In the third part of our guide, we review 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 the pooling of significant amounts of capital from various investors. In the local regulation of the JSC, we can see 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 by the AD acronym included in the company name.
What makes the JSC attractive to investors is the fact that it is useful for pooling significant amounts of capital from various investors. In addition, shares in a JSC are much more easily tradable than ownership interests in other company forms. As such, the JSC is the only company form whose shares can be traded on a stock exchange.
As in the case of the LLC, shareholders cannot be held liable for the obligations and actions of the JSC. In comparison with the LLC, the disadvantage of the JSC is that it is more complicated and expensive to establish and manage, while its key advantage over the LLC is the simpler regime for trading shares, both in listed and unlisted JSCs.
II. Establishment & Share Capital
There are two types of procedures for establishing a JSC – simultaneous and successive.
When a JSC is established simultaneously, the founders sign the statute and subscribe for the shares without a public offering. On the other hand, when a JSC is established successively, the founders first adopt the statute, subscribe for a certain number of shares, and then issue a public offering for the subscription of additional shares.
The minimum share capital of a JSC is EUR 25,000 when the JSC is established simultaneously or EUR 50,000 when the JSC is established successively.
III. Shareholders & Shares
A 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 on ownership by foreign investors.
In fact, foreign ownership is encouraged by local regulations, and foreign shareholders in local companies may receive beneficial treatment in areas such as residence procedures, investment protection, and other benefits available under applicable law.
Shareholders’ rights are represented by shares in the JSC. Shares that confer the same rights constitute the same type of shares. According to the rights they confer, shares may be ordinary shares or preference shares.
Preference shares may be divided into several classes and may not be issued with a nominal value lower than the nominal value of ordinary shares. Preference shares of the same class confer the same rights. The nominal value of one share may not be less than EUR 1.
The JSC may issue new shares at any time with a two-thirds majority of the shareholders represented at the Shareholders’ Assembly.
Shares may be transferred to third parties without restriction, and, if the JSC is listed, its shares may be freely traded on the stock exchange. The principal stock exchange in the country is the Macedonian Stock Exchange. Its activities are regulated by the Law on Securities, while matters such as initial public offerings (IPOs) and trading are further regulated by the Listing Rules of the Macedonian Stock Exchange.
Finally, even if a JSC is established and registered in North Macedonia, its shares may also be listed on foreign stock exchanges.
IV. Corporate Governance
The main decision-making body of a JSC is the Shareholders’ Assembly. The Assembly has a quorum if the meeting is attended by shareholders who jointly hold at least a majority of the total number of voting shares, unless otherwise provided by the statute.
Most decisions of the Assembly are adopted by a majority of the represented voting shares. However, for certain decisions, the law prescribes qualified majorities. An example is a decision to increase the share capital of the JSC, which requires a two-thirds majority.
The management of a JSC can be organized under either a one-tier system or a two-tier system. The shareholders are free to choose between the two systems and may subsequently decide to change from one system to the other.
One-Tier System
The one-tier system is where we can see the US influence on the Law on Companies.
Under the one-tier system, the JSC has a Board of Directors, consisting of between 3 and 15 members. 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 be lower than the number of non-executive members.
The shareholders elect the Board members, while the President of the Board is elected by the Board members. Only a non-executive member may be elected as President. The decision-making quorum of the Board is met if at least half of all its members are present, provided that the number of non-executive members present is greater than the number of executive members present.
Two-Tier System
In the two-tier system, we can see the influence of the German AG on local company regulation. Under this system, the JSC is managed by a Management Board, while 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 decisions if at least half of its members are present at the Board meeting. However, the JSC may instead be managed by a single managing director, provided that its share capital is lower than EUR 150,000.
Regardless of whether the company is managed by a Management Board or a managing director, they are appointed by the Supervisory Board. The Supervisory Board also consists of between 3 and 11 members. Its members are elected by the Shareholders’ Assembly, while the President of the Supervisory Board is elected by its members by a majority vote. The Supervisory Board may hold meetings and make decisions if at least half of all its members are present.
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.
This Guide continues with additional articles on other company types. Read more about the details and characteristics of each company form on our blog.
For more information, you can also consult our articles on taxation, residence permits, and other business services, write to us at contact@boshnjakovski.com, or call us at +389 70 257 879.
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