Law on the Reorganization of Instances Promoting Economic Development, Job Creation, and Administrative Facilitation

To amend Articles 3, 10, and 11 of the Law of the National Program for Employment Generation and Economic Growth, denominated: "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 the Public Administration that will be carried out through an Associated Center. It is financed by 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 identifies.

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, by 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 it may attend sessions of the Board with voice, but without vote. This Board of Directors must meet at least once a month, and may do so in extraordinary form at any time. In case of inability to achieve quorum to hold a meeting, a second convocation must be issued within the following twenty-four (24) hours, incorporating alternates if necessary. If the second convocation cannot be held, the Secretary may submit matters to be resolved electronically by the members of the Board of Directors so that they may pronounce themselves in favor or against within a determined period. A quorum is considered to exist for meetings of said Board of Directors when half plus one of the principal members are present physically or through electronic means, or the alternates who cover the vacancies of principal members who cannot attend. Decisions in the Board of Directors are made by consensus of its members, and in case of disagreement, it 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 entities or bodies, public or private, dedicated to the promotion of investments.

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

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

The Board of Directors of the "Honduras 2020" Program assumes all functions, powers, or powers contained in Decree No. 51-2011 dated May 3, 2011, published in the Official Gazette "La Gaceta" on July 15, 2011, in Edition No. 32,568, previously performed by the National Investment Council, including the "National Brand" Project and "Country Image" and related projects, as well as those currently developed by the Office denominated "ProHonduras" of the State Secretariat in the Office of Economic Development and the State Secretariat in the Offices of Foreign Relations and International Cooperation, regarding the promotion of investments at the international level; and others at the national level held by other entities or bodies of the Executive Branch in the matter of investment promotion.

To amend Article 48 of the Law of the Financial System, 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 they issue and must have regulation equal to or superior to that of the National Commission of Banks and Insurance (CNBS) and must have an agreement to share information with the latter.

The National Commission of Banks and Insurance (CNBS) must issue special regulations for the constitution of reserves for doubtful credits to productive sectors that reflect the cyclical nature of the cash flows of those sectors, especially for the agricultural, housing, tourism, and micro, small, and medium enterprise (MIPYME) sectors, as well as in industries that require significant amounts of labor or are considered strategic for the country's economy. 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 set forth in numerals 4) and 9) of this Article are excepted for credits and public or private issuances of bonds, shares, or other types of securities in projects, programs, or items declared of national interest by the Government of the Republic, provided that the investments to be made or already made upon the effectiveness of this Law do not jeopardize 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 administer, capitalize, or finance shall not be computed within the limit of related parties of a financial institution supervised by the National Commission of Banks and Insurance (CNBS). Resources administered by these collective investment vehicles may be invested in all types of projects and investments that meet the criteria of profitability, safety, and liquidity.

To amend Article 200 of the Law of Securities Market 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:

Obligations are securities that acknowledge or create a debt against the issuer and may be issued by commercial corporations and other entities authorized by special laws exclusively for fixed income securities. The National Commission of Banks and Insurance (CNBS) and participants of the securities market must promote the development of an alternative market for securities directed at small and medium enterprises (PYME), in order to facilitate access to financing under favorable conditions aimed at promoting and developing the competitiveness of this sector, for which policies shall be established that promote the creation of financial instruments, requirements, rates, charges, and differentiated commissions.

Remote Operators.- Foreign securities houses may participate in operations that occur in a stock exchange constituted in accordance with national legislation, on behalf of investors not domiciled in Honduras, prior authorization from the National Commission of Banks and Insurance (CNBS) and registration in the Public Register of the Securities Market, when requested by interested foreign securities houses, through the stock exchange in which they intend to operate, provided that the applicant complies with the requirements determined by the Commission. Likewise, securities houses constituted in the country are authorized to carry out 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 duly registered in the stock exchange where they operate. Foreign securities houses are prohibited from providing in Honduras the services established in Article 65 of the Law of Securities Market to persons or entities domiciled in Honduras, by virtue of the fact that these may only be performed by securities houses domiciled in the country.

In order to create a securities market, the income of funds administered by pension fund management companies and those established in Article 82 of this Law and securitization companies domiciled in the country belonging to those funds and their participants shall be exempt from the payment of the Income Tax for the interest, prizes, and other similar income they receive; capital gains tax on the profits they receive from the investments they make; as well as from the Real Property Deed Transfer Tax and registration fees for the purchase of real property they conduct. Likewise, investment funds, mutual funds, and securitization funds and trusts are exempt from all types of taxes, rates, and fiscal contributions. In the case of the latter, the return of patrimony held in trust 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 the payment of credit cards, public services, mortgages, secured transactions, remittances from abroad, invoicing from exports, flows from the operation of energy generation contracts, and all others that the National Commission of Banks and Insurance (CNBS) authorizes. For the period that their investment lasts, persons who invest in the aforementioned funds must pay only a capital gains tax equivalent to three percent (3%) of the gain obtained from the revaluation of capital shares that they make.

Public offering of foreign securities.- Securities issued by the States and Central Banks of the Central American countries, as well as regional and international financial organizations of which the State of Honduras is a member, may be the subject of public offering and their registration in the Public Register of the Securities Market maintained by the National Commission of Banks and Insurance (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, partnerships, or all types of legal entities, public or private, from any country in the Central American region that has regulation equal to or superior to that of the National Commission of Banks and Insurance (CNBS), at the discretion of the latter, must be automatic through registration in the Public Register of the Securities Market and in the Stock Exchange where they are intended to be traded, of the issuance documents accompanied by a certification issued by the regulator of the country where the issuance occurred. Securities issued by States and central banks not considered in the preceding paragraph, as well as those issued by corporations, partnerships, or all types of legal entities, public or private, from any country in the Central American region, may be the subject of public offering in the secondary market, provided that they previously comply with the requirements established by the National Commission of Banks and Insurance (CNBS). All these operations must be conducted and registered in the organized securities market. The securities house that intends to trade such securities in the country must request registration in the Public Register of the Securities Market, of the issuance and its issuer, when it is the primary market. For secondary market issuances, only registration of the issuance in the Register is required. In both cases, they must be registered in the corresponding stock exchange so that they may be the subject of public offering. For the registration of foreign securities, the requirements established in the Regulations of the Public Register of the Securities Market must be complied with.

To amend the Law for the Promotion and Development of the 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 Gazette "La Gaceta", by adding Article 52-A, which shall read as follows:

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