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Department of International Law > OAS

Private International Law - February 2014

MSMEs – Simplifying Business Start-Up - Department of International Law Attends UNCITRAL Working Group I

The Department of International Law attended the February session of Working Group I of the United Nations Commission on International Trade Law (UNCITRAL), which is beginning its work on reducing the legal obstacles faced by micro, small and medium-sized enterprises (MSMEs) throughout their life cycle, in particular, in developing economies. As a result of two international colloquia on microfinance, five broad topics have been suggested for study. The first of these is preparation of legal standards to enable simplified business start-up and registration.

For the Working Group’s consideration, the Government of Colombia presented a description of Law 1258, enacted in 2008, which introduced a new type of business entity referred to as the Simplified Corporation or Sociedad por Acciones Simplificada (SAS). This law has reduced incorporation formalities to a simple filing before the mercantile registry, streamlined costs and formalistic requirements, clarified shareholders’ liability as limited, reinforced the principle of freedom of contract and enabled arbitration and administrative adjudication to supersede inefficient judicial procedures. Apparently, the law has had a dramatic effect on business in Colombia.

As was noted at the UNCITRAL Working Group I meeting, in March 2012 the Inter-American Juridical Committee (CJI) had considered a model law for the simplified stock corporation that was based upon the Colombian legislation. The CJI passed a resolution by which it transmitted the model law to the OAS Permanent Council for its due consideration. As of the present time, the matter has not yet been taken up by the Permanent Council.

It is estimated that in the Western Hemisphere there are about 120 million MSMEs, which generate between 50 and 70 percent of jobs in the region and 40 percent, on average, of the gross domestic product (GDP) of the countries of the region. More than a third are headed by women, while about 25 percent are created by entrepreneurs under 35 years of age. Most of the MSMEs in Latin America and the Caribbean operate primarily in the informal sector.

Given their role and contribution in fostering job creation, poverty reduction and prosperity with social inclusion, the OAS fosters support for MSMEs in Member States; however, this has been primarily at the policy and programmatic levels, for example, through support to the Inter-American Dialogues of High-Level MSME Authorities, a forum for policy dialogue for the exchange of best practices and lessons learned. Equally important is the furtherance of legislative initiatives such as simplified business start-up and registration to facilitate entry by MSMEs into the formal sector.

The Department of International Law was represented at the meeting of UNCITRAL WG I by Ms. Jeannette Tramhel, Senior Legal Officer. 

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