do business in the Dominican Republic - Pellerano & Herrera

Pellerano & HerreraAttorneys at law89The establishment of branches of foreign companies is made through the procedurefor fixing legal domicile in the country, which applies both to persons andcompanies.It should be noted that, although from a strictly legal standpoint this procedureis not mandatory, given that a foreign company may operate in the country withouthaving fixed its domicile in the Dominican territory,in practical terms the fulfillmentof this requirement is advisable, since it is necessary for certain administrativeprocedures, such as the registration of the investment.Furthermore, in some cases foreign companies have to comply with the requirementof fixing domicile in the country. For example, in order to provide financialservices in the local market foreign banks must either incorporate a Dominicancompany or open a branch in the country.Finally, it should be noted that for tax purposes branches of foreign companiesreceive the same treatment than Dominican companies, given that the Tax Coderequires that companies incorporated in the country, as well as permanent establishmentsof foreign companies pay the same income tax rate.Designation of Agents or LicenseesForeign companies wishing to designate agents or licensees in the local marketshould mainly take into account the following statutes:Law 173 of 1966 on Protection of Importer Agents of Goods and Products,andLaw 16-95 on Foreign Investment.Statutory ProtectionLaw 173 seeks to protect local agents from the unjust termination of their agreementsby their foreign principals.This law has a wide scope of application, comprisingany type of agency, representation, distribution, license, concession, franchiseor other agreement relating to products manufactured abroad or in thecountry.It is not even required that a formal agreement is signed, since the law applies toany type of relation between a foreign firm (“licensor”) and a local enterprise(“licensee”) by which the second ensures the promotion of the interests of thefirst.The protection granted by Law 173 is not automatic: the licensee, in order tobenefit from its provisions, must register the agreement with the InternationalDepartment of the Central Bank within 60 days after its signature.The provisions of Law 173 are of public order, meaning that the clauses normallyestablished by foreign firms to keep the right of suspending or amending theiragreement with the local agent, or choosing a foreign law as the applicable legislation,do not have any value if they contradict Law 173, which applies regardlessof the will of the parties.Pursuant to Article 2, even when the agreement so provides, the licenser cannotterminate the relation with the licensee, nor refuse to renew it at its date of expiration,unless a “just cause” exists.“Just cause” is defined as any non-compliance