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    RECENT CORPORATE GOVERNANCE REFORM IN
RM   Prof. Tito Belicanec, PH.D    
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THE ADOPTION OF NUMEROUS DOCUMENTSThe
preparation of the new Company Law coincided with
the adoption of numerous documents containing
opinions and rules which have to protect the
position and regain the trust of the investors
(shareholders) following the big scandals that
took place in the USA and Europe- The
Agreement for stabilization and association in
the Republic of Macedonia with the European Union
- in the next ten years the Republic of Macedonia
must to harmonize its legislation with the
European Union directives - In the new Company
Law the European is incorporated the basics of
the By-law for the status of the so called
European society (Societas europea).  - The
obligations arising from the Program for
stimulating investments in the Republic of
Macedonia that should create the best atmosphere
for attracting domestic and foreign investments
was also assumed.
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OECDS PRINCIPLES OF CORPORATE
GOVERNANCE - The new CL contains all the
principles of the White Paper which further
elaborates the OECDs Principles of corporate
governance- The reference for implementation
and preparation for application of the principles
included in the White Paper is also taken into
consideration - The new CL also contains all
the principles of revised OECDs Principles of
corporate governance  - Furthermore, the views
of the European financial regulatory committee
were also taken into consideration, and
particularly the references regarding the most
important issues of governance (corporate
governance) in relation to the report of the so
called Winters group.  - When accepting
numerous solutions from the above mentioned
documents, the historical circumstances in the
country were also taken into account.
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THE EMPLOYEE   - The Directive of the
European Union 2001/86/EC starting from October
8, 2001 regulates the participation of the
employees in the European society and is a
constituent part of the By-law for the European
society. These two normative documents must be
applied together.   - The new CL refers to the
right to participate in the decision making upon
issues and decisions regarding the life of the
employees, or managing the so called economic
rights of the employees arising from the employee
status, particularly the employees right to
participate in the profit and other economic
rights, as well as information and consultation
to be regulated by a separate law, which is
already in progress.
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ONE-TIER AND TWO-TIER MANAGEMENT SYSTEMS   -
The new CL takes over the one-tier and two-tier
management system from the first CL.   - The
reasons behind this are the positive results in
the development of corporate governance which
were achieved by their application.   -
According to the results from the project of EBRD
Corporate Governance Sector Assessment Project
2002 Results these legal solutions were highly
rated. The final scores of countries are
categorised as A,B,C, D and E. Republic of
Macedonia from 27 countries with other seven
countries is categorised as B (High
Compliance) level of corporate governance system
when measured against OECD Principles of
Corporate Governance by using revised Checklist.
No country was categorized as A- High
Compliance.   - Despite such high rating of
the solutions for the one-tier and two-tier
management systems from the first 1996 CL, in the
new CL they are partly changed and significantly
amended.
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MANAGEMENT SYSTEMS   According to the new CL as
well, the JSCs may choose between the two
different systems of management   - one-tier
(board of directors) or - two-tier system
(management board and supervisory board).   The
novelty here is the possibility that the two-tier
system may be organized with a manager instead of
a management board and supervisory board.
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BODIES THAT CARRY OUT THE ELECTION   - Cumulative
voting is introduced as an optional provision.
Namely, if stipulated by the company charter, the
election of the members of the Board of Directors
or Supervisory Board may be executed by
cumulative voting    - Prior informing of the
general meeting of shareholders of the JSC for
candidates elected is introduced with the
obligation for data on candidates to be submitted
to shareholders not later than seven days prior
to the election of the general meeting.
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THE ANNUAL REPORT   In the annual report on the
operations of the company for the previous
business year, the management body shall be
obliged to objectively present and explain   -
the main factors and circumstances which
influenced the operations, including any changes
in the environment in which the company operates,
the response of the company to such changes and
their impact - the investment policy for
maintenance and support of the successfulness of
the operations of the company, including the
dividend policy, the sources of the companys
assets - the policy of the long term debt
against the charter capital and the policy of
risk management   - major transactions and
interested party transactions, as well as the
assets of the company the value of which is not
reflected in the balance sheet according to the
international accounting standards
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- the prospects of future development of the
company and its business venture -
activities in the field of research and
development, as well as information in relation
with acquisition of own shares or parts,
depending on the relevant circumstances   - the
earnings of each executive member of the Board of
Directors and member of the Management Board
(salary, salary allowances, bonuses, insurance
and other rights) or the reimbursement of the
non-executive members of the Board of Directors
and members of the Supervisory Board.
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LIABILITIES IN CASE OF LOSS, OVER-INDEBTEDNESS
AND INSOLVENCY   - The provision in Article 354,
which was not consisted in the first Company Law,
defines the liabilities of the executive members
of the Board of Directors, or the Management
Board, if during the operation, and especially if
according to the quarterly or semi-annual
calculations, or the annual account statement the
JSC shows new losses that exceed 30 of the value
of the assets of the company, or 50 of the
charter capital, when there are circumstances
determined by the law as a condition for
initiating a bankruptcy procedure, or following
the occurrence of insolvency to pay or
over-indebtedness. - The members
of the management body shall be jointly and
severally liable to the creditors and to the
shareholders for the damages caused, if they
acted contrary to their liabilities.
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•  
• Composition The new CL amends the composition of
  the board of directors as follows
•  
• - As opposed to five members the Board of
  Directors shall consist of at least three where
  the number of executive members shall be less
  than the number of the non-executive members of
  the Board of Directors.
•  
• - The obligation of the number of non-executive
  members to be divisible by three is abandoned
  and
• As already mentioned, all members of the Board of
  Directors shall be elected by the General Meeting
  of Shareholders.

ONE -TIER MANAGEMENT SYSTEM (BOARD OF DIRECTORS)
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ELECTION OF EXECUTIVE MEMBERS  The new CL
abandons the previous manner of electing
executive members of the board of directors -
The executive members shall be elected by all
members of the board of directors.The manner of
electing executive members of the Board of
Directors shall be determined in the charter.
  - The charter of the JSC shall stipulate the
majority required to elect non-executive members.
  - There is a possibility for one of the
executive members of the Board of Directors, to
bear the title which is typical for the exercise
of the function (general director, chief
executive director, and other appropriate title).
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INDEPENDENT MEMBER

• - If the Board of Directors has up to four
  non-executive members, at least one of the
  non-executive members of the Board of Directors
  shall be an independent member and if the Board
  of Directors has more than four non-executive
  members, at least one quarter of them shall be
  independent members of the Board of Directors
• - When electing the members of the Board of
  Directors, it shall be specified which members
  are elected as independent members of the Board
  of Directors.

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TWO-TIER MANAGEMENT SYSTEM (MANAGEMENT BOARD AND
SUPERVISORY BOARD)   The following three
provisions have been added with respect to the
composition of the management board   - No
person shall be at the same time a member of the
Management Board or manager, and a member of the
Supervisory   - The Management Board has a
president who shall call and chair the meetings,
and shall be responsible for keeping the minutes
of the meetings and organizing other forms of
operation and decision making of the Management
Board   - If the president, for any reason, is
not able to exercise his function, or if he is
absent, the meetings of the Management Board
shall be chaired by a member of the Management
Board, appointed by the Supervisory Board.
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MANAGER INSTEAD OF MANAGEMENT BOARD Notwithstandin
g the JSC the charter capital of which is less
than 150.000 EUR in denar equvalent, instead of a
management board a manager can be elected having
all rights and liabilities of the management
board.  
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SUPERVISORY BOARD Composition and Election of
the Members of the Supervisory Board  Article
378 contains two new provisions   - The
Supervisory Borad must have independent
members  - If the Supervisory Board has up to
four members, at least one of the members shall
be an independent member and if the Board of
Directors has more than four members, at least
one quarter of its members shall be independent
members of the Supervisory Board.