BizCLIR

The legal framework for company law is characterized by appropriate but insufficient provisions. The law is generally sound, as far as it goes, but it does not go far enough. The Securities Committee is currently drafting a new law to address some of these gaps, including issues of corporate governance, but this draft is also inadequate, despite outside technical assistance. Further assistance is needed.

The implementing institution – the Company Registry – is undercutting the otherwise positive environment for company law. The Registry is famous for unnecessary delays in registration, sometimes taking months to register a company. There are widespread complaints of rent seeking and abuse of authority for political reasons, including delays based on political and religious discrimination. The additional costs of these delays can be absorbed by larger investors, but not by smaller entrepreneurs who are significantly damaged by their inability to do business or the elevated costs of entering the formal sector. This institution is responsible, in part, for the increased choice of small businesses to avoid the formal sector and operate in the gray economy.

At this time there are very few supporting institutions at all for company law issues.

Demand for change in the registration and licensing system is quite high, and the AmCham and the Association of Entrepreneurs are actively pursuing reforms. Changes in the law, however, are being pursued from the supply side. The State Securities Commission is heading the reform of the company law, and is very open to additional technical assistance to ensure the best possible result. Unfortunately, this Commission is not involved in the issue of licensing reform, which does not yet have a champion on the supply side.