This content is from: Local Insights

Honduras: Updating a classic

José Ramón Paz Morales
The Honduran Commerce Code (1950) is a pillar of Honduran Law, and has undergone very few reforms in its lifetime. The key to its success can be attributed to Honduran legislators, who at the time of its creation, acknowledged the importance of having a legal instrument that would address issues involving domestic and international commercial transactions in Honduras, but that would also adapt to the constant evolution of mercantile activities.

With these objectives in mind, Honduras hired famous international jurists such as Joaquin Rodriguez Rodriguez, who were experts in renowned jurisprudence such as the Mexican Code of Commerce and the Italian Civil Code from 1942. Once it became law, the Honduran Commerce Code was one of the most modern commercial laws in Latin America.

In June of this year, Decree 284-2013, which contains the Law for the Generation of Employment, Promotion of Entrepreneurship, Business Incorporations, and for the Protection of Investor Rights, came into force and significantly reformed the Honduran Commerce Code.

The historic reforms include: single-shareholder companies and partnerships are now permitted; incorporation, merger, acquisitions, transformation and the increase of the social capital of a corporation do not require the participation of a notary public; minimum social capital at the time of incorporation is now voluntary; the figure of secret corporate documents was introduced; the shareholder percentage to exercise minimum shareholder rights was reduced from 25% to five percent; the board of directors must now follow a special procedure involving related party transactions; and, the duties that the general manager must comply with were broadened by including six rules that make the company's interest the ultimate goal.

Other reforms involving corporate governance, some of which have already been adopted by other sectors of the Honduran economy like the Honduran financial system, are now expressly available for all corporations For example: shareholders' or board of directors' meetings may take place through electronic means; requests for shareholders' or board of directors' meetings may now be sent via email without the need to publish the invitation in a local newspaper; no authorisation by the government is required for the company´s legal books; shareholders' or board of directors' meetings may be video recorded; and finally, the company's legal books may now be kept electronically.

Decree 284-2013 has without a doubt modernised Honduran corporate law. Some of these reforms have been heavily criticised, while others have been praised by the legal and business community. The Decree establishes that the Honduran Secretary of Finance and the Mercantile Registry in the case of the procedures involving mergers and acquisitions must be regulated. It is necessary that the legal and business community have a clear understanding of the different items contained in the Decree. In order for the Decree to succeed, the regulations must be issued, events and discussions must be held and the Mercantile Registry must receive adequate funding in order to enforce the Decree.

José Ramón Paz Morales

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