A division of a company by way of demerger with transfer represents a form of status change regulated under the Law on Trade Companies. Through this status change, part of the assets and liabilities of the company being divided are transferred to another, already existing company that assumes them. The company being divided does not cease to exist and continues its operations with the remaining assets and liabilities. In this process, universal legal succession occurs in relation to the transferred portion of assets and liabilities, whereby the acquiring company steps into the legal position of the transferring company with respect to those assets and obligations.

This mechanism is commonly used in corporate restructurings, separation of business activities, or reorganization of ownership structures between shareholders.

Division Agreement

The procedure begins with the preparation and execution of a division agreement, which constitutes the core legal document governing the status change. The agreement is concluded between the company being divided and the acquiring company and must be executed in the form of a notarized deed.

The division agreement, as the key document defining the conditions under which the transaction will be implemented, must include:

• identification details of the participating companies;
• the manner of transfer of assets and liabilities and, where applicable, the exchange of shares/quotas;
• the purpose and conditions of the division;
• the value of the assets and liabilities of the company being divided, together with a detailed allocation (division balance sheet);
• the date from which transactions shall be deemed to have been carried out on behalf of the acquiring company;
• the share/interest exchange ratio (if applicable);
• rights, obligations or special benefits granted to shareholders and management;
• conditions relating to the transfer or continuation of employment relationships;
• deadlines for preparation of financial statements.

Financial Statements and Division Balance Sheet

For the purposes of the division and execution of the division agreement, the company being divided prepares a division balance sheet, representing a detailed overview of its assets and liabilities, as well as the allocation of those elements to the acquiring company.

In addition, the company prepares financial statements, and the values reflected therein are correspondingly transferred and recorded in the financial statements of the acquiring company.

Following the implementation of the status change, the companies are required to prepare and submit financial statements in accordance with applicable accounting and tax regulations.

Audit of the Division Agreement

The law provides for an audit of the division agreement by licensed auditors, unless exempted under specific legal provisions. The auditors issue an opinion on the fairness of the proposed exchange ratio (where applicable) and the valuation methods used, thereby ensuring protection of the shareholders’ interests.

Shareholders’ Inspection Rights and Creditor Protection

The law requires that all relevant documents related to the division be made available to the shareholders.

The division agreement, auditor’s report, financial statements and all related documentation must be made available at the registered offices of the companies for inspection for a period of at least one month prior to the decision on approval of the division.

Within the same period, the companies are required to:

• register a preliminary filing (pre-registration) with the Trade Register;
• publish a notice of the pre-registration in the Official Gazette of the Republic of North Macedonia and inform that the division agreement is available for inspection;
• publish a notice of the executed division agreement in the Official Gazette and in at least one daily newspaper.

Where applicable, additional obligations may arise, including:

• notification of competent regulatory authorities, if required for specific regulated activities;
• individual written notification to known creditors with claims exceeding EUR 10,000.

These measures are intended to ensure transparency and enable creditors to protect their rights.

Approval of the Division and Registration

Upon expiry of the statutory deadlines, the shareholders of the participating companies adopt resolutions approving the division.

The statutory timelines are calculated retrospectively, meaning that at the time of adopting the resolution, a minimum period of one month must have elapsed from the date of publication and notification.

Although the law does not explicitly prescribe a deadline for submission of the registration application, it follows from the applicable framework that the financial statements submitted must not be older than six months.

Upon submission and approval of the registration with the Trade Register:

• the transfer of assets and liabilities becomes legally effective;
• the acquiring company assumes the rights and obligations related to the transferred assets;
• both companies continue to exist as separate legal entities.

Tax Aspects

A division by way of demerger with transfer has a specific tax treatment.

As a general rule, the transfer of assets and liabilities within a status change is not treated as a standard sale or transfer of assets, but rather as a corporate reorganization. In accordance with the Corporate Income Tax Law, tax continuity may apply, provided that the assets and liabilities are transferred at their book value.

However, tax neutrality is not absolute and depends on the specific structure of the transaction.

Phases of the Procedure

The procedure for implementing a division by way of demerger with transfer is carried out through several structured phases:

1. Structuring the transaction

The initial phase involves analysis of the corporate and financial structure, identification of the assets and liabilities to be transferred, and determination of the legal framework of the division.

2. Preparation of the division balance sheet and execution of the division agreement

A division balance sheet is prepared, followed by the drafting and execution of the division agreement in the form of a notarized deed, setting out the key terms and financial data of the transaction.

3. Preparation of financial statements

The company prepares financial statements, often based on the latest annual accounts, which serve as the basis for the transaction.

4. Audit of the division agreement

An audit is carried out by licensed auditors, who assess the fairness of the valuation and exchange ratio (if applicable).

5. Pre-registration, publication, shareholder inspection and creditor notification

The agreement is submitted for pre-registration, followed by publication and commencement of the mandatory one-month period. During this time, documentation is made available to shareholders and creditors are notified.

6. Adoption of resolutions and final registration

After expiry of the statutory period, shareholders adopt the necessary resolutions, and the companies submit the application for registration. The division becomes legally effective upon registration with the Trade Register.

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Due to the complexity of the procedure and its legal and tax implications, such status changes are typically structured with coordinated legal and accounting support from the earliest stages.