Convertible loan is enabled under the Macedonian corporate law

By the latest amendments to the Company Law published on April 21, 2022, limited liability companies in North Macedonia, in addition to debt and equity financing, may use convertible loan for financing the business activities. Namely, to date convertible loan was allowed only with respect to limited liability companies established by sole shareholder. But with the latest law amendments, the definition of convertible loan is extended to shareholders and investors which loans are now permitted for conversion into equity.

Loan conversion into equity shall be performed by way of procedure of share capital increase with the company. The procedure of increase of the share capital is completed based on a loan agreement and a decision to transform the loan into an investment.

Provided that money is assumed, the loan extended by third party as an investor may be transformed into a share in the share capital in the company, and the procedure of transformation shall be completed no later than three years after the loan agreement had been signed.

Nevertheless, the content of the loan agreement is stipulated in the law and must include:

• total amount of the loan;
• repayment terms;
• terms for transforming the loan into a share in the company;
• term in which the loan can be transformed into a share of the company; and
• percentage of a share acquired through the transformation of the loan; or method of calculating the share, if the percentage of the share cannot be foreseen on the day of concluding the loan agreement.

The loan agreement must be notarized and must be signed between the manager and the shareholders on one side and the investor on the other side. Following completion of capital increase procedure, registration with Macedonian Central Registry is required.