According to the International Finance Corporation‘s 2012 Doing business report, Bosnia and Herzegovina is ranked at the bare bottom (162 out of 183) of the ease of starting the business chart.
According to the Republic of Srpska Ministry for economic relations and regional cooperation, to start the business by registering limited liability company in Republic of Srpska, in best case scenario one needs:
- to spend 23 days overall;
- to visit 10 institutions including: the notary office, municipal court, municipality, bank, commercial court, national statistics office, tax administration, indirect tax administration and authorized distributor of fiscal devices;
- to pay registration fees ranging from 565 EUR to 766 EUR without expenses of copying and verification of the required documents that includes:
- a certificate from the fines register – 7,5 EUR;
- contract of establishment made by notary 175,5 EUR + transcript of establishment assembly session – 58,5 EUR;
- verification of the responsible person’s signature – 5 EUR;
- court registration fee of 225 EUR + 25 EUR for the application (+ 150 EUR in case of foreign trade);
- publication of the registration in the Official gazette of Republic of Srpska – 25 EUR;
- company seal – 25 EUR;
- certificate of the assigned statistical number – 5 EUR;
- certificate of tax registration – 1 EUR;
- VAT registration certificate – 12,5 EUR;
- (municipal approval for trade, tourism and catering – 51 EUR).
Taking into consideration that:
- the assessment is based on the required procedures, time and cost for establishment of the company with the minimal amount of initial capital (1,000 EUR), and activities that do not fall into the category of dangerous to human health and the environment and activities of special interest for the republic, and person as the founder,
- the minimum amount of initial capital is not included in the cost of establishment, because that is the money that company operates with after registration,
- the purchase of a fiscal cash is considered to be the purchase of business equipment with which company will operate during the time of its existence, and it is excluded from the overall establishment cost,
it can be easily concluded that all of above is significant vaste of time and money of the person that is interested to start the business by registering LLC. In addition, each and every change of status of the company (ie. responsible person, owner, firm, residence address) requires re-registration that, in terms of necessary time and money, do not differ from the process of the establishment. Frequent changes in laws also result in re-registration which is everything but the stimulative environment for the entrepreneurs.
It is clear that the situation is extremely discouraging, resulting in stifling the entrepreneurial spirit. Given that next to the development of business ideas and business planning, registration of a legal entity is the most important segment for starting a business, it is clear that reform of the process is much-needed. Throughout the process, focus needs to be placed on time that is necessary for the interested party to meet its legal obligations, because the main objective of reform is not only to eliminate the procedure that is qualified as unnecessary, but also acceleration of those which are needed. This is particularly important if we want to attract foreign investors, who have high expectations in regard to the legal stability and rule of law and lack of fiscal levies in order to freely and quick as possible enter into the production and trading process.
According to the Action plan that Republic of Srpska Government adopted on December 21st of 2012, reform includes not only change of legislation, but also significant cut of administrative and court taxes. Aim is to limit overall expenses to static amount of 200 EUR, plus the initial capital lowered to 500 EUR instead of 1000 EUR for the LLC. Also, many of prominent lawyers and experts in the field of business law are now persuading the government to initiate the change in Company law that would introduce simpler form of LLC (which neighboring Croatia and some other countries adopted) that could be established in single day.
Electronic registration means a fully automated registration process from the moment of filling the web forms, up to the issuing of the certificate of establishment. In practice, it includes the existence of central electronic registrar (database) of both active and passive companies and associated forefront software throughout which all stakeholders (ie. tax administration and court officers) both communicate and cooperate. First phase of the project has set the objective of the “One-stop shop” establishment and single-point of contact system in which interested party needs to visit single counter, wait for certain amount of time (three days) and to come back to get the establishment certificate.
Second phase includes fully operationale-Registration system and usage of digital certificates and electronic signatures, so that whole process could be conducted via Internet. Good news is that Republic of Srpska is the only entity of Bosnia and Herzegovina that has adopted the set of so-called “e-laws”, currently issuing qualified digital certificates for its public administration institutions only, but with indications that this is going to be expanded to all of the citizens and perspective foreign investors. Proposal that is included in Action plan defines Agency for IT and financial services (APIF) as the commercial certification authority and one-stop shop service that will take care of the central electronic register.
Deadline for the implementation of the project is one year. During that time, it is expected for 22 laws to be changed, to design and implement new information system which will include two data centers and completely new forefront software, document management system and database throughout which all stakeholders are going to communicate in order to establish one-stop shop. First registration is going to take place after January 1st 2014.
Certainly, much of the work needs to be done in the area of overall liberalization of the economy, but reform of the process of business registration is the first step on the many miles road. By conducting the reform, Republic of Srpska government has set high aim that both Federation and Brcko District need to achieve if we want to rank higher in upcoming Doing business report. Moreover, sucessfull reform will result in introduction of long forgotten entrepreneurial spirit that is expected to arise after almost a century of communist rule and its directive-based economic experiment.
Written for and published on: balkaninside.com