The month of November held significant importance for Startup Macedonia in its efforts to improve the legal framework for startup companies. Summarizing several activities from the past 6 months, the aim was to identify the need for legal changes.

MAPPING THE NEED FOR NEW AMENDMENTS TO IMPROVE STARTUP REGULATIONS

The activities were categorized into three pillars:

1.Meetings with relevant institutions and ministries: Meetings with relevant ministries and institutions revealed that the Ministry of Economy is actively working on regulations related to business angels, while the Ministry of Interior is focused on introducing visas for digital nomads.

2.Meetings with founders of the “founder’s club”: Startup companies in Macedonia particularly face challenges in:

• payment services and systems,
• lack of regulations for rewarding employees with a share of the company through appropriate mechanisms (employee shares vesting), and
• complex procedures for attracting new investments and transferring ownership.

3.Comparative analysis of practices in other countries: Italy, Croatia, and Bulgaria were reviewed for their practices.

Based on these activities, there is a clear need to modernize the legal regulations to meet the requirements of innovative startup companies, investors, and entrepreneurs who rely on contractual freedom in determining the structure, competence, and functioning of the company’s governance bodies, shareholder relationships, as well as investors.

Modernizing the legal regulations should provide a solid foundation for the development of the new generation of companies and products in various spheres such as FinTech (innovations in financial services), BioTech (innovations in biotechnology), RegTech (innovations in regulatory process management), AI (artificial intelligence), Machine learning, Blockchain, IoT (Internet of Things), etc.

INTRODUCTION OF A NEW TYPE OF COMPANY – COMPANY WITH VARIABLE CAPITAL IN MACEDONIA

Some challenges can potentially be resolved by introducing a new type of trading company – a Company with Variable Capital (VCC), following the examples of other countries such as the:

• German Unternehmergesellschaft (UG) (Entrepreneur Company);
• French Société par actions simplifiée (SAS) (Simplified Joint Stock Company);
• Spanish Sociedad Limitada Nueva Empresa (SLNE);
• Slovak Jednoducha spolodnost’ na akcie;
• Polish Prosta spоlka akcyjna;

Bulgaria recently enacted changes to introduce a Company with Variable Capital (VCC) starting from 30.06.2024, expecting to prepare the institutions for this change.

CONDITIONS TO BE MET FOR A VC COMPANY

In the proposed changes in Bulgaria, a Company with Variable Capital must meet the following conditions:

• Have fewer than 49 employees
• Have an annual income and/or accounting value of 4,000,000.00 BGN (approximately 2 million euros)

If either of these conditions is exceeded, the company is transformed into a limited liability company or a joint-stock company.

WHAT’S NEW WITH THIS TYPE OF COMPANY?

This type of company:

• Doesn’t need to open a separate account for capital/finances (but still requires an operational bank account)
• Doesn’t need to record changes in the primary capital in the register (these are declared with the final annual accounts)
• Doesn’t have a defined minimum capital
• Shareholders are not registered in the central register (they are registered in the “shareholders’ book”, but ultimate owners are registered)
• Regulated opportunity to issue a portion of the company’s ownership to employees (employee shares options, shares vesting)
• Company management can be undertaken by individuals or legal entities
• Simplified procedure for transferring ownership
• Holding shareholder meetings via electronic communication and making decisions electronically

EXPECTED RESULTS

These changes are expected to create greater flexibility and accessibility for creating and managing innovative, fast-growing small companies without additional administrative barriers, making them more attractive for easier investment collection.

Allowing participants in companies with variable capital to define and structure management according to their needs and agreements with investors would simplify and reduce administrative hurdles and challenges in management.

Furthermore, it could facilitate the creation of incentive measures tailored to the needs of participants in the startup community and directly target startup companies registered as Companies with Variable Capital.

ANY REGULATION CURRENTLY IN MACEDONIA?

In Macedonia, the definition of a “startup” is outlined in the Law on Innovation Activity, which established the „Fund for Innovation and Technological Development“.

According to the definition in this Law:
„A newly established micro, small, and medium trading company startup“ is a trading company founded by one or more natural and/or legal persons that hasn’t exceeded six years since its establishment until the moment of applying for funding from the Budget of the Republic of North Macedonia.

This definition has practical application when applying for projects in the Fund, but trading companies are established as either Limited Liability Companies (LLC) or Simplified Limited Liability Companies (SLLC), and they can be micro, small, or medium-sized trading companies by size.

Introducing a new solution for a special type of company, following the example of other European countries and Bulgaria most recently, is expected to address many challenges in the startup community.

This idea was presented to the Ministry of Economy, and the efforts of Startup Macedonia, in the upcoming period, in the context of improving regulations for startups, will move in this direction.

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