of the approved amount for financial support, and the second tranche will be paid additionally, during the current year).

The information in this document does not constitute legal advice on any particular matter and is provided for general informational purposes only.

By Veton Qoku, and Ljupka Noveska Andonova, Independent Attorneys at Law in cooperation with Karanovic & Partners

During the summer, the Assembly in North Macedonia adopted relevant amendments to the Labour Law concerning the conditions for retirement. According to the estimations by the proposers of the amendment, around 6000 employees from the public and the private sector already reached 64 years of age by the end of 2020.

Namely, with the amendment the employer is obliged to terminate the employee’s employment agreement once the employee reaches the age of 64, except where otherwise determined by law. According to the Prime Minister of North Macedonia, the amendment will allow certain flexibility, in particular the exception is related to fields which are staff deficient, i.e. health employees and employees in the education sector.

The latest amendment of the Labour Law removed the possibility to extend the validity of the employment contract above the age of 64 based on an employee’s statement which was previously possible. According to the latest amendment, all employees who have reached the age of 64 have to retire and no further extension of the employment will be possible. Although the amendment removes the possibility of extension of the employment, it does not change the position of the Law on Pension and Disability Insurance which enables female employees to opt for retirement at the age of 62. The employment of employees who have already been granted extension until the adoption of the latest amendment will remain valid until 30 June 2022.

These are not the only news regarding the labour regulation in North Macedonia. The initial draft of the newly proposed Labour Law is completed on behalf of the Ministry for Labour and Social Policy as it was announced by the Minister. The law is expected to enter the assembly procedure by the end of October or the beginning of November at the latest. Furthermore, the debates of the proposed law are expected to continue after the assembly’s collective holiday comes to an end. Among other issues, the new labour regulation is expected to further regulate paternity leave and extend the possibility for usage of maternity leave up to one year.

One of the most highlighted amendments of the new legislation is that Sunday is expected to be declared as a non-working day for all employees, aiming to improve the  balance between the professional and private life of all categories of employees.

The information in this document does not constitute legal advice on any particular matter and is provided for general informational purposes only.

By Veton Qoku, and Ljupka Noveska Andonova, Independent Attorneys at Law in cooperation with Karanovic & Partners

“Data Protection matters have kept us extremely busy this year,” Gjorgji Georgievski, ODI Law Partner in North Macedonia and Regional Head of TMT Group, reports, primarily as a result of the looming end of the transition period of the new data protection law in the country.

Georgievski explains that while a new GDPR-based data protection law was adopted in February 2020 in North Macedonia, it allowed for a transition period until the end of August 2021. “In the period following the adoption, we did try our best to launch a small public awareness campaign – basically telling the market what needs to be done in broad terms and announcing that we’re here to help – but the pandemic hit shortly after and no one was thinking about data protection anymore.” According to the ODI Partner, “in 2020, no one did anything, or very little, to ensure compliance. As the deadline was approaching, though, we saw increased interest in the issue at the beginning of the year across the board – both existing and new clients were reaching out as they were scrambling to ensure compliance.” And it makes sense that they did, according to Georgievski, since, in contrast to the old legislation that only included nominal fines, the new one stands to slap companies with penalties in the realm of 2-4% of their turnover.

“And the reality is that, once you make the jump into the area of data protection, things can get complex quickly,” Georgievski says, pointing to a car manufacturer they are working with for whom the ramifications are immense – from their head-up stores to the GPS user-profiles and other applications they are implementing as part of their offering.

And the deadline is unlikely to be moved. “While I personally believe an extension should be made when taking into account the pandemic, we have not seen any announcements from the Government in this regard as of yet,” Georgievski reports.

Looking into the future, the ODI Partner points to two elements that will likely influence the workload for the practice. First, he explains that “an interesting instance is that large tech companies that process personal data of Macedonian citizens on a large scale are not present in the country”. Based on the new law, they should be appointing a local Data Protection Officer to ensure compliance with the local data protection law. “Still, we have not heard of any such appointments just yet.” That, he said is quite “strange when you compare it to the situation of Serbia, where these companies have been busy appointing local representatives. Hence, we hope to be able to assist and be appointed for some of these companies as well for North Macedonia.” Second, “and this is the big question mark,” according to Georgievski, there isn’t a strong enforcement arm on the ground just yet, “which is a significant problem.” In his view, “if there are a few examples of the agency going to companies, if we start seeing some fines, we expect many who have been relaxed until now will realize they really need to address this.”

Ultimately, according to Georgievski, “data protection is here to stay, and we’re likely going to see it branch out into more and more aspects of our work.” The same way that, “all of a sudden, force majeure clauses were the thing to look out for in contracts,” he explains that “data protection will matter beyond just simple compliance. We’ll see it starting to play a role in M&A transactions as well, so I suspect our work in the practice will keep increasing – it only depends on enforcement for now as to how soon that will happen.”

With the enactment of the new Law on Personal Data Protection (“Law”) in 2020, North Macedonia largely harmonized its data protection legislation with the EU General Data Protection Regulation (GDPR).

Data controllers and data processors to which the Law applies must ensure compliance with the data protection requirements by 24 August 2021 at the latest. If not, they could face the new and severe penalty policy, which includes fines up to 2% and up to 4% of the total annual income of the legal entity from the previous financial year per misdemeanour, while for non-compliance with the provisions for video surveillance, controllers (legal entities) can be fined ranging between EUR 1,000 and EUR 10,000. The fines envisaged for natural persons – controllers or processors, or responsible persons within controllers or processors are smaller – around several hundreds of EUR.

There is no officially defined path that a company should take to comply with the Law. Data controllers should assess their current data protection system and identify the additional steps that need to be undertaken in a data protection compliance action plan. The steps can include adoption of all-new and/or amendment of existing internal data protection acts, implementing data protection by design and by default, keeping internal records of processing activities, carrying out an assessment of the impact of the envisaged processing operations on the protection of personal data etc.

With around 60 days left until the deadline for achieving compliance, it is recommendable that data controllers and data processors that have not initiated the compliance process yet, do so as soon as possible.

The information in this document does not constitute legal advice on any particular matter and is provided for general informational purposes only.

By Veton Qoku, Attorney at Law in cooperation with Karanovic & Partners

While relatively slow on certain fronts, the North Macedonian Government seems focused on economic growth according to Aleksandar Kchev, Partner at Bona Fide Law Firm, with the country’s IT industry and renewables sector seeing some notable movement. 

“Business in North Macedonia in many ways depends on the political atmosphere in the country and having a stable government, considering that the most substantial projects in areas such as infrastructure, sustainable energy, etc., need constant the follow-up from different authorities,” begins Kchev. “Considering the tight majority of seats in the Parliament, the Government seems to have many delays in adopting new, and changing current, legislation to facilitate and run its economic agenda, but also in adopting certain laws that could have sped up the process of immunization of citizens against COVID-19.”

Kchev says that now, with the pandemic weakening, the Government plans to focus on economic growth and development, mainly via public and private investments in sectors such as energy, environment, waste management, public health, and the like. “The economy will also be influenced by what the Government does in lieu of aiding businesses, especially with pandemic shell-shock being present.” 

Turning to legislative updates, Kchev reports that “several changes have been adopted in terms of environmental law and waste treatment law that straightened the legal framework to be considered by anyone entering a process of licensing and that, in general, will provide clearer interpretations for any future foreign investors.” At the same time, he says that the government has adopted special legislation that allows for obtaining North Macedonian citizenship quickly via an investment program. “This is a program with which the Fund for Innovation and Technology Development determines the economic interest for citizenship. It makes foreigners that have invested capital in the amount of at least EUR 200,000 in a private investment fund eligible to apply for citizenship.” 

Finally, turning more to the economic reality itself, Kchev says that the North Macedonian economy was in a ‘stand-by’ mode due to the pandemic. “However, a more aggressive approach was noticeable by companies coming from stronger economies within the broader region that entered into acquisitions of Macedonian companies, especially those placed within the IT industry,” he says. As an example, Kchev points Payten, belonging to Asseco South Eastern Europe acquiring Grouper, a local e-commerce startup.

However, Kchev underlines the sustainable energy sector as the one with “the most crucial developments planned with several projects to be completed or in their final stages. For example, Germany-based WPD struck a deal to construct a 400 megawatt wind power plan plant,” with Kchev also mentioning a procedure that has recently been completed for a 30 megawatt wind farm in Bogdanci – a project by Energo Systems Slovenia and Austria, worth EUR 50 million.

The year of 2020 was marked, in North Macedonia as elsewhere, by the COVID-19-induced economic crisis, which will obviously extend well into 2021. Despite the high hopes that the pandemic would be brought under control with mass vaccination programs, the North Macedonian economy’s return to pre-Covid status within the current year is highly unlikely.

COVID-19 imposed a unique reality on both the public and private sector, which hardly any government or company in the world, including those in North Macedonia, was prepared to embrace. Struggling to harness unemployment and maintain social stability, the North Macedonian Government deployed various state aid measures and incentives, while at the same time keeping a steady level of capital expenditure in the state budget in order to boost the Macedonian economy in the post-Covid period, with more than EUR 350 million in the state budget for 2021 allocated in capital investments. Under these conditions, the already stagnating Macedonian economy showed some movement in the Transport and Infrastructure sector (as well as in the Energy sector in the context of replacing old carbon-based with renewable energy sources).

According to official statistical data, the portfolio of ongoing infrastructure projects in North Macedonia includes the construction of 400 kilometers of country-wide infrastructure, including more than 50 kilometers of highway, 100 kilometers of express roads, and 20 kilometers of local roads. The construction of the Kicevo-Ohrid highway in the southwest part of the country, valued at over EUR 350 million, which started in 2014, is approaching its final phase. Construction is also ongoing on Corridor 8, which connects countries from the Adriatic Sea to the Black Sea and passes through North Macedonia. Along with the Corridor 8, the first part of the construction of a railway connection between North Macedonia and Bulgaria, which is projected for 2023, is already almost complete.

In Skopje, the capital of North Macedonia, citizens are waiting for the implementation of the bus rapid transit system. This project, which is expected to resolve transportation issues in the capital, was selected following a feasibility study in which various transport models were evaluated, including the possibility of a Skopje metro.

The main infrastructure project in the country is the gasification of North Macedonia – a project valued at EUR 350 million. The public announcement of the initiation of a public-private partnership for the financing, design, construction, management, maintenance, and development of the gas distribution network in North Macedonia was made in 2020. This project is designed to ensure an additional energy source for North Macedonia and reduce the cost of energy for Macedonian citizens, companies, and institutions, while at the same time increasing the competitiveness of the local economy and preserving a clean and healthy environment.

The gasification project in North Macedonia will be implemented in three phases, starting in the industrial area of Skopje and neighboring municipalities where the initial gas infrastructure is in place, and developing the gas network towards cross-border connections. The contract duration is set at 35 years. The subject of the contract includes the construction of a gas distribution network, investment in connections to the network for the final consumers, the development and maintenance of the gas distribution system, and investment in heating energy facilities and the adaptation of existing facilities for production of heating energy. This project is also expected to prompt other energy efficient projects along the gas network, such as gas turbines, cogeneration turbines that produce heating and electrical energy, and other energy production plants.

As far as the regulatory framework in North Macedonia for implementing transport and infrastructure projects is concerned, the Law on Concessions and Public-Private Partnerships of 2012 sets the grounds for concessions and public-private partnership contracts. While the model of concession is well established and has been implemented in a number of concession projects to date, the practice of public-private partnerships in the country is limited and yet to be developed.

We expect expansion in the Transport and Infrastructure sector in North Macedonia to continue in 2021 with the connection and integration of the Western Balkans into the EU, which is on the EU Accession Agenda for North Macedonia as well as for Albania. This trend of course depends on the normalization of the economy in the upcoming period and recovery in all types of transport and communications.

By Svetlin Adrianov, Associate Partner, and Jana Nikodinovska, Law Manager, EY Law North Macedonia

This Article was originally published in Issue 8.3 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

The Ministry of Agriculture, Forestry and Water Economy of North Macedonia (“Ministry”) recently pointed out that 577,662 ha are classified as arable land in North Macedonia, while 41% of this land is state-owned. It also noted that the current applicable Law on Sale of State – Owned Agricultural Land (“Law”) has many ambiguities and systemic weaknesses, which prevent its full implementation.

In order to rectify the deficiencies of the Law, the Ministry prepared a new draft Law on Sale of State – Owned Agricultural Land (“Draft Law”), which regulates the manner, procedure and conditions for sale of state-owned agricultural land. The Draft Law introduces several novelties compared to the current Law.

While the Draft Law, much like the current Law, prohibits foreign natural persons and legal entities to acquire state – owned agricultural land (apart from certain exceptions), the Draft Law will open the door for foreign natural persons and legal entities to acquire state – owned agricultural land indirectly through ownership of stocks or shares in a domestic legal entity, provided that the ownership is a result of the realisation of a strategic investment project approved under the Law on Strategic Investments of North Macedonia (“Investments Law”).

For a project to be considered as strategic, apart from meeting other criteria prescribed with the Investments Law, such investment must amount between at least EUR 30 million to at least EUR 100 million depending on the territory where it is realised. It should be noted that these amounts do not apply to projects realised within the framework of agreements between states, projects implemented and financed in cooperation with the European Union, Ministerial Council of the Energy Community and international financial institutions (where the holder of the investment is a Macedonian state body listed in the Investments Law).

Subject to certain exceptions, the acquired state – owned agricultural land under the Draft Law cannot be sold, given as a gift, exchanged, given under concession for geological research or exploitation of mineral resources, or converted into construction land for a period of at least ten years after the conclusion of the sale agreement.

The Draft Law envisages various procedures for sale of state – owned agricultural land, which include: (i) sale through public announcement; (ii) sale through public call; (iii) sale of technological unit through direct agreement; (iv) sale for consolidation of agricultural land through direct agreement; and (v) sale for strategic purposes through direct agreement.

Currently, the Draft Law is under public consultation, and should enter into parliamentary procedure in the following months. 

The information in this document does not constitute legal advice on any particular matter and is provided for general informational purposes only.

By Veton Qoku, Attorney at Law in cooperation with Karanovic & Partners

Karanovic & Partners has advised energy company Interenergo and investment firm Trigal on an investment of EUR 40 million for the construction of a 30 MW wind farm in Bogdanci, North Macedonia.

According to Karanovic & Partners, “Interenergo as holder of 51% [of the venture] and the chief technical developer will be responsible for the implementation of the project, which will include use of cutting-edge technology. The six wind turbines are expected to become operational by 2023 and to generate 72 GWh on an annual basis, enough to supply 18,000 households.”

Karanovic & Partners could not provide additional information on the deal.