Photo: Vecteezy.com

Following the latest amendments to the Company law from April 2022, an extension to the debt-to-equity swap possibility in course of a procedure for increasement of the share capital of a LLC was introduced, previously such being exclusively available only to the loans provided by the single shareholder in a single shareholder LLC (while in practice, shareholders in a LLC with more than a single shareholder, were deprived of such possibility).

With the new changes, this opportunity is now presented also to third parties – investors i.e. lenders, providing them the possibility to become a shareholder of a LLC through a debt-to-equity swap procedure, by transforming the loans they have provided to the company, into a contribution in the company.

Such right of third parties to transform the provided loans to the company into contribution in the same will be limited to a term of three years as of the date of such loan agreement, and it will be subject to certain additional formalities as a precondition for conducting such debt-to-equity swap procedure. In any event, it remains to be seen how this new mechanism will affect the investment climate and the financing of companies in North Macedonia, especially the investor’s approach in respect to start-up companies.