Decree No. 54-2019 by which the Law of the National Employment Generation and Economic Growth Program "Honduras 2020 Program" is reformed

To reform Articles 3, 10, and 11 of the Law of the National Program for Employment Generation and Economic Growth, named: "Honduras 2020 Program", contained in Decree No. 36-2016 dated April 14, 2016, and to add to that same legal body Articles 30-A and 31-A, which shall read as follows:

The Honduras 2020 Program is an activity of Public Administration that will be carried out through an Associated Center. It is financed with contributions from the Government of the Republic, contributions from the Private Sector that participates in the Program through voluntary contributions, with income from the services it provides, with donations it receives, and other sources of income that it may identify.

The Board of Directors must be composed of: 1) Up to seven (7) principal members, with their respective alternates, representing the Government of the Republic, who are appointed or removed by the President of the Republic; and, 2) Up to six (6) principal members, with their respective alternates, who are appointed or removed by representative business organizations or groups of the country. The President of the Republic, through Executive Agreement, shall incorporate the appointments made by representative business organizations or groups of the country to form part of the Board of Directors. The alternate members of this Board of Directors may only participate in case of temporary or permanent absence of any of the principal members. The decisions made by the Board of Directors are binding for the Transformation Unit and must be executed by its bodies. The Executive Director or a representative of the structure that replaces him may attend the Board sessions with voice, but without vote. This Board of Directors must meet at least once a month, and may do so in extraordinary fashion at any time. In case of inability to achieve a quorum to conduct a meeting, a second convocation must be made within the following twenty-four (24) hours, incorporating alternates if necessary. If the second convocation cannot be held, the Secretary may submit the matters to be resolved via electronic means to the members of the Board of Directors so that they may pronounce themselves in favor or against within a determined time. There is considered to be a quorum for the meetings of said Board of Directors when half plus one of the principal members or the alternates covering the vacancies of the principal members who cannot attend are present physically or by electronic means. Decisions in the Board of Directors are made by consensus of its members and in case of disagreement, they must be submitted to a vote and decided by majority. The Board of Directors may invite to its sessions the alternate members and representatives of other public or private entities or bodies dedicated to the promotion of investments.

The Board of Directors has the following powers and duties: 1)...; 2)...; 3)...; 4)...; 5)...; 6) To promote the creation of employment and opportunities throughout the country; 7) To modify the name of the "National Program for Employment Generation and Economic Development of Honduras 2020" to the one it considers most appropriate for the goals pursued; 8) To modify the executive organization of the "Honduras 2020 Program", being able to adopt the structure that best adapts to the Program's initiatives, which may include one or more Managers or Executive Directors. In case multiple Managers or Executive Directors are appointed, it must be specified which of them will exercise legal representation; and, 9) To submit to the authorization of the Executive Power, the special regime or regimes to which certain projects, prioritized industries, or economic clusters must be subject. The Executive Power, through Decree issued in Council of State Secretaries, may apply any existing regime or one to be created for employment and opportunity generation anywhere in the Republic.

The Executive Power may grant fiscal stability agreements for the periods established in Article 21 of the Law for the Promotion and Protection of Investments, reformed through Decree No. 284-2013 dated January 8, 2014, which in order to enter into effect require their approval in the National Congress to guarantee that certain conditions necessary to attract or maintain an investment that generates employment in the country will be maintained over time.

The Board of Directors of the "Honduras 2020" Program assumes all functions, powers, or duties contained in Decree No. 51-2011 dated May 3, 2011, published in the Official Newspaper "La Gaceta" on July 15, 2011, in its Edition No. 32,568, previously performed by the National Investment Council, including the "Country Brand" and "Country Image" Project and related matters, as well as those currently developed by the Division called "ProHonduras" of the State Secretariat of the Office of Economic Development and the State Secretariat of the Offices of Foreign Relations and International Cooperation, insofar as international investment promotion is concerned; and any others at the national level that other entities or bodies of the Executive Power may have in the matter of investment promotion.

To reform Article 48 of the Financial System Law, contained in Decree No. 129-2004 dated September 21, 2004, published on September 24, 2004, and to add Articles 17-A, 38-A, 48, and 63-A, which shall read as follows:

Financial System institutions that decide to operate in financial centers, national or international, located in the country and that are subject to a special legal regime may do so by themselves or through the creation of another entity or through the establishment of branches, agencies, or other means of providing financial services. The operations they conduct in those financial centers must be governed by the rules these centers issue and must have regulation equal to or greater than that of the National Banking and Insurance Commission (CNBS) and must have an agreement to share information with the latter.

The National Banking and Insurance Commission (CNBS) must issue special regulations for the constitution of reserves for doubtful credits to productive sectors that reflect the cyclical nature of cash flows of those sectors, especially for the agricultural, housing, tourism sectors and micro, small and medium enterprises (MIPYME) as well as in industries that require significant amounts of labor or are considered strategic for the economy of the country. Likewise, refinancing of these credits must not be subject to additional reserve requirements.

PROHIBITIONS. Banks are prohibited from: 1....; 2....; 3....; 4....; 5....; 6....; 7....; 8....; 9....; 10....; and, 11....; The limits established in items 4) and 9) of this Article are excepted for credits and public or private bond emissions, shares, or other types of securities in projects, programs, or items declared to be of national interest by the Government of the Republic, provided that the investments to be made or already made at the vigency of this Law do not place at risk the solvency situation of Financial System Institutions.

Credits granted to collective investment institutions, such as pension funds, investment funds, mutual funds, securitization funds, and similar, whether or not domiciled in the country; and credits granted to projects that these manage, capitalize, or finance shall not be computed within the related parties limit of a financial institution supervised by the National Banking and Insurance Commission (CNBS). The resources administered by these collective investment vehicles may be invested in all types of projects and investments that meet profitability, security, and liquidity criteria." Amendments to the Securities Market Law

To reform Article 200 of the Securities Market Law contained in Decree No. 8-2001 dated February 20, 2001, and to add Articles 253-A, 253-B, and 253-C, which shall read as follows:

Bonds are securities that acknowledge or create a debt charged to the issuer and may be issued by commercial corporations and other entities authorized by special laws exclusively for fixed income securities. The National Banking and Insurance Commission (CNBS) and securities market participants must promote the development of an alternative securities market directed to small and medium-sized enterprises (PYME), in order to facilitate access to financing under favorable conditions tending to promote and develop the competitiveness of this sector, for which purpose policies are established that promote the creation of financial instruments, requirements, fees, charges, and differentiated commissions.

Remote Operators.- Foreign brokerage firms may participate in operations that occur on a securities exchange constituted in accordance with national legislation, on behalf of investors not domiciled in Honduras, prior authorization from the National Banking and Insurance Commission (CNBS) and registration in the Public Register of Securities Markets, when requested by interested foreign brokerage firms through the securities exchange in which they intend to operate, and the applicant complies with the requirements the Commission determines. Likewise, brokerage firms constituted in the country are authorized to conduct operations on behalf of non-resident clients in the country, as well as to conduct operations on behalf of investors residing in Honduras with securities issued abroad that comply with the requirements of the jurisdiction of origin and are properly registered in the securities exchange where they operate. It is prohibited for foreign brokerage firms to provide in Honduras the services established in Article 65 of the Securities Market Law to persons or entities domiciled in Honduras, by virtue of the fact that these can only be performed by brokerage firms domiciled in the country.

In order to create a securities market, the income from funds administered by pension fund management societies and those established in Article 82 of this Law and securitization societies domiciled in the country belonging to said funds and their participants shall be exempt from payment of Income Tax on interest, awards, and other similar income they receive; capital gains tax on profits they receive on investments they make; as well as the Real Estate Property Transfer Tax and registration fees for the purchase of real estate that they conduct. Likewise, investment funds, mutual funds, and securitization funds and trusts are exempt from all types of taxes, fees, and fiscal contributions. In the case of the latter, the return of the trust assets to the originator of the securitized flows is also free of taxation. Securitization funds and/or trusts may securitize all types of cash flows, including flows from credit card payments, public services, mortgages, secured lending guarantees, remittances from abroad, export invoicing, flows from energy generation contract exploitation, and all others authorized by the National Banking and Insurance Commission (CNBS). For the duration of their investment, persons who invest in the aforementioned funds must pay only a capital gains tax equivalent to three percent (3%) of the gain obtained by revaluation of the capital participations they make.

Public offering of foreign securities.- Securities issued by the States and Central Banks of Central American countries, as well as regional and international financial organizations of which the State of Honduras is a member, may be subject to public offering and their registration in the Public Register of Securities Markets maintained by the National Banking and Insurance Commission (CNBS) must be automatic. This same provision applies to sovereign bonds issued by the Government of Honduras abroad. The registration of securities issued by corporations, societies, or any type of public or private legal entities of any country in the Central American region that has regulation equal to or superior to that of the National Banking and Insurance Commission (CNBS), at the discretion of the same, must be automatic through registration in the Public Register of Securities Markets and in the Securities Exchange where it is intended to commercialize them, of the issuance documents accompanied by a certification issued by the regulator of the country where the issuance took place. Securities issued by States and by central banks not considered in the previous paragraph, as well as those issued by corporations, societies, or any type of public or private legal entities of any country in the Central American region, may be subject to public offering in the secondary market, provided that they previously comply with the requirements established by the National Banking and Insurance Commission (CNBS). All these operations must be conducted and registered in the organized securities market. The brokerage firm that intends to trade such securities in the country must request registration in the Public Register of Securities Markets of the issuance and its issuer, when it comes to the primary market. For issuances in the secondary market, only the registration of the issuance in the Register is required. In both cases, they must be registered in the corresponding securities exchange so that they may be subject to public offering. For the registration of foreign securities, the requirements established in the Regulation of the Public Register of Securities Markets must be met.

To reform the Law for the Promotion and Development of Competitiveness of Micro, Small, and Medium Enterprises contained in Decree No. 135-2008 dated October 1, 2008, published on January 14, 2008 in the Official Newspaper "La Gaceta", adding Article 52-A, which shall read as follows:

In order to achieve the objectives established in this Law, the State Secretariat of the Office of Economic Development, through the Deputy Secretary of the Office of Micro, Small, and Medium Enterprises and the Social Economy Sector, must promote the participation of Private Enterprise in the creation, development, and strengthening of Micro, Small, and Medium Enterprises (MIPYME), for which the monetary resources it contributes to promote development, sustainability of the business, and generate value chains must be recognized as deductible expenses from the net taxable income in the fiscal period in which it is made. Additionally, the contributing private enterprise has the benefit that after five (5) years, if the MIPYME remains as a sustainable going concern business, it may recover the value of the contributed resources that must be registered in the period it recovers as non-taxable extraordinary income, or in the case that the parties by mutual agreement agree that the contributor participate as a partner of the MIPYME.