In the third part of our guide we review what is the Macedonian approach to the Joint Stock Company (JSC).
The joint stock company is one of the cornerstones of modern capitalism. This company form is usually used for larger business undertakings that require pooling of significant amounts of capital from various investors. In the local regulation of the JSC we can notice the mixed influence of the German and US traditions of corporate governance.
I. Key characteristics
The Joint Stock Company (JSC) is the second most commonly used company form in the Republic of North Macedonia. The Law on Companies has borrowed elements from both the German Aktiengesellschaft (AG) and the US joint stock company (JSC). The Joint Stock Company (in Macedonian: Акционерско Друштво) in the Republic of North Macedonia is usually recognized through the AD acronym included in the company name.
What makes the JSC attractive for investors is the fact that it is useful for pooling significant amounts of capital from various investors. In addition, the shares of the JSC are much more easily tradable, than those of other company forms. As such, the JSC is the only company form whose shares can be traded on the stock exchange.
As in the case of the LLC the shareholders cannot be held liable for the obligations and actions of the JSC. In comparison to the LLC, the disadvantage of the JSC is that it is more complicated and expensive to establish and manage a JSC, while its key advantage over the LLC is the simple regime for share trading – both listed and unlisted JSCs.
II. Establishment & sharecapital
There are two type of establishment procedures of a JSC – simultaneous and successive. On the one hand, when the JSC is established simultaneously the founders sign the statute and take over the shares without a public offer. On the other hand, when the JSC is established successively, the founders first adopt the statute, underwrite a certain number of shares, and then issue a public offer for additional share purchase.
The minimal share capital of a JSC is EUR 25.000,00 when the JSC is established simultaneously or EUR 50.000,00 when the JSC is established successively.
III. Shareholders & Shares
The JSC can be established and owned by any number of natural persons or legal entities, such as individuals, companies, corporations, associations etc. The number of shareholders is not limited and there are no restrictions of ownership by foreign investors. As a matter of fact, foreign ownership is strongly encouraged by the local regulation, as foreign shareholders in local companies receive beneficial treatment in terms of residence procedures, tax benefits and investor protection.
Shareholders rights are represented by shares in the JSC. The shares that give the same rights constitute the same types of shares. According to the rights, the shares may be equity shares or preference shares. Preference shares may be of several classes and may not be issued with a lower nominal amount than the nominal amount of the ordinary shares. Preference shares of the same class give the same rights. The nominal amount of one share may not be less than EUR 1. The JSC may at any time issue new shares with a two third majority of its shareholders present at a shareholder’s assembly.
The shares may be transferred to third parties without any limits and if the JSC is listed shares may be trader freely on the stock exchange. The major stock exchange in the country is the Macedonian Stock Exchange. Its activity is regulated with the Law on securities, while issues such as initial public offering (IPO) and trading is regulated with the Listing Rules of the Macedonian Stock Exchange. Finally, even if a JSC is established and registered in the state, its shares may also be listed on foreign stock exchanges.
IV. Corporate Governance
The main decision-making body of a JSC is the Shareholder’s Assembly. The Assembly has a working majority if the session is attended by participants who jointly own at least a majority of the total number of voting shares, unless otherwise provided in the statute. Most of the decisions of the Assembly are made by a majority of the represented voting shares, however for some decisions the law prescribes qualified majorities. Example of such a decision is the one for increasing the share capital of the JSC, which requires 2/3 majority.
The management of a JSC can be organized in either a one-tier system or a two-tier system. The shareholders are free to choose between the two systems. In addition, shareholders may choose at any time to swap systems.
The one-tier system is where we see the US influence on the Law of companies. In the one-tier system, the JSC has a board of directors, with anything between 3 and 15 board members. The members of the board may be either executive or non-executive members. It is important to note that the number of executive members must always me less than the number of non-executive members. The shareholders elect the board members, but the president of the board is elected by the board members. Only a non-executive member can be elected as president. The decision-making quorum of the board is fulfilled if at least half of all its members are present, whereby the number of present non-executive members must be greater that the number of present executive members.
In the two-tier system we see the influence of the German AG on the local companies’ regulation. Under this system, the JSC is managed by a management board, while the supervision is entrusted to a supervisory board. The management board may have a minimum of 3 and a maximum of 11 members. The board elects a president and may make decision if at least half of its members are present at the board meeting. However, the JSC may be managed by one managing director instead, under the condition that its share capital is lower than EUR 150.000,00.
Regardless of the company is run by a management board or a managing director, they are all chosen by the supervisory board. The supervisory board also has anything between 3 and 11 members. Its members are elected by the shareholders meeting, while the president of the supervisory board is elected by its members with a majority vote. The supervisory board may hold sessions and make decision if at least half of all its members is present at the meeting.
The shareholders assembly may recall any or all board members in both the one-tier and two-tier systems even before the expiry of their mandates. In the two-tier system, the supervisory board may at any time recall any or all members of the management board or the managing director, while in the one-tier system the board of directors may recall an executive member.
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