CRF2009CRF2009BUSINESS REGISTRATION REFORMS IN AFRICABUSINESS REGISTRATION REFORMS IN AFRICA

Practitioners’ WorkshopPractitioners’ WorkshopCape Town - March 30, 2009Cape Town - March 30, 2009

REFORM OF THE BUSINESSREFORM OF THE BUSINESS REGISTRATION SYSTEMREGISTRATION SYSTEM IN THE IN THE

REPUBLIC OF SERBIAREPUBLIC OF SERBIA

Zvonko Obradovic,Zvonko Obradovic,Director, Director,

Serbian Business Registers Agency (SBRA)Serbian Business Registers Agency (SBRA)

2

FORMER FORMER BUSINESS REGISTRATION SYSTEM IN SERBIABUSINESS REGISTRATION SYSTEM IN SERBIA

2

INSTITUTIONAL NETWORK:

- Commercial courts: 17

- Municipalities: 165

TIME AND COST indicators :Indicator 2002 2003

Average number of days

71 51to register a new company

Cost US$ US$to register a new a company 202,43 197,99

1. Time:- Companies: 71 days (2002), 51 days (2003)- Entrepreneurs (“sole traders”): 3 - 7 days 2. Costs:- Companies: US$ 202- Entrepreneurs (“sole traders”): US$ 4 - 7

The source for the data: The World Bank “Doing Business” Report

3

FORMER FORMER BUSINESS REGISTRATION SYSTEM IN SERBIABUSINESS REGISTRATION SYSTEM IN SERBIA

(continued)(continued)

4 Different Databases (PARALLEL4 Different Databases (PARALLEL):):o Commercial Courts: registered companies

o Municipalities: registered entrepreneurs

o Republican Statistics Bureau: registered companies and entrepreneurs

o Customs Office: companies which engage in foreign trade

3 Procedures for Registration of Business Entities3 Procedures for Registration of Business Entities::o For companies: in the commercial courts

o For entrepreneurs: in the municipalities

o National Bank/Solvency Center: Financial

4

DRAWBACKS OF THE FORMER SYSTEMDRAWBACKS OF THE FORMER SYSTEM

DecentralizedDecentralized: each of the 17 commercial courts had its own paper register

Difficult to ImplementDifficult to Implement

CostlyCostly for new businesses

Sometimes corrupt, semi-regulatorySometimes corrupt, semi-regulatory in a manner inconsistent with market needs

Data Data produced was unreliableunreliable: out of 250.000 registered companies app. 90.000 only were active companies

Lack of TransparencyLack of Transparency: access to data only by proving legal interest

5

SETTING THE GROUNDSETTING THE GROUNDSS FOR THE REFORM FOR THE REFORM

Several studies (WB, USAID, Economic Institute) identified the legal legal framework for start-upframework for start-up as one of the main impediments to investments

The Reform was designed within the Council for Regulatory ReformCouncil for Regulatory Reform and implemented within the Serbian Business Registers Agency

The Business Registration Law was the fThe Business Registration Law was the first law passed in Serbia irst law passed in Serbia through RIA;through RIA; The success of the reform is the proof that RIA helps The success of the reform is the proof that RIA helps develop better regulationsdevelop better regulations

This positive experience influenced the introduction of mandatory RIAmandatory RIA in the legislative process; RIA is now coordinated by the Council for Council for Regulatory ReformRegulatory Reform

GOALS FOR REFORMING THE REGISTRATION GOALS FOR REFORMING THE REGISTRATION SYSTEMSYSTEM

6

To simplify and acceleratesimplify and accelerate the business registration procedure in Serbia

To create a more favorable business environment for foreign more favorable business environment for foreign investmentsinvestments

To create conditions for easier business start upseasier business start ups in Serbia

To upgrade state administrationupgrade state administration through a greater reliance on ITCITC

To establish the conditions for creating new jobs and reducing the new jobs and reducing the

informal economyinformal economy

6

7

IMPLEMENTATION OF THE IMPLEMENTATION OF THE BUSINESS REGISTRATION REFORMBUSINESS REGISTRATION REFORM

The reform implementation was guided by key principles adopted by the Serbian Government in 2003:

• Ministry of EconomyMinistry of Economy

• Council for Regulatory ReformCouncil for Regulatory Reform

• SSupport upport byby the WORLD BANK was cruci the WORLD BANK was crucial!al!

Implementation was financed through a grant by:

• The Swedish GovernmentThe Swedish Government

• USAIDUSAID

8

STEPS IN THE REFORM PROCESSSTEPS IN THE REFORM PROCESS

Step 1: Analyze best practicesAnalyze best practices

o Serbia has applied some aspects of the Anglo-SaxonAnglo-Saxon legal system

o Organizational and operational system from the Irish Irish Companies Registration OfficeCompanies Registration Office served as a model for establishing the SBRA

Step 2: Principles for the reform were developedPrinciples for the reform were developed

Step 3: Legislation was drafted (using RIA)Legislation was drafted (using RIA)

Step 4: Funds for implementation were securedFunds for implementation were secured

Step 5: Public Consultation ProcessPublic Consultation Process

Step 6: Adoption of the lawsAdoption of the laws

Step 7: ImplementationImplementation

9

LEGISLATION DRAFTEDLEGISLATION DRAFTED

9

• Parliament adopted the following laws:

LAW ON THE SERBIAN BUSINESS REGISTERS AGENCYLAW ON THE SERBIAN BUSINESS REGISTERS AGENCY

(“Official Gazette of the RS” – No. 55, May 21, 2004)

BUSINESS REGISTRATION LAWBUSINESS REGISTRATION LAW

(“Official Gazette of the RS” – No. 55, May 21, 2004)

REGULATION ON THE LEVEL OF FEES CHARGED BY THE SERBIAN REGULATION ON THE LEVEL OF FEES CHARGED BY THE SERBIAN BUSINESS REGISTERS AGENCY FOR ISSUING REGISTRATION BUSINESS REGISTERS AGENCY FOR ISSUING REGISTRATION CERTIFICATES AND OTHER SERVICES PROVIDED BY SBRACERTIFICATES AND OTHER SERVICES PROVIDED BY SBRA

LAW ON THE CHANGES OF AND SUPPLEMENT TO THE BUSINESS LAW ON THE CHANGES OF AND SUPPLEMENT TO THE BUSINESS REGISTRATION LAWREGISTRATION LAW was passed in the later stage, in order to harmonize it with the Company Law

10

ESTABLISHMENT AND IMPLEMENTATIONESTABLISHMENT AND IMPLEMENTATION OF THE OF THE SERBIAN BUSINESS REGISTERS SERBIAN BUSINESS REGISTERS

AGENCYAGENCY ( (SBRASBRA))

10

• SBRA:

• Is self sustainableself sustainable

• Holds eelectronic lectronic and and centralized registerscentralized registers

• Applies the ““Silence is ConsentSilence is Consent”” Rule Rule: if it does not act within 5 days registration is considered granted

• Applies feesfees,, which are limited by law which are limited by law and set at the minimum level to secure self-sustainability

• SBRA is the first institution in Serbia where STATE ADMINISTRATION HAS BEEN TRANSFORMED IN A SERVICE FOR CITIZENS

• Its Head Office is in Head Office is in BeBellgradgradee, and it has 113 branch offices3 branch offices throughout Serbia

11

IMPLEMENTATION COSTSIMPLEMENTATION COSTS

• For software and hardwaresoftware and hardware, and the first three months first three months of of operational costsoperational costs, a GRANTGRANT was secured by the Swedish Swedish GovernmentGovernment in the amount of app. app. EUR EUR 11..4 mill4 mill.

(The grant was administered by the World Bank)

• USAID USAID secured equipment in the value of app. USUS$$ 200 200,,000000

• MicrosoftMicrosoft secured a temporary software solutiontemporary software solution to allow for a timely start of operations

• The Agency was self-sustainable after three months of operation

12

SERBIAN BUSINESS SERBIAN BUSINESS REGISTERS AGENCYREGISTERS AGENCY ( (SBRASBRA))

12

At present, the SBRA runs 3 registers3 registers:

1.1. REGISTER OF BUSINESS ENTITIESREGISTER OF BUSINESS ENTITIES (operational as of January 1, 2005):

• Registration of companies (operational as of January 1, 2005)

• Registration of entrepreneurs (“sole traders”) (operational as of January 1, 2006)

• Registration of foreign branch offices (operational as of January 1, 2006)

• Registration of annual accounts of business entities (operational as of January 1, 2006)

2.2. FINANCIAL LEASING REGISTERFINANCIAL LEASING REGISTER (operational as of January 1, 2005)

3.3. REGISTER OF PLEDGES ON MOVABLES AND RIGHTSREGISTER OF PLEDGES ON MOVABLES AND RIGHTS (operational as of August 15, 2005)

13

IMPACTS OF THE REFORMIMPACTS OF THE REFORM

13

1. Since its establishment, the Agency has achieved exceptionally good results: within the 1st yr of operation, number of new registered number of new registered companies increased by 50% companies increased by 50%

2. Creation of a UNIQUE ELECTRONIC DATABASEUNIQUE ELECTRONIC DATABASE of registered business entities on the territory of the Republic of Serbia:

THE SBRA is the ONLY UPDATED SOURCE OF DATA on registered THE SBRA is the ONLY UPDATED SOURCE OF DATA on registered companies and entrepreneurs (“sole traders”)companies and entrepreneurs (“sole traders”)

3. SIMPLIFICATION SIMPLIFICATION and ACCELERATIONACCELERATION of the registration procedure:

o only formal registration requirementsformal registration requirements have to be met

o introduction of “silence is consent” rule“silence is consent” rule

o time required to register a new company is now 2-3 days2-3 days, and 1 1 day for registering a new entrepreneur (“sole trader”)day for registering a new entrepreneur (“sole trader”), although the law allows for a maximum of 5 days

14

WEAKNESSESWEAKNESSESIN THE REFORM PROCESSIN THE REFORM PROCESS

14

• Lack of a clear strategy by the GovernmentLack of a clear strategy by the Government regarding the commercial law reform in general, which impacted implementation of the business registration reform

• Poor coordination between different ministriesPoor coordination between different ministries - due to the lack of strategy (e.g., the Ministry of Justice undertook a parallel project financing a registration software for the commercial courts)

• Lack of a strategy in regards to the compromises that need to be madeLack of a strategy in regards to the compromises that need to be made in order to reach consensus between different interest groups involved in the reform process (Ministry of Economy and Privatization, Ministry of Justice, National Bank, Commercial Courts)

• Lack of institutional capacity for the reformLack of institutional capacity for the reform at the beginning of the process– Strengthening of the Council for Regulatory Reform accompanied the reform

implementation

15

IMPLEMENTATION CHALLENGESIMPLEMENTATION CHALLENGES

OF THE BUSINESS REFORMOF THE BUSINESS REFORM

1.1. LEGALLEGAL CHALLENGES:In the phase of drafting the necessary laws, the reform was highly controversial and was opposed even by some of the ministries within the Government (MOJ)Management of legal challenges:Adoption of the principles of the reform by the Government eliminated further opposition

2.2. TECHNICAL TECHNICAL CHALLENGES:The IT can be crucial for the success of the reform. The software was not ready in time due to the complex procurement rules of the World Bank.The reformers faced a difficult decision: whether to postpone the implementation date or to start operation even if not completely ready?Management of technical challenges:A temporary software solution was developed to surpass the problem.

16

IMPLEMENTATION CHALLENGESIMPLEMENTATION CHALLENGESOF THE BUSINESS REFORMOF THE BUSINESS REFORM

3. HUMAN RESOURCES3. HUMAN RESOURCES CHALLENGES:

The Agency was pressured to employ existing government officials and judges and staff from commercial courtsManagement of human resources challenges:The Agency decided to start employing new young people who will be able to learn that public administration is a service for its users

4.4. FINANCIALFINANCIAL CHALLENGES

The donor funds secured only three months of operational costs (rent, salaries, office supplies..)Management of financial challenges:When drafting the law RIA was applied including cost-benefit analysis, which secured setting the fees of the Agency at the lowest level which at the same time secures self-sustainability of the Agency.

17

UNIFORMITYUNIFORMITY of registration practices regardless of where registration takes place

DECREASE COSTS OF REGISTRATION:DECREASE COSTS OF REGISTRATION:– Costs of registration have been cut to EUR 41 for the

registration of a limited liability company and EUR 6 for entrepreneurs (“sole traders”)

– Basic capital requirement has been cut from US$ 5,000 to EUR 500

AVAILABILITY OF ALL DATAAVAILABILITY OF ALL DATA in the Register without having to prove legal interest

HARMONIZATIONHARMONIZATION with EU standards and directivesEU standards and directives

IMPACTS OF THE REFORMIMPACTS OF THE REFORM

18

STRENGTHS IN THE REFORM PROCESSSTRENGTHS IN THE REFORM PROCESS

• Accepted strategy was immediately aimed at a radical reformradical reform

• The reform was implemented in two phasestwo phases: phase I included elimination of the pre-entry inspections

• To develop the scope and principles of the reform and draft the law RIA RIA was appliedwas applied

A detailed cost analysis of the new registerA detailed cost analysis of the new register was conducted to find the right balance between the requirements for an independent and self-financing register and the minimum costs for the users-businesses

• Different interest groups were included in the processDifferent interest groups were included in the process, both in the drafting and public consultation phases

It is advisable to use an inter-ministerial bodyinter-ministerial body, such as the Council for Regulatory Reform, as a basis for the creation of an strategy for the reform of the commercial law, and as a mechanism for coordination between different ministries involved in the reform process

19

USEFUL ADVICE FOR ANY COUNTRY USEFUL ADVICE FOR ANY COUNTRY PLANNING TO REFORM THE BUSINESS PLANNING TO REFORM THE BUSINESS

REGISTRATION SYSTEMREGISTRATION SYSTEM

19

Prior to starting a radical reform such as reform of the business registration system, and as early as possible, is necessary TOTO ENSUREENSURE as wide as possible CONSENSUS ON THE BASIC CONSENSUS ON THE BASIC PRINCIPLES OF THE REFORMPRINCIPLES OF THE REFORM within the Government and interested institutions

Since reform involves competencies of several ministries, it is necessary for the Government to establish an INTER-MINISTERIAL INTER-MINISTERIAL BODYBODY to follow up and coordinate the overall reform, and to ensure consistency in the regulations and in the implementation of the Action plan ( for the reform)

SBRA STATISTICS SBRA STATISTICS As of February 27, 2009

20

REGISTER OF BUSINESS ENTITIES:REGISTER OF BUSINESS ENTITIES:

Entrepreneurs (“Sole traders”)• Total registered 216,983216,983• Registered in 2008 43,584• Registered in 2009 5,699• Deleted in 2008 34,769• Deleted in 2009 5,854Companies• Total registered 105,559105,559• Registered in 2008 11,406• Registered in 2009 1,506• Deleted in 2008 3,077• Deleted in 2009 425

Annual Financial reports in 2008 110,655110,655

20

20

www.investmentclimate.org 21

CURRENT REGISTRATION REQUIREMENTSCURRENT REGISTRATION REQUIREMENTSSource: Source: ““Doing BusinessDoing Business 2007” 2007”

No Procedure for a LTD Company Time to complete Cost to complete

1 Obtain registration forms (Form RJR-1, Form OP, Forms M1 and M4) 1 day CSD 5 (form OP)

2 Notarize the memorandum of association and lease contract at the Basic Court 1 day

depends on the amount of capital

3 Open a temporary bank account; pay founding deposit or its part and all other fees 1 day no charge

4 Obtain the registration certificate Business Registers Agency (SBRA)

3 daysRSD 5,060

(RSD 3,600 + RSD 1,460)

5 Make Stamp and seal 1 day RSD 2,500

6 Obtain tax identification number (PIB) at the Municipal Hall; certify the signatures (three copies) for opening bank account

6 days no charge

7 Register with local tax authority 5 days no charge

8 Open a permanent business account with the commercial bank

1 day(less than half a

day)

RSD 400 (signature certification and republic tax)

9 Register the employment contracts with the Employment Organization/Fund 1 day no charge

10 Obtain certificate from the pension fund (PIO Fund) 2 days no charge

11 Obtain certificate from the Health Fund 1 day no charge

23 days

INEFFICIENCIES INEFFICIENCIES OF THE CURRENT MODELOF THE CURRENT MODEL

Registrants must:

PersonallyPersonally visit up to 6 different offices6 different offices

Complete up to 11 procedures11 procedures

Submit forms to different officesto different offices containing duplicate duplicate informationinformation

Perform many procedures sequentially, rather than procedures sequentially, rather than concurrently (in parallel)concurrently (in parallel)

Register separatelyRegister separately with each agency

22

Desired Model:Desired Model:• Introduce a single business registration formsingle business registration form• Introduce a system whereby public authorities can recognise

enterprises by a single identification numbersingle identification number• Set up single contact pointssingle contact points where a single registration form

can be deposited• Ensure that government departments avoid introducing avoid introducing

duplicated or superfluous forms and/or contact pointsduplicated or superfluous forms and/or contact points• Use IT and databases as much as possibleIT and databases as much as possible for the

transmission and authentication of information submitted and/or the exchange of information between public authorities

PRINCIPLES FOR FUTURE REFORMSPRINCIPLES FOR FUTURE REFORMS

23

Thank you for your attention!

 

I am at your disposal for any further questions!

 ZOBRADOVIC@APR.GOV.RSZOBRADOVIC@APR.GOV.RS

24