Legal and tax toolbox

Companies can be established by domestic and foreign, natural and legal entities. The legal entity can outlive its founders.

In order to perform business activities, the regulation of North Macedonia also provides legal grounds for individuals to register as sole proprietors, instead of registering a company.

Trade companies can be incorporated in the following forms:

• General partnership - a trade company where two or more natural persons and legal entities join together, and who are liable to the creditors regarding the company's obligations unlimitedly and jointly with their entire asset;
• Limited partnership - a trade company where two or more natural persons or legal entities are joined, and at least one partner is personally liable for the obligations of the company with his/her entire assets, i.e. unlimitedly and jointly if there are two partners (i.e. “General partners”), and at least one partner is liable for the obligations of the company only up to the entered contribution of the company (i. e. “Limited partners”);
• Limited liability company - a separate legal entity having at least one (1) and up to fifty (50) shareholders which participate with one contribution each in the company’s pre-determined basic capital. The liabilities of such a company cannot be transferred to the shareholders unless in exceptional circumstances (e.g. if a shareholder illegally disposes of the property of the company as if it was his or her own property);
• Joint-stock company - a trade company in which the stockholders participate with contributions in the basic capital that is divided in stocks and they are not liable for the obligations of the joint-stock company. It can have one or more stockholders; and
• Limited partnership with stocks - a trade company in which the basic capital is divided into stocks, where one or more partners are jointly and severally liable with their entire assets for the company’s liabilities (i.e. “General partners”) and few partners having the status of stockholders and who are liable up to the amount of their contributions and who are not liable for the company’s liabilities (i. e. “Limited partners”). The number of the Limited partners cannot be less than three.

Foreign companies that do not intend to establish a company but want to carry out business activities in North Macedonia have an option to open a branch office. Foreign companies that intend to carry out market research and other similar activities, which do not include commercial activities, could also establish a representative office in North Macedonia. Both branch offices and representative offices are considered as a functional unit of their founder and do not have the status of a separate legal entity.

General and limited partnerships are not that common in North Macedonia due to the unlimited liability of shareholders for the debts of the company. Establishment of a joint stock company is also rare in cases when this type of company is not a precondition for operation in a specific business (e.g. banking and finance sector) considering that the incorporation procedure for a joint stock company is rather complex and time-consuming and requires minimum share capital in the amount of approx. EUR 25,000 or EUR 50,000 (depending whether the company will be established by issuing a public notice for share subscription or not).

The most common type of companies established in North Macedonia is a limited liability company (LLC).

Incorporation requirements

Incorporation requirements differ from the type of company or other corporate presence which is being registered. All documents should be provided in original and should not be older than three months at the moment of submission to the Central Registry of the Republic of North Macedonia (“Central Registry”). Founders are not required to pay any administrative fees at the Central Registry when establishing a company in North Macedonia. Establishment of branch offices and representative offices is subject to low administrative fees, which do not exceed EUR 40.

Companies are established by adoption of adequate articles of association, i.e. Memorandum of Association at LLCs, or Statute at joint stock companies. Articles of association have different compulsory elements depending from the type of entity being registered, including but not limited to determine the company’s name, registered address, prevailing business activity, management, division of loss and profit etc. Branch offices and representation offices are established by adoption of a decision by the foreign founder. Note that the registration of the companies, branch offices and representation offices at the Central Registry has a constitutive effect, and entities are considered as established only after the Central Registry issues the Certificate of Incorporation.

Registration agents – Since the beginning of 2014, the procedure for registration of a new company, branch office or representative office in North Macedonia is carried out by appointed registration agents via the electronic system administered by the Central Registry. The list of authorised registration agents is published on Central Registry’s web site. Authorized accountants and attorneys at law may qualify to act as registration agents. The latest amendments of the relevant law provide that if natural persons fulfil certain conditions, they can submit registration applications through the system for e-registration of the Central Registry, without the assistance of registration agents.

The law prescribes that the required time for incorporation in most cases is up to five business days from the date of submitting of the complete appropriate documentation.

Opening of a non-resident bank account is a pre-condition for establishment of a representative office in North Macedonia. Regarding companies and branch offices, the choice of bank should only be determined during the incorporation procedure, while the activation of the bank account is carried out only after the Central Registry completes the registration of the entity.

In addition, post-registration procedures take approximately a maximum of two weeks. These post- registration procedures include:

• The opening of a bank account;
• VAT registration (if applicable);
• Registration of a foreign direct investment, in cases when the founders of a company or branch office are foreign natural or legal persons. Registration of a foreign direct investment in companies could be carried out only after the payment of the share capital.

Capital requirements

The share capital of an LLC may consist of monetary or contributions that are deemed as being "in kind" such as equipment, goods, know-how etc. The minimal value of the basic share capital should be at least EUR 5,000 in MKD counter value. Furthermore, the amount of the share capital has to be expressed in a round number divisible by 100. The monetary share of the share capital does not have to be paid in prior to the registration; rather, it has to be paid in within one year after the registration of the company in the Central Registry.

Minimal value of the basic share capital at a joint stock company should be in amount of EUR 25,000 in cases of establishment without public notice for subscription of shares, and EUR 50,000 in cases of establishment with public notice for subscription of shares. Nominal value of one share cannot drop beyond EUR 1. Joint stock companies which have specific authorizations or carry out particular business activities (e.g. business, insurance and finance sector) have higher thresholds for their basic share capital. Stocks are issued, transferred and kept in a form of an electronic record in the Central Securities Depositary of the Republic of North Macedonia. The stocks are unlimitedly transferable and free to be traded with at the secondary securities market. Each stock must have a nominal amount at which the stock is registered.

Contributions in capital of a general partnership may consist in different amounts in the form of cash, belongings, rights, as well as labour and services. Contribution in labour and services are not allowed in other forms of companies.

There are no capital requirements for the establishment of a branch office or a representative office. The branch office would constitute a permanent establishment for taxation matters.

Management requirements

General partnership - Each partner is authorized to manage the general partnership, unless the partners appoint one or several partners as manager. The same applies to the representation of the company towards third persons.

Limited partnership - The General partners participate with at least one-fifth of the total amount of the contributions and are obliged to personally participate in the operation of the limited partnership and manage it, whereas the Limited partners do not have the right of management. Also, the Limited partner cannot represent the limited partnership.

LLC - Corporate governance can be organised as either (i) one-tier or (ii) two-tier system:

• In one- tier system, besides the shareholders’ meeting, a company has one or more directors (not forming any separate corporate body, such as board of directors), all of which are presumed to act as executives, in charge of the day to day running of the business of the company.
• In two-tier system, besides the shareholders meeting, there is a supervisory board as a separate supervisory and controlling body and one or more directors (executives). The supervisory board consists of at least three members, appointed by the shareholders’ meeting. The supervisory board appoints and controls the work of director(s) who are in charge of running the daily business of the company and are considered as executives.

Joint stock companies - The management of the company can be organized either as (i) one-tier system (board of directors) or (ii) two-tier system (management board or manager and supervisory board).

• In one- tier system, the board of directors manages the joint-stock company and it consists of at least three, and 15 members at the most.
• In two-tier system, the management board manages the company and it between 3 – 11 members. The members of the board jointly represent the company. The supervisory board has between 3 - 11 members and it supervises the management board.

Stockholders under equal conditions, have equal status in the company. Each stockholder registered in the stockholders list has, from the day of entry, the right to participate in the operations of the assembly and the right to vote. Unless the statute determines a greater majority, the assembly can operate (operation quorum), if verified participants holding at least majority of the total number of the voting stocks are present at the session. The decisions of the assembly are adopted with majority of the voting stocks represented at the assembly, unless otherwise provided by law or the statute.

Limited partnership with stocks- The contributions of the General partners cannot be less than 10% of the basic capital. In proportion to their participation in the basic capital, the General partners have a right to vote at the assembly of the limited partnership with stocks. They also manage the company.

The assembly of the limited partnership with stocks elects members of a supervisory board, composed of at least three stockholders. A stockholder from among the General partners cannot be elected in the supervisory board. The General partners cannot participate in the election of the members of the supervisory board.

Branch office of a foreign company – A branch office could have one or several managers, with limited or unlimited authorization appointed by the decision on establishment of a branch office and registered at the Central Registry.

Representative office - A representative office could have one or several authorized representatives, with limited or unlimited authorization appointed by the decision on establishment of representative office and registered at the Central Registry.

Permitted activities

Companies and branch offices of foreign companies have an obligation to determine and register a prevailing business activity from the National Classification of Business Activities upon their establishment. However, other than their prevailing activity, a company and a branch office are generally free to perform all other business activities which do not require a specific license. Certain activities can be performed only upon prior consent, license, approval or other act of a state body or other competent authority (e.g. construction, insurance, and health-care). The general partnership can perform a business activity related to a certain profession only if there is a person with the appropriate qualification between the partners or the employees.

Representative offices are prohibited to perform commercial activities. Their activities should be limited to market research, carrying out preliminary and preparatory activities for conclusion of contracts between the founder and its clients, promotional and information activities, as well as self-representation.