Creating

More documents

Recommendations

Info

38 DOING BUSINESS IN 2006 than countries that rely on other judicial measures. When creditors can seize and sell collateral without resorting to the courts, enforcement can be even faster. But summary proceedings are also important as a backstop to out-of-court enforcement. Albania introduced a summary proceeding in 1999. With a registered collateral agreement in place, a creditor may seek an enforcement order from the court when a Why reform? Businesses get better access to loans and better terms of credit when creditors and borrowers have stronger legal rights and good credit information is available. 4 Take Romania. In 1999 it expanded the scope of collateral, clarified priority rules and expedited enforcement. It also set up an online collateral registry. Since then more than 200,000 notices of security interests have been registered. The number of borrowers has increased threefold, and the volume of credit by 50%. And interest rates have fallen. 5 After Slovakia adopted laws permitting the pledging of movable assets, more than 70% of new business credit was secured by such collateral—and private credit jumped by 10% in a year. Benefits flow beyond access to credit. Countries with more legal rights for borrowers and lenders and borrower defaults, after giving the debtor 5 days’ notice. The order is issued within a few days. An execution officer may then seize the collateral and deliver it to the creditor. Enforcement takes less than a month. Bulgaria, India and Romania have introduced similar proceedings. Such reforms are especially successful when they limit grounds for appeal and allow enforcement to proceed pending appeal. more credit information have fewer nonperforming loans and lower financial system risk (figure 6.5). With better-functioning credit markets, investment and growth increase. 6 Small firms and women, who face the biggest hurdles in accessing credit, are the ones who gain most when collateral laws and credit information support lending decisions. 7 Some governments attempt to protect borrowers by weakening creditors’ ability to take and enforce security. Laws in Benin and Syria cap the interest rates that lenders can charge. Côte d’Ivoire and Italy make a bankrupt debtor immune from debt collection for the entire insolvency proceeding—by which time the bankruptcy estate is whittled to nothing. This is folly. The best way to help borrowers is to improve credit information and make it easier to take and enforce collateral. Notes 1. Based on national statistics. 2. Positive information covers loans outstanding and payment behavior on accounts in good standing; negative information covers defaults and arrears. 3. Djankov, McLiesh and Shleifer (2005). 4. Davydenko and Franks (2005), Qian and Strahan (2005), Djankov, McLiesh and Shleifer (2005) and Avery, Calem and Canner (2004). 5. Chaves, de la Peña and Fleisig (2004). 6. Acemoglu (2001) and King and Levine (1993). 7. World Bank (2004a) and Love and Mylenko (2003).
39 Protecting investors Who is reforming? What to reform? Why reform? Executives at Elf Aquitaine, France’s largest oil company, took bribes in exchange for awarding business deals. Along with the extra cash, they got 7 years in jail and a 2 million euro fine for abuse of power. 1 Russian oil firm Gazprom purchased materials for new pipelines through intermediaries owned by company officers. The high prices charged for the materials raised eyebrows, but not court battles. 2 Big cases like these make headlines, but looting by corporate insiders occurs every day on a smaller scale. And it often goes undetected. Protecting investors against self-dealing—the use of corporate assets for personal gain—is necessary for equity markets to develop. It is just one corporate governance issue, but it is the most important one. Other issues in investor protection—for example, writing management contracts that provide incentives for optimal investment decisions—are not discussed in the chapter. To document investor protections against selfdealing, Doing Business measures how countries would regulate a standardized case. 3 The case facts are simple. Mr. James, who owns 60% of the stock in a public company and sits on its board, proposes that the company purchase 50 used trucks from a private company of which he owns 90%. The price is higher than the going price. Mr. James benefits from the transaction, since for each dollar that his private company receives, 40 cents come from income belonging to the minority investors in the public company. This is not fraud—such transactions are perfectly legal if proper disclosures are made and approvals obtained. Several questions arise. Who approves the transaction? What information must be disclosed? What company documents can investors access? What do minority shareholders have to prove to stop the transaction or to receive compensation from Mr. James? An index of investor protection is constructed based on these and other answers. New Zealand protects investors against self-dealing the most (table 7.1). Singapore is next. Regulation is so extensive in Singapore that one lawyer describes practicing law there as “tip toeing through the tulips.” The countries that best protect against self-dealing have several things in common. They require immediate disclosure of the transaction and Mr. James’s conflict of interest. They require prior approval of the transaction by other shareholders. They enable shareholders to hold the company’s directors liable and to have the trans- TABLE 7.1 Where are investors protected—and where not? Most protected New Zealand Singapore Canada Hong Kong, China Malaysia Israel United States South Africa United Kingdom Mauritius Least protected Costa Rica Croatia Albania Ethiopia Iran Ukraine Venezuela Vietnam Tanzania Afghanistan Note: Rankings are on the strength of investor protection index. See the Data notes for details. Source: Doing Business database.
Page 1: Creating Jobs
Page 5: Contents Doing Business in 2006: Cr
Page 8 and 9: 2 DOING BUSINESS IN 2006 to registe
Page 10 and 11: 4 DOING BUSINESS IN 2006 Less costl
Page 12 and 13: 6 DOING BUSINESS IN 2006
Page 15 and 16: 9 Starting a business Who is reform
Page 17 and 18: STARTING A BUSINESS 11 duced the mi
Page 19 and 20: STARTING A BUSINESS 13 Introduce st
Page 21 and 22: 15 Dealing with licenses Who is ref
Page 23 and 24: DEALING WITH LICENSES 17 plain that
Page 25 and 26: DEALING WITH LICENSES 19 Not in Sie
Page 27 and 28: 21 Hiring and firing workers Who is
Page 29 and 30: HIRING AND FIRING WORKERS 23 TABLE
Page 31 and 32: HIRING AND FIRING WORKERS 25 raised
Page 33 and 34: 27 Registering property Who is refo
Page 35 and 36: REGISTERING PROPERTY 29 In Latin Am
Page 37 and 38: REGISTERING PROPERTY 31
Page 39 and 40: 33 Getting credit Who is reforming?
Page 41 and 42: GETTING CREDIT 35
Page 43: GETTING CREDIT 37 But public regist
Page 47 and 48: PROTECTING INVESTORS 41 TABLE 7.2 I
Page 49 and 50: PROTECTING INVESTORS 43 TABLE 7.6 W
Page 51 and 52: 45 Paying taxes Who is reforming? W
Page 53 and 54: PAYING TAXES 47
Page 55 and 56: PAYING TAXES 49 What to reform? Tax
Page 57 and 58: PAYING TAXES 51 2004, despite the n
Page 59 and 60: 53 Trading across borders Who is re
Page 61 and 62: TRADING ACROSS BORDERS 55 Who is re
Page 63 and 64: TRADING ACROSS BORDERS 57 documents
Page 65: TRADING ACROSS BORDERS 59
Page 68 and 69: 62 DOING BUSINESS IN 2006 Who is re
Page 70 and 71: 64 DOING BUSINESS IN 2006 loans at
Page 73 and 74: 67 Closing a business Who is reform
Page 75 and 76: CLOSING A BUSINESS 69 What to refor
Page 77: CLOSING A BUSINESS 71 Such measures
Page 80 and 81: 74 DOING BUSINESS IN 2006 Working P
Page 82 and 83: 76 DOING BUSINESS IN 2006 Slovak St
Page 84 and 85: 78 DOING BUSINESS IN 2006 Economy c
Page 86 and 87: 80 DOING BUSINESS IN 2006 a procedu
Page 88 and 89: 82 DOING BUSINESS IN 2006 • Is 10
Page 90 and 91: 84 DOING BUSINESS IN 2006 Protectin
Page 92 and 93: 86 DOING BUSINESS IN 2006 Assumptio
Page 94 and 95:
88 DOING BUSINESS IN 2006 Assumptio
Page 97 and 98:
91 Ease of doing business: an appen
Page 99:
APPENDIX 93 countries all rank in t
Page 102 and 103:
96 DOING BUSINESS IN 2006 Starting
Page 104 and 105:
98 DOING BUSINESS IN 2006 Hiring an
Page 106 and 107:
100 DOING BUSINESS IN 2006 Hiring a
Page 108 and 109:
102 DOING BUSINESS IN 2006 Getting
Page 110 and 111:
104 DOING BUSINESS IN 2006 Paying T
Page 112 and 113:
106 DOING BUSINESS IN 2006 Paying T
Page 114 and 115:
108 DOING BUSINESS IN 2006 Enforcin
Page 116 and 117:
110 DOING BUSINESS IN 2006 AFGHANIS
Page 118 and 119:
112 DOING BUSINESS IN 2006 AUSTRALI
Page 120 and 121:
114 DOING BUSINESS IN 2006 BENIN Su
Page 122 and 123:
116 DOING BUSINESS IN 2006 BULGARIA
Page 124 and 125:
118 DOING BUSINESS IN 2006 CENTRAL
Page 126 and 127:
120 DOING BUSINESS IN 2006 CONGO, R
Page 128 and 129:
122 DOING BUSINESS IN 2006 DOMINICA
Page 130 and 131:
124 DOING BUSINESS IN 2006 ETHIOPIA
Page 132 and 133:
126 DOING BUSINESS IN 2006 GHANA Su
Page 134 and 135:
128 DOING BUSINESS IN 2006 HONDURAS
Page 136 and 137:
130 DOING BUSINESS IN 2006 IRAN Mid
Page 138 and 139:
132 DOING BUSINESS IN 2006 JAPAN OE
Page 140 and 141:
134 DOING BUSINESS IN 2006 KUWAIT M
Page 142 and 143:
136 DOING BUSINESS IN 2006 LITHUANI
Page 144 and 145:
138 DOING BUSINESS IN 2006 MALI Sub
Page 146 and 147:
140 DOING BUSINESS IN 2006 MOLDOVA
Page 148 and 149:
142 DOING BUSINESS IN 2006 NETHERLA
Page 150 and 151:
144 DOING BUSINESS IN 2006 OMAN Mid
Page 152 and 153:
146 DOING BUSINESS IN 2006 PERU Lat
Page 154 and 155:
148 DOING BUSINESS IN 2006 RUSSIA E
Page 156 and 157:
150 DOING BUSINESS IN 2006 SERBIA A
Page 158 and 159:
152 DOING BUSINESS IN 2006 SOUTH AF
Page 160 and 161:
154 DOING BUSINESS IN 2006 SYRIA Mi
Page 162 and 163:
156 DOING BUSINESS IN 2006 TONGA Ea
Page 164 and 165:
158 DOING BUSINESS IN 2006 UNITED K
Page 166 and 167:
160 DOING BUSINESS IN 2006 VIETNAM
Page 169 and 170:
163 Acknowledgments Contact details
Page 171 and 172:
ACKNOWLEDGMENTS 165 Tibor Fabian BI
Page 173 and 174:
ACKNOWLEDGMENTS 167 Barthélémy Ke
Page 175 and 176:
ACKNOWLEDGMENTS 169 Ghislane Moise
Page 177 and 178:
ACKNOWLEDGMENTS 171 Bernt Juthstrom
Page 179 and 180:
ACKNOWLEDGMENTS 173 Kari Hrafn Kjar
Page 181 and 182:
ACKNOWLEDGMENTS 175 Ivan A. Zaitsev
Page 183 and 184:
ACKNOWLEDGMENTS 177 Samuel Tembenu
Page 185 and 186:
ACKNOWLEDGMENTS 179 Russell Lawn BU
Page 187 and 188:
ACKNOWLEDGMENTS 181 Jazmin Banal RO
Page 189 and 190:
ACKNOWLEDGMENTS 183 Ivan Petrovic L
Page 191 and 192:
ACKNOWLEDGMENTS 185 Wen-Horng Kao P
Page 193 and 194:
ACKNOWLEDGMENTS 187 Katherine Stone
Page 196:
Doing Business in 2006: Creating Jo
show all

Creating

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

Delete template?

Save as template?