Trade and Commercial Law Assessment - Honduras - Economic ...

More documents

Recommendations

Info

TRADE AND COMMERCIAL LAW ASSESSMENT DECEMBER 2004HONDURASnot automated and lacks financial resources. The Commercial Registry is part of the propertyregistry and falls in the portfolio of the Supreme Court.In Tegucigalpa, the Commercial Registry receives more documents than it can handle.Approximately 400 documents are received daily, with only one computer available to processthem. As a result of these limited technological resources, most operations are recordedmanually, delaying registration. According to the registry’s officers, registration of a companytakes roughly 45 days. Lawyers interviewed, however, say that the process typically takes 2 to 3months. In addition to the time associated with registration, registration costs are high. Theminimum cost to register a company is $1,500.00.One lawyer reported that sophisticated business structures, such as international trusts combinedwith joint venture contracts, are denied registration because the registry’s officers are unfamiliarwith international business transactions. At the same time, lawyers have reported that corruptionis a problem.Regional commercial registries exist throughout the country; however, there is no integrationbetween offices. Indicative of this lack of integration between registries is the duplication ofnames of companies that have been registered in different offices. This has created uncertaintyamong creditors who do not know which of the companies is responsible for payment.Under the umbrella of the LdP, the Instituto de Propiedad will soon hold authority over all thenational registries, including the Commercial Registry. The Instituto de Propiedad will begin fulloperations in January 2005. A recently initiated 5-year, $44 million competitiveness projectfinanced jointly by the World Bank and the Inter-American Development Bank will devote somefunds to modernizing the Commercial Registry. In addition, automation of the registries is beingpursued under a land regularization project financed by the World Bank. The latter effort has hadsome success in rationalizing the real property framework; however, this program has focusedprimarily on the Property Registry, not on the Commercial Registry.Starting a Business (2004)The challenges of launching a business in Honduras are shown below through four measures: proceduresrequired to establish a business, the associated time, the associated cost, and the minimum capitalrequirement. Entrepreneurs can expect to go through 13 steps to launch a business over 62 days (onaverage), at a cost equal to 72.9 percent of gross national income (GNI) per capita. They must deposit atleast 37.0 percent of GNI per capita in a bank to obtain a business registration number, compared with theregional average of 28.9 percent of GNI and the OECD average of 44.1 percent of GNI.Nature of Procedure (2004) Proc # Duration (days) US$ CostProcure a certificate of deposit at a local bank 1 1 0Constitute the company before a notary public 2 2 326.31Publish the registration in La Gaceta 3 1 15.00Purchase the stamps 4 1 0File the articles of incorporation with the Mercantile Registry 5 25 61.13Apply for tax identification code 6 1 0Acquire legal accounting and minutes books 7 1 180.00Apply for an operational permit 8 30 132.96Obtain authorization of the company books 9 7* 0III-5
TRADE AND COMMERCIAL LAW ASSESSMENT DECEMBER 2004HONDURASRegister at the Hand Labor Training Institute 10 1* 0Register at Social Security Institute 11 7* 0Register at Social Fund for Housing 12 1* 0Register with local and national chambers of commerce 13 1* 0Totals: 13 62 $715.40* This procedure runs simultaneously with previous procedures.Source: World BankThe Commercial Code provides that company-related disputes are to be managed by courts. 23The judicial system, however, tends to be inefficient, and slow. In addition, there are no courtsspecializing in commercial matters. It is perceived that Honduran business people do not trust theefficiency of the court system. Lack of trust increases transaction costs. When business peoplelack trust in formal mechanisms for enforcing obligations, the alternatives are to remain informalor to use alternative dispute resolution (ADR) mechanisms, though concerns over enforcement ofagreements may cast a doubt on the effectiveness of ADR mechanisms.For the latter, Honduras has two arbitration centers, one in Tegucigalpa and one in San PedroSula. The arbitration center in Tegucigalpa has handled only eight cases in 3 years. Arbitration isperceived as expensive and there is generally low awareness of ADR.According to the Constitution, a Superintendency of Companies is to be created to supervisecompanies operating in Honduras. Some lawyers have asserted that the Superintendency ofCompanies should provide a better mechanism for improving corporate governance principles.Currently, however, because of the cost associated with setting up a new government office,Congress has not established this agency.To conclude, implementing institutions in Honduras require significant improvements to copewith the new business that CAFTA might attract. In addition, the present state of the CommercialRegistry and the judicial system discourages the growth of local business.D. SUPPORTING INSTITUTIONSArticles of incorporation and bylaws must be authenticated by a notary before a companypresents them to the Commercial Registry. Notaries certify the identity of parties and the contentof documents. In Honduras, not all lawyers are notaries. The Supreme Court is in charge ofappointing notaries, who are required to pass an oral examination. The business community hascriticized involvement of notaries in the incorporation process; one businessman critical of therole of notaries in transactions stated, “It does not add anything but transaction costs.”The Tegucigalpa Chamber of Commerce is very critical of the current state of company law inHonduras, and was instrumental in the approval of the Law on Administrative Simplification.The chamber of commerce has expressed interest in reforming the Commercial Code and wouldlike to repeat the experience of other Latin America countries in which the Commercial Registryis managed by the chambers of commerce. The chamber has a help desk that provides assistancein obtaining municipal business licenses. It has also entered into an agreement with themunicipality to expedite the process for its affiliates. Obtaining business licenses typically takes23 CdCom. Art. 199.III-6
Page 1 and 2: TRADE AND COMMERCIALLAW ASSESSMENT
Page 3 and 4: TRADE AND COMMERCIAL LAW ASSESSMENT
Page 23: TRADE AND COMMERCIAL LAW ASSESSMENT
Page 75 and 76:
TRADE AND COMMERCIAL LAW ASSESSMENT
Page 77 and 78:
Page 79 and 80:
Page 81 and 82:
Page 83 and 84:
Page 85 and 86:
Page 87 and 88:
Page 89 and 90:
Page 91 and 92:
Page 93 and 94:
Page 95 and 96:
Page 97 and 98:
Page 99 and 100:
Page 101 and 102:
Page 103 and 104:
Page 105 and 106:
Page 107 and 108:
Page 109 and 110:
Page 111 and 112:
Page 113 and 114:
Page 115 and 116:
Page 117 and 118:
Page 119 and 120:
Page 121 and 122:
Page 123 and 124:
Page 125 and 126:
Page 127 and 128:
Page 129 and 130:
Page 131 and 132:
Page 133 and 134:
Page 135 and 136:
Page 137 and 138:
Page 139 and 140:
Page 141 and 142:
Page 143 and 144:
Page 145 and 146:
Page 147 and 148:
Page 149 and 150:
Page 151 and 152:
Page 153 and 154:
Page 155 and 156:
Page 157 and 158:
Page 159 and 160:
Page 161 and 162:
THRADE AND COMMERCIAL LAW ASSESSMEN
Page 163 and 164:
Page 165 and 166:
Page 167 and 168:
show all

Trade and Commercial Law Assessment - Honduras - Economic ...

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?