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Case Study

Challenge

Privatization of state-owned companies turned many Macedonians into shareholders.However, Article 292 of Macedonia’s Company Law of 1996 permitted shareholders to signover their voting rights to a third party for a period of five years under “managementagreements.” Managers and directors coerced thousands of employee who wereshareholders to sign these agreements through explicit or implicit threats to their jobs. Thisdeprived the shareholders of their rights as owners and rendered the shares non-tradable. Ineffect, when the employees lost their voting rights, they also lost the value of their sharesestimated at $12 million, since they could not sell them.

Photo: Skopje, Macedonia Stock exchange
Skopje's small stock exchange operates everyday.

“Macedonian workers will nolonger face pressure from amanager to forfeit theirshareholder rights.”
- Melica Gjorgieva, LegalDepartment Head in theMinistry of Economy

USAID’s Macedonia Financial SectorStrengthening Project was already bringingtogether senior government officials to designreforms to the Macedonian stock market andother critical financial institutions. Leaders withinthis group concurred that the loss of value tothousands of citizens constituted an abuse thathad to be remedied.

Simultaneously, USAID’s Corporate Governanceand Company Law (CGCL) Project assisted theGovernment of Macedonia to draft a newCompany Law. In less than sixty days, CGCLpresented the issue to the drafting committee andParliament passed an amendment to theCompany Law.

Results

In the months following the new law’samendment, shareholders recovered the right tosell shares with a nominal value of approximately$12 million, a significant figure in the context ofMacedonia’s capital markets. Furthermore, boardof director members, the management team, andsupervisory boards of companies in Macedoniaare now prohibited from being beneficiaries ofagreements to transfer voting rights. Thisenormously reduces the motive for managementto pressure employees to forfeit their shareholderrights.

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