With the recent amendments to the Companies Law, legislators introduced the institute of convertible loans—an eagerly anticipated option for investors and startup companies in North Macedonia.

In 2022, through amendments to the Companies Law, lawmakers provided investors (third parties) with the ability to convert provided loans into shares. This conversion process involves increasing the company’s share capital by issuing new shares or, in other words, transforming the given loan into shares.

In this article, we will outline the procedure for augmenting the share capital by issuing new shares using convertible loans in a limited liability company.

Convertible loans

The process

The procedure for increasing the company’s share capital is governed by the Companies Law and is executed through the Trade Registry maintained by the Central Registry of North Macedonia.

A loan provided by a third party (investor) intending to convert it into shares must be paid in cash. The conversion of the loan into shares must be completed no later than the end of the third year from the signing of the loan agreement.

To implement this process, the Investor and the Company are required to undertake the following steps:

How can we help you in this process?

Tosic & Jevtic, attorneys and counselors-at-law, boast extensive experience and expertise in handling various procedures before the Trade Registry. Throughout our professional journey, we have successfully navigated numerous intricate procedures for trade company modifications, including the intricate process of augmenting company share capitals through the conversion of loans into shares.

Our esteemed Law Firm comprises seasoned lawyers ready to guide and support you throughout this process. With our wealth of experience, we assure efficient and effective assistance for our clients.

Conclusion

Prior to the recent amendments to the Companies Law, the conversion of loans into shares was limited to existing shareholders of the Company exclusively.

However, with the latest amendments to the law, this option has been extended to third parties investing in a company, providing them with the opportunity to convert their loans into shares of the Company.

This development presents a favorable option, particularly for startup companies in North Macedonia, as it allows them to attract investors by offering the conversion of loans as a form of security for the investment.

Convertible Loans

Ivana Jevtic Nikolova

Overview

Despite being a relatively small country, the Republic of North Macedonia has a significant history in the exploitation of mineral resources. In the past year 2022, data indicates that the top 5 mining companies alone generated a total revenue of nearly 270 million euros, with a net profit of around 68 million euros.

While there is an increasing demand for investments in green and non-polluting industries or renewable sources, the impact of the mining sector on the economy of the Republic of North Macedonia cannot be overlooked.

The mining sector positively influences the development of the Macedonian economy. Its contribution to the GDP is approximately 2%, and it constitutes about 3.2% of the country’s exports. The sector directly employs over 8,000 individuals, offering a higher average gross salary compared to other industries. Mining wages surpass those in agriculture, forestry, and fishing by 67.1%, in manufacturing by 58%, in construction by 42.8%, and in retail trade by 45.5%.

Mining activities are often concentrated in small towns where economic development and survival are closely tied to the economic activity of these mining companies. Besides being significant employers and tax contributors, large mining companies indirectly create at least three (3) times more jobs in industries serving as suppliers to these companies.

Compensations

According to the Law on Mineral Resources (Official Gazette of the Republic of North Macedonia no. 136/12, 25/13, 93/13, 44/14, 160/14, 129/15, 192/15, 39/16, 53/16, 120/16, 189/16, and Official Gazette of the Republic of North Macedonia no. 7/19, 99/22, 129/23, and 253/23, hereinafter referred to as the “Law on Mineral Resources”), the concessionaire conducting the exploitation of mineral resources is obligated to pay:

The amount of compensation is determined according to the Tariff for Determining the Amounts of Compensation for Issuing Permits and Concessions for Detailed Geological Exploration and Concessions for the Exploitation of Mineral Resources, which, for metallic minerals, amounts to 2% of their market value.

Additionally, in accordance with Article 76 of the Law on Mineral Resources, 78% of the concession compensation goes to the municipalities where the concession activity takes place, while only 22% goes to the state budget. This distribution stimulates local development, especially in small municipalities where these funds are crucial for growth and development.

Safety and Environmental Protection

Safety at work and environmental protection are prioritized in North Macedonia, a candidate country for EU membership. This has led to a significant reduction in workplace accidents and fatalities. The mining sector in North Macedonia currently does not rank among the top 5 industries in terms of injuries and accidents at work.

According to reports from the Macedonian Association for Workplace Injuries, in 2020 and 2021, there were only 9 (nine) reports of workplace related accidents in the entire mining sector, and  in 2022 only (four) 4 workplace related accidents making it one of the safest industries due to strict adherence to training, provision of protective equipment, and compliance with safety regulations.

Regarding environmental protection, one of the major challenges in the mining sector, the Ministry of Environment in North Macedonia regularly conducts strict controls. The requirement for A-integrated environmental permits for the operation of large mining companies ensures minimal or non-existent impact on the environment. In the last 10 (ten) years, there has been no example of significant environmental damage or pollution from any company engaged in the exploitation of metallic minerals, neither in soil nor water.

Summary

While the mining sector is often considered polluting and hazardous, with the proper application of new technologies and legal regulations that enforce strict safety and environmental protection standards, the sector can contribute to sustainable and environmentally friendly growth and development in the Macedonian economy.

Our law firm has actively participated in the most significant deals in the mining sector and has been supporting major mining companies in the Republic of North Macedonia. For more information regarding investment opportunities and legal regulations, please feel free to contact us.

Mining Sector

Ivica Jevtic – Managing partner at Tosic & Jevtic law firm

The holder of a concession for the exploitation of mineral resources – the Concessionaire, during the duration of the concession granted by the state – the Grantor, may transfer the concession to another legal entity, respecting the procedure prescribed in detail by the law. The procedure for transfer of exploitation concession of mineral resources is in detail prescribed in the Law of Mineral Resources (“Official Gazette of Republic of Macedonia” no. 136/12, 25/13, 93/13, 44/14, 160/14, 129/15, 192/15, 39/16, 53/16, 120/16, 189/16 and “Official Gazette of Republic of North Macedonia” no. 7/19, 99/22, 129/23 и 253/23, hereinafter referred to as the “Law on Mineral Resources”).

According to the Law on Mineral Resources, the concession for the exploitation of mineral resources, can be transferred only entirety to another legal entity.

Аs provided in Article 47 of the Law on Mineral Resources, the procedure stars with the submission of a request for transfer of the exploitation concession by the Concessionaire to the Ministry of economy of Republic of North Macedonia.

Furthermore, the Ministry of economy prepares and sends a request for preparation of an assessment of the Concessionaire’s business venture to the Bureau of assessment within 15 days from the day of receipt of the request for concession transfer. The Bureau of assessment prepares the Assessment of the concessionaire’s business venture within 60 days from the day of receipt of the request for preparation of an assessment of the concessionaire’s business venture. The Assessment made by the Bureau of assessment is used in this procedure in order to calculate the compensation that the new Concessionaire will be obliged to pay.

After the receipt of the Assessment of the Concessionaire’s business venture, i.e. within 30 days of the day of receipt of the Assessment, the Ministry of economy prepares and sends a detailed proposal and decision for the transfer of the exploitation concession to the Government of the Republic of North Macedonia.

Within 30 days from the day of receipt of the detailed proposal and decision for the transfer of the exploitation concession from the Ministry of economy, the Government of the Republic of North Macedonia makes a Decision on the transfer of the exploitation concession. After making the Decision on the transfer of the exploitation concession to the new legal entity, the Government of the Republic of North Macedonia, as a grantor and the new Concessionaire will conclude an Agreement for transfer of the concession.

The new Concessionaire is obliged to make a payment of the compensation in the amount of seven percent of the estimated value of the exploitation concession according to the Assessment made by the Bureau of assessment, within 30 days from the day of conclusion of the Agreement for transfer of the exploitation concession with the Government of the Republic of North Macedonia. With the payment of the compensation, the procedure for transfer of the exploitation of mineral resources is finished.

Finally, in the Law on Mineral Resources, it is prescribed that automatically with the transfer of the exploitation concession, the rights and obligations arising from the issued permits and approvals by the competent authorities in the Republic of North Macedonia which are obtained by the old Concessionaire, are transferred to the new Concessionaire. With this guarantee prescribed in the relevant law, the new Concessionaire can pick up where the old Concessionaire left off, without unnecessary business interruptions.

Taking into account everything stated above, we can logically conclude that this administrative procedure is quite complex and long, and requires the consent and opinion of many competent institutions during its course. Therefore, we at Tosic & Jevtic Law Firm are at your disposal with our legal advice, tailored guidance and assistаnce in all procedures before the competent institutions.

Mineral Resources

Ljupka Naumoska Gjorgjievska

MAIN OBLIGATIONS OF THE CONTROLLERS

The issue of personal data protection has become particularly relevant in recent years, especially with the development of the digital era. The latest regulation adopted by the EU to govern this issue is General Data Protection Regulation (Regulation (EU) 2016/679) (hereinafter: GDPR).

Is the GDPR applicable in North Macedonia?

GDPR is not directly applicable in North Macedonia, but as a candidate for membership of the European Union, North Macedonia is in a continuous process of harmonizing its legislation with the EU acquis.

As a result, North Macedonia adopted the Law on Personal Data Protection (hereinafter: Law) which is almost fully in conformity with the GDPR. There are only small variations in some areas which include: specific deadlines for response by the controllers to the subjects’ requests and specific conditions for the data protection officer.

What are the main obligations for the controllers provided by the Law?

In line with the GDPR, the Law provides for the following main obligations of the controllers:

Ensuring lawfulness of the processing

The controllers have to ensure in each specific case that they have legal basis for the processing. Some of the basis provided by the Law are: obtaining consent from the subject; processing based on a contract to which the data subject is party; processing based on a legal obligation etc.

Providing information about the processing to the data subjects

The controllers have an obligation to provide the subjects with certain information defined by the Law before starting the processing. This includes information about the controller and the data protection officer, details about the processing (purpose, duration, scope, recipients), information about the rights of the subjects etc. The controllers also have to ensure that the subjects can exercise their rights stipulated by the Law.

Identifying the processors and governing the relations with the processors

The controllers have to identify if they are about to engage with other parties to process personal data on their behalf (processors). In such cases, the main obligations of the controllers are to conduct analysis of the processor to determine if can provide sufficient guarantees to implement the necessary technical and organizational measures required by the Law. The controllers also have to enter into an agreement with the processor to regulate the mutual relations.

Keeping records of the processing activities

With some exceptions, the Law provides obligations for the controllers to keep records of the activities of the processing. The information that should be included in these records is defined in details with the Law.

Implementation of technical and organizational measures

The Law stipulates that the controllers have to implement appropriate technical and organizational measures to ensure protection of the personal data. A detailed list of measures is further given in the Rulebook for Security of the Processing of Personal Data (Official Gazette of Republic of North Macedonia no.122/20). The controllers also have an obligation to adopt many internal policies to define those measures.

Identifying transfer of data and taking appropriate legal measures to protect the data

The controllers have to determine if they transfer personal data outside North Macedonia. If the transfer is made to a country within the EU, the controller solely has to inform the Agency for Personal Data Protection about the transfer. If the transfer is made to a third country, the Law provides for other specific conditions to be met for the transfer to be considered secure and legal.

Carrying out a data protection impact assessment

The Law provides that when a type of processing is likely to result in high risk to the rights and freedoms of the subjects, especially when introducing new technologies, the controller is obliged to conduct a data protection impact assessment. The Law and the bylaws provide for a list of cases when this analysis is to be carried out.

Designation of a data protection officer

The Law provides that in most cases, the controllers have an obligation to designate a data protection officer whose responsibility is to ensure that the controller operates within its legal obligations and takes appropriate measures to protect the personal data of the subjects.

The DPO may be employed by the controller or perform the duties on the basis of a service contract

The conditions that DPO has to meet before his/her appointment are the following:

These conditions are specific for the Law in North Macedonia and are not provided with the GDPR.

Conclusion

Even though GDPR is not directly applicable in North Macedonia, the Macedonian Law on Personal Data Protection is almost in full conformity with the GDPR and provides for the same obligations for the controllers with some minor variations.

The main obligations of the controllers include: ensuring lawfulness of the processing; providing information about the processing to the data subjects; identifying the processors and governing the relations with the processors; keeping records of the processing activities; implementation of technical and organizational measures; Identifying transfer of data and taking appropriate legal measures to protect the data; carrying out a data protection impact assessment; designation of a data protection officer.

GDPR IN NORTH MACEDONIA

Elena Kuzmanovska