BizCLIR

It is well established that for-profit enterprise development (e.g., partnerships, corporations, sole proprietorships, etc.) cannot flourish in previously non-free-market economies without active governance that assures domestic and foreign investors that there is regularity, predictability, and transparency in all commercial undertakings. In the CEE/NIS, this is a critical period of private institution building that requires the dedication of internal and external financial resources to fund a process of enterprise privatization, restructuring, turn-around, revitalizing, renewal, and new business development (e.g., venture capital type start-up businesses). The government in each of the CEE/NIS countries represents part of the critical support system, which also includes NGOs.

Government regulation is essential, therefore, in terms of encouraging and facilitating the development of these enterprises, establishing standards for the internal governing of these institutions, and controlling their role in the overall economy because of potential abuses in their freedom of contract. This regulation may be part of the existing civil code, a new system of commercial codification designed to establish standards of practice in specifically defined situations ranging from commercial and secured transactions, bankruptcy, taxation, or the result of court-developed concepts such as fiduciary duty and the application of contract law. Constructive governance in this context also requires both an operating ethic that is conducive to for-profit enterprise development and that is broadly accepted by all political and bureaucratic levels. This is demonstrated by factors that go beyond code promulgation and to the very heart of the operations of the systems that result from the earlier stages of legal and regulatory reform. Examples include, among many others, increasing the size of the judiciary; educating judges about both code and regulatory reform and its importance to the overall performance of the economy; providing reasonable remuneration for the judiciary; the creation of registry bureaus that assure accurate recordation; assuring enforcement by getting buy-in by all key participants at the political, bureaucratic and business level; etc.

Company law plays a key role in market economies as it establishes guidelines for the internal organization of private companies and for corporate governance. Along with securities legislation, company law tries to protect outside investors and the public by specifying minimum requirements for capital and for the publication of information about the company. It also aims to encourage entrepreneurship by setting limits on the liability of investors.