White Book 2010-11 f2:White Book 2010 21.4.2011 13:19 Page 1                         WHITE BOOK 2010/11                   ...
White Book 2010-11 f2:White Book 2010 21.4.2011 13:19 Page 2                        Copyright Notice                      ...
White Book 2010-11 f2:White Book 2010 21.4.2011 13:19 Page 3                                TABLE OF CONTENT             1...
White Book 2010-11 f2:White Book 2010 21.4.2011 13:19 Page 4                                         TABLE OF ACRONYMS    ...
White Book 2010-11 f2:White Book 2010 21.4.2011 13:19 Page 5                     1        FOREWORD             T          ...
White Book 2010-11 f2:White Book 2010 21.4.2011 13:19 Page 6
White Book 2010-11 f2:White Book 2010 21.4.2011 13:19 Page 7                     2        FIC IMPRESSIONS             T   ...
White Book 2010-11 f2:White Book 2010 21.4.2011 13:19 Page 8                               Foreign Investors Council      ...
White Book 2010-11 f2:White Book 2010 21.4.2011 13:19 Page 9              3                  BIH BUSINESS CLIMATE OVERVIEW...
White Book 2010-11 f2:White Book 2010 21.4.2011 13:19 Page 10                                 Foreign Investors Council   ...
White Book 2010-11 f2:White Book 2010 21.4.2011 13:19 Page 11                     4         EXECUTIVE SUMMARY             ...
White Book 2010-11 f2:White Book 2010 21.4.2011 13:19 Page 12                                  Foreign Investors Council  ...
White Book 2010-11 f2:White Book 2010 21.4.2011 13:19 Page 13                                                             ...
White Book 2010-11 f2:White Book 2010 21.4.2011 13:19 Page 14                               Foreign Investors Council     ...
White Book 2010-11 f2:White Book 2010 21.4.2011 13:19 Page 15                                                             ...
White Book 2010-11 f2:White Book 2010 21.4.2011 13:19 Page 16                                Foreign Investors Council    ...
White Book 2010-11 f2:White Book 2010 21.4.2011 13:19 Page 17                                                             ...
White Book 2010-11 f2:White Book 2010 21.4.2011 13:19 Page 18                                 Foreign Investors Council   ...
White Book 2010-11 f2:White Book 2010 21.4.2011 13:19 Page 19                                                             ...
White Book 2010-11 f2:White Book 2010 21.4.2011 13:19 Page 20                               Foreign Investors Council     ...
White Book 2010-11 f2:White Book 2010 21.4.2011 13:19 Page 21                                                             ...
White Book 2010-11 f2:White Book 2010 21.4.2011 13:19 Page 22                               Foreign Investors Council     ...
White Book 2010-11 f2:White Book 2010 21.4.2011 13:19 Page 23                     5         OBSTACLES TO INVESTMENT       ...
White Book 2010-11 Sections f2:White Book 2010 21.4.2011 13:20 Page 24
White Book 2010-11 Sections f2:White Book 2010 21.4.2011 13:20 Page 25                     6        SECTIONS              ...
White Book 2010-11 Sections f2:White Book 2010 21.4.2011 13:20 Page 26                               Foreign Investors Cou...
White Book 2010-11 Sections f2:White Book 2010 21.4.2011 13:20 Page 27                                                    ...
White Book 2010-11 Sections f2:White Book 2010 21.4.2011 13:20 Page 28                               Foreign Investors Cou...
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In order to stress the main obstacles to investment in Republic of Srpska and Bosnia and Herzegovina and to propose a program of priority reforms to eliminate these barriers the Foreign Investors Council - FIC has created a publication entitled "White Paper 2010/11."

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White book publication 2010/11

  1. 1. White Book 2010-11 f2:White Book 2010 21.4.2011 13:19 Page 1 WHITE BOOK 2010/11 Editor: Bojana Škrobić Omerović 2010/11 Foreign Investors Council
  2. 2. White Book 2010-11 f2:White Book 2010 21.4.2011 13:19 Page 2 Copyright Notice Permission to use, copy, and distribute the contents of this document in any medium and without fee, royalty and formal request to the Board of Directors of the Foreign Investors Council is hereby granted, provided that copies are not made or distributed for profit and that the Foreign Investors Council’s copyright is acknowledged and attributed to the source given. The Foreign Investors Council does not warrant, guarantee or make any representation regarding the accuracy, reliability, or any other aspect regarding this document. The FIC gratefully acknowledeges the sponsorship from IFC, a member of the World Bank Group, for the print- ing of the White Book 2010/11. The views and opinions expressed in this publication reflect Foreign Investors Council’s point of view and not necessarily those of the IFC. Under no circumstances shall the Foreign Investors Council or its sponsors be liable for any direct, indirect, special, incidental or consequential damages, or for damages of any kind arising out of or in connection with the use of this document under any theory of liability even if we have been advised of the possibility of such damages.
  3. 3. White Book 2010-11 f2:White Book 2010 21.4.2011 13:19 Page 3 TABLE OF CONTENT 1. FOREWORD .............................................................................................................. 5 2. FIC IMPRESSIONS ..................................................................................................... 7 3. BiH BUSINESS CLIMATE OVERVIEW – 2010 .................................................................. 9 4. EXECUTIVE SUMMARY ............................................................................................... 11 5. OBSTACLES TO INVESTMENTS ................................................................................... 23 6. SECTIONS ............................................................................................................... 25 6.1. BUSINESS REGISTRATION .................................................................................. 25 6.2. TEMPORARY RESIDENCE AND WORK PERMIT ........................................................ 31 6.3. LAW ON EXECUTION PROCEEDINGS ..................................................................... 36 6.4. COMPANIES LAW ............................................................................................... 42 6.5. LAW ON SECURITIES MARKET ............................................................................. 48 6.6. TAXES .............................................................................................................. 52 6.7. CONSTRUCTION PERMITS ................................................................................... 62 6.8. FBIH LIQUIDATION LAW AND BANKRUPTCY .......................................................... 66 6.9. EXPORTS .......................................................................................................... 74 7. FIC MEMBERS .......................................................................................................... 79 8. ACKNOWLEDGMENTS ................................................................................................ 81 9. SUPPORT TEAM LEADERS AND TEAM MEMBERS ........................................................... 83 10. REFERENCES ........................................................................................................... 85 3
  4. 4. White Book 2010-11 f2:White Book 2010 21.4.2011 13:19 Page 4 TABLE OF ACRONYMS ASYCUDA Automated System for CUstoms Data ATA Carnet combination of French and English phrases "Admission Temporaire/Temporary Admission BATA Institute for Accreditation of BiH BH FMT BiH Ministry of Finance and Treasury BiH Bosnia and Herzegovina BU Business Unit CD Customs declaration CDM  Clean Development Mechanisms CEMT fr. Conférence Européenne des Ministres des Transports - The European Conference of Ministers of Transport District / BD District Brcko DNA  Designated National Authority EBRD European Bank for Reconstruction and Development EDMWS system Electronic Document Management and Workflow System EU European Union FBiH Federation of Bosnia and Herzegovina FDI Foreign Direct Investments FIC Foreign Investors Council GNI Gross national income HJPC BiH High Judicial and Prosecutorial Council of Bosnia and Herzegovina IFC International Finance Corporation ILO  International Labor Organization ITA BiH Indirect Taxation Authority of Bosnia and Herzegovina KS Canton Sarajevo MoFTER BiH Ministry of Foreign Trade and Economic Relations of Bosnia and Herzegovina OECD Organization for Economic Co-operation and Development PARS Parlamentary Assembly of RS RS Republic of Srpska TIR Carnet fr. Transports Internationaux Routiers – Karnet TIR –International Road Transport VAT Value Added Tax * Recommendations from the previous White Book edition 4
  5. 5. White Book 2010-11 f2:White Book 2010 21.4.2011 13:19 Page 5 1 FOREWORD T he White Book is the most important in the local banking market. The Republic of publication produced by the Foreign In- Srpska entity approved a law authorizing PPPs vestors Council. In this annual publica- and FBiH still hasn’t adopted this law and we tion the FIC highlights the key obstacles our strongly believe that the government of this en- members are facing while doing business in tity as well as the state level will put in the ef- Bosnia and Herzegovina. The White Book 2010 forts to handle the issue of PPP. The EU progress is the most thorough edition the FIC has yet report for 2009 shows a small number of imple- published and contains only the most important mented reforms, as a result of which BiH is still issues as determined by our membership. pending on the EU membership process. Despite Bosnia and Herzegovina’s efforts to In the last year some limited improvements open its economy to more foreign investment, in the business environment were recorded, but foreigninvestors continue to face a number of the inadequate reforms were not sufficient to serious obstacles, including a complex legal and substantially foster private sector develop- regulatory framework, non-transparent busi- ments. We need more improvement and FIC ness procedures, and weak judicial structures. members are ready to assist the government in Given the fact that many of last years recom- developing an agenda for needed reforms, thus mendations still remain the same it is an obvi- contributing in their implementation. ous indication that very little has been acco- It is our hope that the recommendations mplished. We intentionally left the majority of provided in this edition of the White Book 2010 last years recommendations to emphasize the will pave the path for an improved business cli- necessity and actuality of the same. mate which will insure a better working envi- Privatization of state-owned enterprises has ronment for the present foreign companies and lagged behind the rest of the countries in the secure conditions that will attract investors will- region (including Croatia, Serbia, Montenegro ing to contribute to better employment of BiH and Macedonia). Government authorities at all citizens and the economic growth of the coun- levels have begun to address these obstacles as try. We are hopeful that the newly elected gov- part of the larger effort to transition to a market ernment will show more support to foreign economy; however, BiH is still in the early companies and in that way contribute to a bet- stages of this process. As a result, foreign in- ter business climate in Bosnia and Herzegovina. vestment (particularly greenfield investment) We would like to express our gratitude to all has shown only limited gains. Foreign invest- who contributed to the production of the White ment in the banking sector is the exception, Book 2010 edition, with a special thanks to our with Austrian banks taking a significant position devoted members. Tie Sosnowski FIC President 5
  6. 6. White Book 2010-11 f2:White Book 2010 21.4.2011 13:19 Page 6
  7. 7. White Book 2010-11 f2:White Book 2010 21.4.2011 13:19 Page 7 2 FIC IMPRESSIONS T he Foreign Investors Council aims to act The FIC is striving to maintain a con- as a single voice for all foreign investors stant flow of information to govern- in Bosnia and Herzegovina and seeks to ment authorities.  promote business-oriented initiatives and pro- One of these attempts may be reflected in vide practical support to all investors in order the FIC’s publication of the Open Letter to BiH to improve the business environment in the authorities, with the aim of emphasizing the im- country. By taking an active role in the transi- portance of the government endorsing foreign tion process, the FIC contributes to the im- investments in BiH. Through this communica- provement of the investment climate in Bosnia tion we have attempted to highlight the impor- and Herzegovina, engaging in dialogue with the tance of tax reform, construction and work stakeholders and voicing the position of the in- permits reform, further development of PPP, vestors. stressing and the significance of privatization.. In order to meet or accomplish goals, we In  order  to  channel  our  vision  and have so far conducted activities related to the aims we are in constant cooperation promotion of our members and their aspira- with representatives of foreign insti- tions, with the aim of pointing out important tutions and other foreign companies.  facts about our work in BiH as well as our influ- As a part of the Kyoto protocol, the CDM ence on the business climate. (Clean Development Mechanisms) is one of the Since 2007, we have been working on pro- most important elements that should be imple- moting our activities mostly through advocating mented in order to secure further development and lobbying for better conditions for foreign of the companies dealing with renewable en- and local investors. ergy sources. Our members, along with foreign When it comes to the implementation of the embassies and other foreign companies have recommendations from the White Book 2009, advocated for the forming of a DNA, a national some limited and slight improvements could be body for submitting the applications for CDM seen. According to data that we obtained, some certification, on a state level. In October 2010, modest improvements have been noticed in the the BiH Council of Ministers adopted the deci- area of business registration. As of 2008, FIC sion on forming this important body. The con- members along with other company represen- tinuation of these activities will follow during tatives were involved in working groups that this year. lobbied for these changes. In addition, the Law FIC members have also played a significant on Direct Foreign Investments have recently role in the process of promoting exports in been altered and improved in a way to reduce Bosnia and Herzegovina. This has been done the administration when it comes to registration through the cooperation with the EU funded of foreign capital in BiH. project for developing exports in BiH. FIC com- Some of the modest improvements have pany representatives were involved in develop- been noticed in the area of obtaining construc- ing the first National Export Strategy. tion permits, temporary residence permits, land In addition to the above,the Foreign In- and registry documents and court registration. vestors Council organized several events with Together with the municipal court in Sarajevo, the aim of promoting our membership and dis- our member companies have greatly con- cussing foreign investors issues with different tributed to land registry reform in Bosnia and representatives of government institutions, in- Herzegovina. ternational organizations as well as with others 7
  8. 8. White Book 2010-11 f2:White Book 2010 21.4.2011 13:19 Page 8 Foreign Investors Council who significantly contribute to the business cli- ronment, companies are not adequately infor- mate of BiH. Events such as these secured sig- med about the legal and regulatory changes that nificant feedback which was used to direct and have been made and how they will be enforced. guide further work of FIC members. In previous years BiH authorities have taken Representatives of the media played a cru- steps to improve the business climate in BiH. It cial role in covering and highlighting our events is necessary not only to continue these efforts during the year 2010. The media’s active in- but to do much more for the development of a volvement in our actions made it possible for us positive investment climate in the country as to spread our vision and aims throughout the well. Our current cooperation with authorities business community in Bosnia and Herzegovina has been quite satisfactory, but the new gov- and the region. ernment is expected to harmonize legislation, FIC members have demonstrated more than as well as to take concrete measures for reviv- once that they are socially engaged companies ing the investment cycle. responsible for local communities where they Given the fact that the newly elected BiH act. Actions such as: building parks, donating and FBiH Goverments have not been formed by schools, supporting the development of educa- the time this edition of the White Book is being tion, are common activities of our members, edited (end of February 2011), we are using which the society has recognized. this opportunity to stress once more that the The lack of a coherent policy by the govern- activities of our association as well as the activ- ment towards the economy and a clear vision ities of our members have been hindered pend- on how to set priorities and manage the needed ing the formation of the Government. reforms are the biggest obstacles for direct for- The future plans of the FIC are to maintain eign investments. The FIC is primarily con- and build new relations with newly elected gov- cerned with improving the legal and regulatory ernment officials and other important stake- framework in BiH. At the same time we would holders. We will continue our cooperation with like to emphasize the importance of practical other similar associations and foreign embassies steps that government officials can take in through the Cooperation Council, with the aim order to improve the work process within the of attracting new members and improving gen- Institutions. When it comes to business envi- eral conditions for conducting business in BiH. 8
  9. 9. White Book 2010-11 f2:White Book 2010 21.4.2011 13:19 Page 9 3 BIH BUSINESS CLIMATE OVERVIEW - 2010 B osnia and Herzegovina’s progress in The labour market remains relatively rigid, transition has been effectively stalled for which continues to encourage informality of some years, and as a result the country economic activities and employment, particu- lags behind all others in South-eastern Europe. larly during the time of crisis. High payroll con- The country’s complicated political and consti- tributions and high minimum wages remain key tutional structure is a major obstruction to re- factors in sustaining labour market rigidities. In form and good governance. As a result of the response to the pressures created by the crisis, reform paralysis, the country also lags behind the entity authorities introduced limited restric- other EU accession candidates or potential can- tions to the unemployment benefits. The em- didates in the region. ployment capacity is further damaged by the In recent years, policy reform efforts have failure of the country’s education system to been (greatly) inadequate and uncoordinated adapt to the market needs. An advanced draft and the business climate continues to suffer labour law has been prepared in FBiH, but was due to persisting structural rigidities. The lack of not discussed in the Parliament during the pre- political will combined with unfavourable mar- election period. According to the Labour Force ket conditions over the past year to prevent any Survey prepared in line with the ILO methodol- progress on privatization, particularly in FBiH. ogy, unemployment increased to 24.1% in In 2010 Inflows of foreign direct invest- 2009 and it even rose to 27,1% in 2010 . ments in BiH declined by almost 45% in com- Also, labour market issues are one of the parison to 2009. Annual average of foreign 1 key factors for not seeing the development investments inflow for BiH was 14.3 per cent in among foreign companies in BiH, followed by 2009 and beginning of 2010. The highway con- the difficulty to attract new investors. Our struction works on the Corridor Vc were members recognized this to be also a great stopped between September 2009 and March issue while conducting business in this country. 2010 due to political and legal problems. Bosnia and Herzegovina undertook some Graph below, shows FDI’s decline inflow: business environment reforms. The court-based 1 CBBiH, November 2010 – http://www.cbbh.ba/index.php?id=741&lang=bs 9
  10. 10. White Book 2010-11 f2:White Book 2010 21.4.2011 13:19 Page 10 Foreign Investors Council business registration system is in operation major reform. Return to a stronger and more since 2007 and at present permits this segment sustainable growth of economy demands reli- of the registration process to be completed in able public finance, a solid banking system and less than 10 days on average. The need for a better business environment double registration of foreign investors with the BiH is the country open to foreign invest- Ministry of Foreign Trade and Economic Rela- ments, especially, when it comes to natural re- tions was recently replaced by an electronic sources, energy and tourism. However, legal connection to the court-based database. obstacles, constitutional reform and tax admin- Regarding the construction permits, some istration are the most significant reason why improvements can been see in comparison to BiH remains unattractive to foreign investors.4 previous year. A construction permit can now be Graph below shows top three business envi- obtained faster, with the average time down ronment obstacles in the SEE region (relative from 296 to 255 days.2 severity of constraint). Although BiH felt the impact of the global fi- We believe it is high time that all le- nancial crisis, the banking system has remained vels of government take concrete steps sound, and by early 2010, the total level of de- and assign highest priority to impro- posits returned to pre-crisis levels. The Vienna ving environment for foreign and pri- Initiative agreement among the main banks vate investments.  succeeded in preventing outflows of funds back New governments have a precious opportu- to foreign parent banks. In order to counter a nity to reverse the negative trends of economic rise in non-performing loans, regulations re- decline and to take clear and strong actions to garding debt restructuring were loosened in motivate foreign investors to come in Bosnia both entities early in 2010. and Herzegovina. The economy growth in BH is expected to be FIC members will spare no efforts in striving up this year by 2.2 per cent,3 and more signif- towards achieving this particular goal for benefit icant progress is not to be expected without of both foreign investors and local companies. 2 World Bank “Doing business report for 2011”. 3 IMF Global Economic Outlook - BiH 4 EBRD Transition Report 2010. 10
  11. 11. White Book 2010-11 f2:White Book 2010 21.4.2011 13:19 Page 11 4 EXECUTIVE SUMMARY BUSINESS REGISTRATION ISSUES RECOMMENDATIONS INSTITUTION Legislation Legislation FBiH and RS FBiH and RS • Instituting a Lien on Shares in • Registration laws need to be amended • Ministries of Justice of FBIH a Limited Liability Company to provide for registration courts’ re- and RS (d.o.o.) gistering liens instituted on shares. FBiH FBiH • Unclear Definition of the Cases • More specific definition of the facts • Ministry of Justice of FBIH that May Result in a Suspen- that may result in a suspension of re- sion of Registration Procedure gistration procedure • Participation of Notaries in the • Amend the Notaries Law and registra- • Ministry of Justice of FBIH Registration Procedure in FBiH tion regulations such that notaries’ • Registration courts participation is completely reduced in the processing of company’s founding acts and articles of association, as well as any amendments. Practical aspects Practical aspects FBIH and RS FBIH and RS • Inadequate Availability of Ge- • Post information on the registration • Competent registration neral Information on Registra- procedure on web pages of all institu- courts tion Procedure tions involved in the procedure or in- • Competent Ministries of Ju- dicate contact details where the required stice information is available. • Lack of Consistency in Proces- • Remove the unnecessary red tape from • Competent registration sing Registration Applications laws and practices. courts in Courts • Competent Ministries of Ju- stice • Application of the Principle of • Access to basic company information • Competent registration Public Access to the Court Re- should be enabled on the website of courts gistry Records each court that maintains a company’s registry. • Failure to Honor Statutory Ti- • Courts’ operation needs to organize • Ministries of Justice of FBIH meframes and Unnecessary De- such that they provide continuous re- and RS lays in Registration Procedure gistration services. • Competent registration courts 11
  12. 12. White Book 2010-11 f2:White Book 2010 21.4.2011 13:19 Page 12 Foreign Investors Council ISSUES RECOMMENDATIONS INSTITUTION FBiH FBiH • Hours for Consultation with Re- • Since hours for consultation are sche- • Municipal Court in Sarajevo gistration Judges in the Muni- duled in other courts as a matter of cipal Court in Sarajevo typical practice, this practice should also be reinstated in the Municipal Court in Sarajevo. TEMPORARY RESIDENCE AND WORK PERMIT ISSUES RECOMMENDATIONS INSTITUTION Legislation Legislation FBiH, RS, BD FBiH, RS, BD • Work Permit Cannot Be Issued • There are two solutions to this pro- • BiH Parliamentary Assem- in Specific Cases Without an blem: (i) amend Article 84 of the BiH bly and FBiH Parliament Employment Contract Signed Law on Movement and Residence of • Competent Ministries Aliens and Asylum, or (ii) amend the FBiH Law on Hiring Foreign Nationals. Practical aspects Practical aspects FBiH, RS FBiH, RS • Failure to Comply with Applica- • The Department for Alien Affairs • BiH Ministry of Security ble Regulations Regarding the needs to act in accordance with the • Competent Department for Length of the Procedure for BiH Law on Movement and Residence Alien Affairs with the BiH Approving and Extending Tem- of Aliens and Asylum when deciding Ministry of Security porary Residence on an application for approval or ex- tension of temporary residence that was submitted directly to the compe- tent unit with the Department and to issue a decision within 30 days. FBiH, RS, BD FBiH, RS, BD • Inconsistent Enforcement of • A practice of mutual communication • BiH Ministry of Security Laws and Lack of Coordination and coordinated operation needs to be • Competent courts Among State Bodies and Insti- established between the Department • Competent Department for tutions in Exchanging Informa- for Alien Affairs and courts in charge Alien Affairs tion of business registration. FBiH FBiH • Lack of Harmonization of Laws • The BiH Law on Movement and Resi- • Competent Ministries and Practices Relating to the dence of Aliens and Asylum and the • KS Employment Department Procedure of Issuing a Work FBiH Law on Hiring Foreign Nationals 12
  13. 13. White Book 2010-11 f2:White Book 2010 21.4.2011 13:19 Page 13 W H I TE   BO O K ISSUES RECOMMENDATIONS INSTITUTION Permit Before Approving Tem- need to be harmonized with respect to porary Residence in the Sara- the first issuance of a work permit to jevo Canton (FBiH) foreign nationals. • Failure to Comply with Applica- • Practices need to be harmonized and • FBiH Parliament ble Regulations Regarding applicable laws need to be complied • FBiH Ministry of Labor and Working Hours of a Foreign Na- with. Another option is to adopt a rule Social Policy tional in the Sarajevo Canton defining the lower limits of full wor- • KS Employment Department king hours of foreign nationals. LAW ON EXECUTION PROCEEDINGS ISSUES RECOMMENDATIONS INSTITUTION Legislation Legislation FBIH and RS FBIH and RS • The Process of Identifying Deb- • The Law needs to be expanded to inc- • BiH Ministry of Justice tor’s Property Does Not Include lude authentic documents in addition • Entity Ministries of Justice Authentic Documents to enforceable documents. • Abuse of proceedings in case • The Law needs to preclude such stal- • BiH Ministry of Justice of objections submitted against ling of collection of claims, and anot- • Competent courts a writ of execution her possible solution would be to prevent the debtor from making arbi- trary and groundless allegations in his/her objections. • The rules for preparing and • The Law needs to define the course • BiH Ministry of Justice managing an auction are not of auction in detail because currently • Competent courts defined each court determines the terms and course of auction on its own. • Different Interpretation of the • The Law needs to clearly define the • BiH Ministry of Justice Provision Concerning Sale of meaning of the provisions that a real Real Property property “may be sold without restric- tions on the lowest price”. • Imprecisely defined deadlines in the following areas: o Satisfaction of claims o Clearly define a deadline to satisfy pe- • Competent courts titioner’s claims (within 15, 30 or 60 days). 13
  14. 14. White Book 2010-11 f2:White Book 2010 21.4.2011 13:19 Page 14 Foreign Investors Council ISSUES RECOMMENDATIONS INSTITUTION o Hearing to split the sale pro- o Define a specific timeframe within • Competent courts ceeds which the court must schedule a hea- ring to split the sales proceeds. o Decision on satisfaction of o Define a specific deadline and replace • Competent courts claims the term “without delay” with 15 or 30 days • Unclear definition of the pro- • Define more precisely the meaning of • Parliaments of cantons/en- cess of appraising the value of “a part of the creditor’s claim”, i.e. tities /People’s Assembly of real property specify an exact amount/ percentage the RS- PARS of the claim, (e.g. 1/3 or the like) • BiH Ministry of Justice • Entity Ministries of Justice Practical aspects Practical aspects FBIH and RS FBIH and RS • Execution against movable • Regulations should provide for recor- • Competent Ministries of the property (motor vehicles) ding a pending execution on a passen- Interior FBiH and RS ger motor vehicle in the vehicle • Competent Ministries of Ju- records with the competent Ministry of stice FBiH I RS the Interior and in the vehicle regi- stration certificate or license. • Abuse of the procedure of de- • These cases need to be defined such • Competent courts termining the sales price that a mechanism is ensured to pre- vent these identified abuses. • Different practices in courts in • The Law needs to clearly define the de- • BiH Ministry of Justice issuing a decision on satisfac- cision detailing satisfaction of claims. tion of claims • Incomplete information on the • The Law needs to specify that emplo- • Ministries of Justice FBiH I debtor’s level of debt yers are required to list all present RS debts of the employee. • Competent courts • Authentic documents do not • The definition of an authentic docu- • Competent courts include an invoice and a state- ment needs to be expanded to include ment from business books for invoices and statements from busi- all legal entities ness book for all legal entities, without exception. 14
  15. 15. White Book 2010-11 f2:White Book 2010 21.4.2011 13:19 Page 15 W H I TE   BO O K COMPANIES LAW ISSUES RECOMMENDATIONS INSTITUTION Legislation Legislation FBiH, RS, BD FBiH, RS, BD • Establishing a Branch Office of • Harmonize the FBiH Law with the RS • Ministry of energy, mining a Foreign Legal Entity and BD Laws and provide for an op- and industry of FBiH tion for foreign legal entities to esta- blish branch offices in FBiH. FBiH FBiH  • Prohibition of Share Purchase • The issue of financing a purchase of • Securities Commission of Financing equity shares/stakes should be defi- BiH ned more specifically in the FBIH Companies Law. FBIH  FBIH  • Convening and Advertising the • Amend Article 242 of the FBiH Law • Securities Commission of Shareholders’ Meeting and specify the minimum required cir- FBiH culation of a daily newspaper issued in FBiH in which the notice on a Share- holders’ Meeting is advertised. • Provision of Materials to Share- • In these cases, the person submitting • Securities Commission of holder for the Shareholders’ the request and having authority to FBiH Meeting directly convene the Shareholders’ Meeting should also be required to prepare draft resolutions. • Making Copies of Materials • Amend provisions of Article 247 of the • Securities Commission of Available to Shareholders for FBiH Law and add a provision accor- FBiH the Shareholders’ Meeting ding to which every shareholder who requests so, must have copies of the documents made available to him/her. • Vote of Confidence for Super- • Amend provisions of Article 259 of the • Securities Commission of visory Board Members FBiH Law, defining the need to con- FBiH vene a Shareholders’ Meeting for mandatory vote of confidence for Su- pervisory Board Members following the first two years of their term. • Age Limit for Supervisory • The Law needs to extend the age limit • Securities Commission of Board Members for Supervisory Board Members to at FBiH least 70 years of age. • Limitations Regarding Appoint- • Amend provisions of Article 264(1), • Securities Commission of ment as Supervisory Board and exempt affiliated companies from FBiH Member this limitation. 15
  16. 16. White Book 2010-11 f2:White Book 2010 21.4.2011 13:19 Page 16 Foreign Investors Council LAW ON SECURITIES MARKET  ISSUES RECOMMENDATIONS INSTITUTION Legislation Legislation FBiH FBiH • Stock Subscription and Pay- • The wording of the FBiH Companies • FBiH Ministry of Finances ment Law and the FBIH Securities Market • FBiH Securities Commissi- Law needs to be harmonized such that on the FBiH Companies Law refers to the FBiH Securities Market Law, instead of setting a time period. • Deadline to Submit Applica- • The deadlines in the FBiH Companies • FBiH Ministry of Finances tions for Approval of Public Law and the FBIH Securities Market • FBiH Securities Commissi- Share Offering Law need to be harmonized such that on the FBiH Companies Law refers to deadlines specified in the FBiH Secu- rities Market Law. RS RS RS • Registration of Securities • Transfers of securities resulting from • RS Ministry of Finances Transfers errors in entering transfer orders in • RS Securities Commission the stock exchange system should be exempted from the mandatory clea- ring. • Inability to Manage a Portfolio • The solution would read: “A stockbro- • RS Ministry of Finance in Other Markets ker that provides securities portfolio • RS Securities Commission management services shall keep its client’s securities that are traded in markets outside the Republika Srpska in a custody account – in its own name and for client’s account.” Practical aspects Practical aspects FBIH and RS FBIH and RS • Brokerage Services • Allow for implementation of the prin- • FBiH/RS Ministry of Finance ciple of reciprocity to banks and pro- • FBiH/RS Securities Commi- fessional brokers that hold brokerage ssion licenses in BiH, provided that full con- trol of the competent Commissions 16
  17. 17. White Book 2010-11 f2:White Book 2010 21.4.2011 13:19 Page 17 W H I TE   BO O K ISSUES RECOMMENDATIONS INSTITUTION over the work of professional brokers is ensured. RS RS RS • The Issue of Publishing a Pro- • Introducing a “preliminary prospec- • RS Ministry of Finance spectus tus” would allow the general public to • RS Securities Commission get to know the company that plans a public share issue. TAXES ISSUES RECOMMENDATIONS INSTITUTION Legislation Legislation FBiH, RS, BD FBiH, RS, BD • BiH Ministry of Finance and • Complicated Procedure for Ap- • All data on international agreements Treasury (BiH MFT) plying International Agree- to be stored in a single database and • FBiH Tax Administration ments for BiH made publicly available • Federation Ministry of Fina- nce • RS Ministry of Finance • Unclear legal provisions of the • Precisely define the obligation to pay • Entity Ministries of Finance personal income tax and social social security contributions for indivi- security contribution for indivi- duals residing in FBiH, RS and the Dis- duals residing in FBiH, RS and trict and earning their income in BD and earning their income in another administrative unit, and har- another administrative unit monize Laws. • Lack of harmonization between • Harmonize regulations at state level. • FBiH/RS Ministries of Fina- Personal Income Tax Laws with nce respect to tax exemptions and the amount of personal deduc- tion at entity and BD level • Unclear legal provisions regar- • Precisely define taxation of foreign in- • FBiH and RS Ministries of ding taxation of foreign natio- dividuals and their rights to a reduc- Finance nals who are employed in their tion in tax base, and develop a system home country and were sent in FBiH that will be linked with institu- on duty to BiH, and who pay tions authorized to carry out payment their social security obligations transactions. in their home country 17
  18. 18. White Book 2010-11 f2:White Book 2010 21.4.2011 13:19 Page 18 Foreign Investors Council ISSUES RECOMMENDATIONS INSTITUTION Practical aspects  Practical aspects FBiH and RS FBIH and RS • VAT Refund for Persons Who • Under the Regulation on VAT Law, cla- • BiH Ministry of Finance and Do Not Have a Registered Bu- rify in detail the right to a VAT refund, Treasury siness in BiH in accordance with EU directives and • BiH Indirect Taxation Aut- publish a list of countries from which hority VAT refund is possible. • Issuance of Opinions by BiH • Allow requests for opinion to be sub- • BiH Indirect Taxation Aut- Indirect Taxation Authority mitted in such a way that an opinion hority may be sought in all cases up to the moment when an inspection control procedure begins. • Inefficient Forced Collection on • The present entity laws governing • FBiH and RS Ministries of Debtors’ Bank Accounts (RS payment transactions should be up- Finance and FBiH) graded by including mechanisms whe- reby all bank accounts of a client would be blocked. RS RS • CORPORATE INCOME TAX o The Law does not clearly define o Clearly define in the Law gains/losses, o RS Ministry of Finance the meaning of unrealized income/expenses not included in the o RS Tax Administration gains/losses, income/expenses tax base. not included in the tax base o Depreciation of newly-acquired o Allow depreciation one month after o RS Ministry of Finance buildings is not possible the building was put into use. o RS Tax Administration o Different practices of taxation o Harmonize legislation regarding taxa- o RS Ministry of Finance of business units which have tion of business units in the other en- o RS Tax Administration their registered address in tity and BD. another entities and BD • Fiscal cash register software • Harmonize the Fiscalization Law and • RS Ministry of Trade and does not support any rebates the Trade Law and their related regu- Tourism or other discounts in retail lations and other regulations. • RS Ministry of Finance sales or requires a very com- plex tracking of such rebates or discounts, which is quite nonsensical in a computer age 18
  19. 19. White Book 2010-11 f2:White Book 2010 21.4.2011 13:19 Page 19 W H I TE   BO O K CONSTRUCTION PERMITS ISSUES RECOMMENDATIONS INSTITUTION Legislation Legislation RS RS • Unclear and Incomplete Urban • Amend the Urban Planning and Con- • Legislative and executive Planning and Construction Law struction Law such that clear cause- authorities in the RS effect relationships may be established between different provisions of the Law. FBiH, RS FBiH, RS • The RS Urban Planning Law needs to • Law Does Not Define Treat- incorporate more detailed telecommu- • Legislative and executive ment of Telecommunications nications infrastructure provisions. In authorities in the entities Sector FBiH, laws need to be further harmo- and cantons nized within the Federation framework (FBiH and cantons) Practical aspects  Practical aspects FBiH FBiH • Transfer of Construction Permit • Relevant laws need to define the con- in the Sarajevo Canton ditions for transferring a construction • Legislative and executive permit from one investor to another. authorities in the Federa- In addition, a new Construction Law tion and cantons needs to be enacted at FBiH level as well as a new law at cantonal level. FBiH, RS FBiH, RS • Inefficient Processing of Appli- • It is important to have professional, • Municipalities in FBiH and cations trained and responsible staff, capable the RS of managing all the changes made. Improvements would also require set- ting up networked databases. FBIH LIQUIDATION LAW AND BANKRUPTCY ISSUES RECOMMENDATIONS INSTITUTION Legislation Legislation FBIH and RS FBIH and RS • Vague Wording of Liquidation • The Liquidation Law needs to more • FBiH Parliament / PARS Procedure adequately address the course of the 19
  20. 20. White Book 2010-11 f2:White Book 2010 21.4.2011 13:19 Page 20 Foreign Investors Council ISSUES RECOMMENDATIONS INSTITUTION liquidation procedure as well as the • Ministries of Justice of FBIH position, rights and obligations of the and RS liquidator; alternatively, the Law should include a provision allowing for an adequate application of provision of the Bankruptcy Proceedings Law to those aspects of the liquidation proce- dure that have not been defined. • Inability to Access a List of • The obligation to record the liquidation • FBiH Parliament / PARS Companies Being Liquidated in procedure with the Companies Regi- • Ministries of Justice of FBIH the Court Registry ster and to include words “under liqui- and RS dation” in the company name during liquidation should be defined by law. • Qualifications and certification • Specific measures needed to improve • FBiH Parliament / PARS of receivers in BiH confidence in the implementation of • Ministries of Justice of FBIH the bankruptcy law should include: (i) and RS amend the present law to set some minimum requirements regarding past experience and define a specific profession that would correspond to the nature of duties of a receiver. • Treatment of company’s real • Entity level property laws should ex- • FBiH Parliament / PARS property after the liquidation pressly provide for this option. • Ministries of Justice of FBIH procedure is completed and RS • Different Practices in Courts • The Liquidation Law needs to include • FBiH Parliament / PARS Regarding Submission of Docu- a list of all the documents that a liqui- • Ministries of Justice of FBIH ments for Liquidation dation petitioner is required to submit, and RS and also to precisely define the mo- • Competent courts ment when each of the documents is to be submitted. Practical aspects Practical aspects FBIH and RS FBIH and RS • Different practices in courts re- • Practice in courts regarding this issue • FBiH Parliament / PARS garding submission of a certifi- needs to be harmonized, and relevant • Ministries of Justice of FBIH cate proving payment of tax regulations need to define that the tax and RS liabilities during the institution administration shall have the same • Competent courts 20
  21. 21. White Book 2010-11 f2:White Book 2010 21.4.2011 13:19 Page 21 W H I TE   BO O K ISSUES RECOMMENDATIONS INSTITUTION of a liquidation procedure position as all other creditors of a com- pany being liquidated. • Penalties for company mana- • The Bankruptcy Proceedings Law • FBiH Parliament / PARS gers who do not file for ban- should include, by way of amend- • Ministries of Justice of FBIH kruptcy on time ments to it, a higher fine and even a and RS criminal penalty for company mana- • Competent courts gers/administrators who do not file for bankruptcy on time. • Payment of a 5% lump sum to • The lump sum payment for the costs • FBiH Parliament / PARS the bankruptcy estate from the of maintenance would only be justified • Ministries of Justice of FBIH sale of movables and real pro- if the real property was in the posses- /RS perty sion of the bankruptcy debtor bet- ween the institution of bankruptcy proceedings and the sale of real pro- perty, which means that in such case all the maintenance costs would be borne by the bankruptcy debtor. • The issue of the right to dis- • Specify the meaning of the right of • FBiH Parliament / PARS pose of real property in ban- disposal, i.e. whether it is the transfer • BiH Ministry of Finance and kruptcy proceedings of possession or something else. A Treasury collision between the Bankruptcy Pro- • Ministries of Justice of FBIH ceedings Law and the VAT Law needs and RS to be resolved in terms of the legal ef- fects of such disposal. EXPORTS ISSUES RECOMMENDATIONS INSTITUTION Legislation Legislation FBIH and RS FBIH and RS • Issuing and Recognition of Cer- • Provide for signing bilateral agree- • BiH Ministry of Foreign Trade tificates in Countries in the Re- ments with neighboring countries (BiH, and Economic Relations gion and EU Croatia, Serbia, Montenegro). Mutual • Institute for Accreditation recognition of certificates. of Bosnia and Herzegovina - BATA/ • Implementation of TIR and ATA • The Ministry of Foreign Trade and Eco- • BiH Ministry of Foreign Trade Carnet Conventions nomic Relations should immediately and Economic Relations 21
  22. 22. White Book 2010-11 f2:White Book 2010 21.4.2011 13:19 Page 22 Foreign Investors Council ISSUES RECOMMENDATIONS INSTITUTION prepare the documents required to ra- tify the ATA Carnet agreement and start implementing it. • Automation of the Process of • The Ministry of Transport and Commu- • BiH Ministry of Transport Awarding ECMT Licenses nications should amend the regulation and Communications in order to formulate the entire pro- cess of awarding an ECMT license. Practical aspects Practical aspects FBIH and RS FBIH and RS • CUSTOMS AND ISSUES EXPO- RTERS FACE IN CLEARANCE: o Waiting for the green lane – o Automation of the ASYCUDA system • BiH Indirect Taxation Aut- often takes too long should enable automatic clearance hority through the green lane after 45 min. o Short office hours of the cu- o Organize customs operation 0-24h (or • BiH Indirect Taxation Aut- stoms offices and the obliga- at least 7-21), especially regarding in- hority tion to provide the CP form two house clearance, and shorten the dea- hours before the end of office dline to provide the form to 0,5-max hours for approved exporters 1 hour before the end of office hours o Too high price for correcting a o Reduce the price to a reasonable level • BiH Indirect Taxation Aut- CD (very often due to a trivial (KM 2.00-5.00) hority technical error) o Individual payment of duty for o Allow collective completion of monthly • BiH Indirect Taxation Aut- each export generates additio- declaration with a single duty or at hority nal bank charges least collective payment of all duties on a single payment slip. o Collecting a copy of 3 ex decla- o Placing mailboxes at all border cros- • BiH Indirect Taxation Aut- rations stamped by competent sings for forwarders to put certified hority authority at a border crossing copies of ex declarations and submitting it to the com- petent institution is a compli- cated procedure, especially for large exporters. 22
  23. 23. White Book 2010-11 f2:White Book 2010 21.4.2011 13:19 Page 23 5 OBSTACLES TO INVESTMENT T he 2010/11 edition of the White Book is • Law on Execution Proceedings looking into nine areas that are impor- • Companies Law tant for the future inflow of investments • Securities Market Law in the country. The issues presented in this pub- • Taxes lication reflect experiences that our Members • Construction permits are facing in the business environment. In cer- • Liquidation Law and Bancruptcy tain sections we are only emphasizing issues • Exports our Members are facing in one BiH entity, but it does not mean that the same or similar prob- Each section provides (i) narrative overview lems do not exist in another BiH entity or the of the key issues,(ii) summary of major recom- District. mendations for reforms (iii) table summarizing The following areas are covered: key issues, recommendation, and key institu- • Business Registration tion (government authority). • Temporary Residence and Work Permit 23
  24. 24. White Book 2010-11 Sections f2:White Book 2010 21.4.2011 13:20 Page 24
  25. 25. White Book 2010-11 Sections f2:White Book 2010 21.4.2011 13:20 Page 25 6 SECTIONS EXPERIENCES: ISSUES AND RECOMMENDATIONS 6.1. BUSINESS REGISTRATION Inadequate Availability of General Information on Registration Procedure* INTRODUCTION FBIH and RS: ISSUE Due to the crisis and the country’s focus on The registration procedure for legal entities elections in October 2010, reforms in the busi- in Bosnia and Herzegovina would have to be ness environment proceeded at a somewhat simpler, faster and cheaper in order to boost the slow pace. economy in general, and foreign investment in The latest amendments to the BiH Law on particular. The enactment of the Framework Law Policy of Foreign Direct Investment disconti- on Business Registration in BiH was aimed at nued the obligation of foreign investors to regi- introducing a simple and rapid procedure for re- ster their individual investments with the BiH gistration of businesses. In practical terms, ho- Ministry of Foreign Trade and Economic Rela- wever, legal entities still encounter problems in tions. Instead, competent registration courts the registration procedure because legislation are now required to act ex officio and forward and in particular practices vary from admini- information to the BiH Ministry of Foreign Trade strative unit to administrative unit in Bosnia and and Economic Relations regarding registered Herzegovina. In some cases, practices are dif- companies that include foreign investments. ferent even within one and the same court, de- The steps required to start a business in Bo- pending on which judge handles the case. Cha- snia and Herzegovina include 12 procedures, nging the present legislation is a lengthy pro- taking 60 days, and the cost are equivalent to cess. It would therefore be useful if the courts/ 15.75% GNP per capita for every start of busi- relevant Ministry of Justice, and even Chambers ness in Bosnia and Herzegovina. of Commerce, could make information related Over the previous year the situation in this to registration of companies publicly available. field has even worsened because the procedure This information should be available on websi- became more complex and expensive. This was tes of courts of law, Ministries or Chambers of primarily due to the fact that decisions made by Commerce, and should be updated as neces- bodies of the company must be now notarized, sary. What is important is that this information which extends the registration process and should be available for review in a single loca- makes it more expensive. We cannot but won- tion to facilitate and shorten the process of gat- der whether this participation of notaries in the hering required information such as documents registration process is merely a matter of for- to be submitted to the court for examination, mality and whether it boils down to "rewriting" amount of duties, contact details, etc. Further- decisions of the bodies that actually passed more, it would help if there were a list of the those same decisions. countries signatories to the Apostille Conven- In spite of the reforms implemented or star- tion and of the countries that had signed bila- ted in this field, there still remain numerous teral agreements with BiH according to which obstacles faced by foreign investors, in parti- the Apostille authentication is not needed. cular with respect to registration of their busi- nesses. FBIH and RS: RECOMMENDATION Below are only some of the obstacles faced Information on the registration procedure by our members in this area. needs to be posted on websites of all institu- 25
  26. 26. White Book 2010-11 Sections f2:White Book 2010 21.4.2011 13:20 Page 26 Foreign Investors Council tions involved in the procedure if they have a fense Laws (Article 80), which should be modi- website, or bulletin boards in these institutions fied. We believe this should only include such should be used to post contact details of the de- minor offenses for which the company and the partment/person where the required informa- responsible person in the company were sub- tion is available. Parties would find it much ject to an appropriate sanction in relation to easier to understand the procedure if instruc- minor offenses committed while performing tions were posted, reference laws were identi- one’s duties related to the company operation, fied and all information relating to the registra- and certainly not for minor offenses committed tion process was provided. In addition, registra- as private individuals. tion instructions should be harmonized among all courts and end users should be able to sim- FBIH and RS: RECOMMENDATION ply input information in these instructions. The laws need to be consistently applied and the unnecessary red tape should be removed Lack of Consistency in Processing Registration from both the laws and practices. If a party has Applications in Courts* failed to provide full documentation with its ap- FBIH and RS: ISSUE plication the first time, the court should issue a While Business Registration Laws are clear single conclusion listing all the shortcomings in and specify the documents required registering the submitted documents. a company, it is often the case that additional This would avoid unnecessary delays in the documents not required by law are requested procedure that are now present when several by courts or that a judge will make conflicting requests are made for different alterations in a conclusions in one and the same case. For single case, in spite of the fact that all the example, the Managing Director of a company shortcomings could have been noted in just one has changed. In addition to a certificate confir- conclusion. ming no outstanding fines issued against the company, the party is requested to provide the Application of the Principle of Public Access to same certificate for the person being relieved of the Court Registry Records the duty. Even though regulations do not re- FBIH and RS: ISSUE quire a certificate of no criminal record to be According to the relevant laws, data entered provided for the person being relieved of in the court registry records are public and his/her duty, such document can be asked for anyone may examine such data without the in practice. need to prove they have a legal interest in This seems unnecessary, particularly be- doing so. In practice, however, the principle of cause the persons being relieved of their duty such public access generally involves only re- do not have to be employed with the company quests for information (certificates, etc.) by re- at the time their names are removed from the gistered companies themselves. court registry records. We can see no reason for the certificate of no outstanding fines to include FBIH and RS: RECOMMENDATION details of traffic and other violations that are Access to this information should be enabled unrelated to the company itself, which these on the website of each court that maintains a persons committed as private individuals or as company’s registry (name and address, registe- citizens-amateur drivers (parking tickets, etc.) red business activity, capital and persons aut- The bases for these are FBiH and RS Minor Of- horized to represent the company) 26
  27. 27. White Book 2010-11 Sections f2:White Book 2010 21.4.2011 13:20 Page 27 W H I TE BO O K Instituting a Lien on Shares in a Limited Liability even longer. In addition to other factors that af- Company (d.o.o.) fect the honoring of these statutory deadlines, FBIH and RS: ISSUE unwarranted delays in the registration proce- Registration courts are the only institutions dure are also due to the registration judge’s that manage records on shares in limited liabi- being on an annual leave/sick leave/training/ lity companies, and it would appear logical that seminar/internship. This results in the registra- they should also register any liens instituted on tion procedure not being conducted and the re- such shares. There have been several attempts gistration case remains pending. Likewise, while to register such liens with the court, but the Business Registration Laws are clear and spe- courts refused these requests because there cify the documents required to register a com- was no explicit legal provision defining such re- pany, it is often the case that additional docu- gistration. This situation affects legal certainty ments not required by law are requested by because potential buyers of such shares cannot courts, or that judges will take different posi- use public records to obtain information on any tions and make different conclusions, which liens instituted on the shares. This is in contrast leads to insecurity and uncertainty in each pro- to purchasers of stocks, because entity securi- cedure. There are also frequent cases that a ties registries have been successfully registe- judge will make several requests for different ring liens instituted on stocks. alterations in a single case, in spite of the fact that all the shortcomings could have been noted FBIH and RS: RECOMMENDATION in just one conclusion. This artificially extends Registration laws need to be amended such the statutory periods to complete the registra- that information on liens instituted on shares tion procedure, which start at the moment all are maintained by registration courts. the relevant documents have been submitted. FBIH and RS: RECOMMENDATION Failure to Honor Statutory Timeframes and Unne- Courts’ operation needs to organize such cessary Delays in Registration Procedure that they provide continuous registration servi- FBIH and RS: ISSUE ces. In case of absences of more than a few Under the law, the procedure of company re- days, registration cases need to be reassigned gistration is an urgent and uniform procedure to other judges in order to honor statutory ti- applicable to all companies established in Bo- meframes. Laws need to be consistently applied snia and Herzegovina both by domestic and in- and only the documents required under law ternational legal entities or individuals. Accor- should be requested. If a party has failed to dingly, the Business Registration Law in the Fe- provide full documentation with its application deration of Bosnia and Herzegovina and the Bu- the first time, a judge should issue a single siness Registration Law in the Republika Srpska conclusion listing all the shortcomings in the stipulate that competent registration courts are submitted documents. This would avoid unne- required to issue a registration decision within cessary delays in the procedure. five days of an application being duly filed. Un- fortunately, this statutory timeframe is not ho- Unclear Definition of the Cases that May Result nored in practice, with registration procedures in a Suspension of Registration Procedure* taking most often 5 – 20 days for companies FBiH: ISSUE being registered for the first time, while regi- The FBiH Business Registration Law provides stration of status changes in the company takes that if a competent registration court suspects 27
  28. 28. White Book 2010-11 Sections f2:White Book 2010 21.4.2011 13:20 Page 28 Foreign Investors Council the existence of a fact that may decide whether FBiH: RECOMMENDATION the registration application is in line with this or Since hours for consultation are scheduled other laws, and if another court of law is to de- in other courts as a matter of typical practice, termine such fact, the registration procedure this practice should also be reinstated in the will be suspended until a final resolution is pas- Municipal Court in Sarajevo. sed ending the procedure before the other court. There were cases when this provision was Participation of Notaries in the Registration Pro- interpreted in very broad terms and the registra- cedure tion procedure was suspended even in cases FBIH: ISSUE when the company was involved in a parallel li- Council members believe that notaries’ par- tigation that was unrelated to the status change ticipation in the processing of company deci- being registered. Due to the length of time re- sions is needless and boils down do copying- quired to end litigation proceedings, such and-pasting of company decisions. This raises groundless suspension of the registration pro- the issue of the justification for such formalism cedure results in irreparable losses and creates and the contribution of a notary who, for exam- difficulties in company’s everyday operation. ple, notarizes a decision on establishing a new branch office (which is required under the law) FBiH: RECOMMENDATION or appointment or removal of a head of branch Since the Law does not specify which facts office in a company with 50 or 100 such branch are decisive for registration with a court regi- offices (this is not required under law, but is re- stry, there should be a more detailed definition quested in practice). Why would a notarized de- of the facts that may lead to a suspension of re- cision carry a greater legal force or be more gistration procedure. authentic in any way than a decision made by the management of a company that appoints Hours for Consultation with Registration Judges the head officer in its own branch? What is the in the Municipal Court in Sarajevo* contribution of a notary, for example, in notari- FBiH: ISSUE zing a decision on capital increase, in which The Municipal Court in Sarajevo has cance- case a corporation must anyhow submit to the led consultation hours. Businessmen believe registration court a certificate issued by the de- these hours are valuable in cases when court pository bank certifying payment of capital, etc? decisions or conclusions ordering supplementa- tion and/or correction of the application and FBIH: RECOMMENDATION submitted documents are not clear or when Amend the Notaries Law and registration re- they need to check what the general position of gulations such that notaries’ participation is the registration court is on certain issues that completely reduced, except in cases of authen- have not been clearly defined by laws and have ticating signatures of persons authorized to re- not been dealt with by courts previously. present the company. KEy ISSUE KEy RECOMMENDATION KEy INSTITUTION • Inadequate Availability of Ge- • Information on the registration proce- • Competent Ministries of Ju- neral Information on Registra- dure needs to be posted on web pages stice tion Procedure of all institutions involved in the pro- 28

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