	Social Enterprise Law Surveys
	Honduras
	(Latin America/Caribbean) Firm Gufa Law
What jurisdiction(s) do you practice in?	Honduras
What are the most commonly used types of for-profit corporate organizational forms in your jurisdiction (e.g., corporation, limited liability company, benefit corporation, social purpose corporation, etc.) used by Enterprises operating a trade ...	The most common for-profit organizational forms utilized in Honduras are the corporation (Sociedad Anónima) and the limited liability company (“LLC”) [Sociedad de Responsabilidad Limitada], which are well understood and traditional in nature. In many ways, they are similar, but LLCs have partners' interests rather than shares, and they are also less flexible in terms of new partners. Finally, Honduras has a cooperative corporation (“CC”) structure that is often used for producers, consumers, borrowers or users of the products or services offered by the cooperative. A CC must have a minimum of 20 partners. a. Enterprises that seek financing from investors and will have multiple owners tend to form corporations. It is certainly possible to work with LLCs that have many members and investor backing, but it is less standard. b. In Honduras there are no for-profit organizations forms used by Social Enterprises.
Do any of your jurisdiction’s traditional organizational forms require or permit the board or managers to consider, balance or prioritize interests other than shareholder value in decision making? What other interests, if any, are they required...	Corporations and LLCs have no requirements.
Does your jurisdiction have organizational forms specifically designed for Social Enterprises? If so:a. What type(s) of organizational forms are they?b. How do they materially differ from the most closely analogous traditional organizational ...	Yes. a. There are different types of forms adopted for Social Enterprises: NGDOs: Civil Associations Foundations Religious Associations Mutual Benefit Associations Private Financial Development Organizations Communities’ Associations Water Administration Associations Cooperatives b. They materially differ from corporations or other for-profit organizational forms in the way they are created, to start with. Social Enterprises require that a special Secretary or other type of government agency approves the status as a legal entity, after reviewing that its bylaws comply with the different laws and their objectives are in harmony with the type of Social Enterprise. A corporation, on the other hand, is incorporated and furthered registered at a commercial registry, but needs no authorization by an authority to receive a legal status, merely a registration. Another difference is the way members are admitted to the organization. Corporations admit new shareholders through a stock purchase or transfer, while members of Social Enterprises are not holders of stock or interest. Social Enterprises must report activities and financial statements every year. Social Enterprises may carry out commercial activities as long as they are destined for their own sustainability and profits are never distributed to their members. On the contrary, corporations distribute profits to their shareholders through dividends. Some Social Enterprises prohibit board members to receive salaries for their appointment. Private Financial Development Organizations are authorized by the National Banking and Insurance Commission. c. Social Enterprises are entitled to different types of tax exemptions, depending on the type of organization. These tax exemptions benefit the sustainability and operation of the Social Enterprise. Funders also benefit by deducing donations from the funder’s income tax, as long as the Social Enterprise is duly incorporated and has the status of a legal entity, as well as up to date with its tax obligations. d. Restrictions are mainly based on the objectives of the Social Enterprise. For example, foundations must have the objective of working towards the benefit of a third-party beneficiary, while civil associations or mutual benefit associations may be formed to benefit or support their own members. If the objective diverges from the purpose that the organization should have by law, it will not receive the status of a legal entity or authorization to operate. e. Yes. A traditional Enterprise can be incorporated in one week, while a Social Enterprise must obtain its legal status or authorization to operate from the responsible State authority. This authorization could take approximately 6 months. The costs of incorporation also differ, especially because the minimum founding capital needed for an Enterprise and a Social Enterprise is different. A corporation requires a minimum of approximately $1k, an LLC a minimum of approximately $200, a Foundation a minimum of approximately $2k and a Private Financial Development Organization a minimum of approximately $41k. Other types of Social Enterprises require no founding capital. Also, nowadays, a lawyer is not absolutely necessary to incorporate a traditional Enterprise, whereas you will need a lawyer to create a Social Enterprise, which will increase its costs. f. Social Enterprise forms are very well known, they each have a special law to regulate its incorporation and operation and it is also well known what specific state authorities oversee their operations.
Are Social Enterprises permitted to be formed and operated as Nonprofits? If so: a. Are Nonprofits that are Social Enterprises treated differently under the law as compared to Nonprofits that are not Social Enterprises, whether from a corporat...	In Honduras, all Social Enterprises must be formed and operated as Nonprofits. There is no difference in Honduras between the two concepts. The use of Nonprofits for Social Enterprises is prevalent.
Does your jurisdiction allow for worker-owned Enterprises, such as cooperatives? If so, please describe any material benefits of, and/or restrictions on, using such forms.	Yes. Cooperatives are entitled to income tax exemption and other types of tax exemptions. However, they must pay a Social Contribution of the Cooperative Sector every year, which is 15% of the gross surplus. Cooperatives are democratic organizations controlled by their members, who actively participate in defining policies and decision making. Cooperatives often have the possibility of adhering to government financing programs for the benefit of their members. However, the size of the cooperative is directly related to the possibility of growth. Smaller cooperatives often have trouble finding financing opportunities.
Are there unique reporting requirements for Social Enterprises? If there are, please describe them. Please also discuss what government bodies Social Enterprises are required to report to.	NGDOs, Religious Associations and Mutual Benefit Associations must report every year in February the latest, the activities carried out during the previous year, as well as submit a financial statement of the previous year. They report to the Directorate of Registration, Regulation and Monitoring of Civil Associations. Private Financial Development Organizations must be audited by an external auditing firm every year. The auditing firm will report the audit results, including financial statements, to the National Banking and Insurance Commission. Cooperatives must submit their financial statements to the National Supervising Council of Cooperatives.
In your jurisdiction, has case law and jurisprudence evolved to address Social Enterprises? If there is meaningful jurisprudence around Social Enterprises, please provide some brief examples.	No.
Does your jurisdiction have any ESG requirements for Enterprises generally? If it does, please describe.	No.
Does your jurisdiction have any ESG requirements specifically for Social Enterprises? If it does, please describe.	In Honduras, there’s a Special Law for the Promotion of Non-Governmental Development Organizations. Such law regulates any NGO that focuses on: protection of the environment, protection and promotion of human rights, construction of housing, generation of educational programs, health support, strengthening democracy, protection of victims of natural disasters, art promotion, etc.
Does your jurisdiction have any ESG requirements for investors? If it does, please describe.	No.
Are any major investor classes (e.g., pension funds, mutual funds, etc.) required to look at ESG issues when making investment decisions in your jurisdiction? a. If they are, please describe the requirements.b. If they are not, are they permi...	There are no investor classes that are required to look at ESG issues when making investment decisions in Honduras. They are nonetheless in their complete liberty to consider and assess these factors to make their investments. Honduras in the last years has been promoting Corporate Social Responsibility (CSR), which seeks the accomplishment of similar economic, social, and environmental goals, but might lack several features that ESG has. Since CSR is seen as a previous step before implementing ESG, investors are continuously developing and enforcing actions that solidify this type of culture within the commercial and productive sectors.
What kinds of philanthropic funding do Social Enterprises in your jurisdiction commonly receive (e.g., grants, charitable investment, traditional investment)?	Social Enterprises in Honduras receive grants, donations, charitable investments, and traditional investments. It is also common that Social Enterprises subscribe to agreements with different companies and private or public entities to achieve specific projects in a way to keep their activities always ongoing.
How prevalent, if at all, are new for-profit impact investments in your jurisdiction (e.g. traditional instruments with impact terms, new investment instruments, aggregation with philanthropic capital, community based funding, etc.)?	In Honduras, for-profit impact investments are not prevalent. This jurisdiction has a long history in which most Social Enterprises work non-profit schemes.
What are the types of government funding and support available to Social Enterprises, if any, available in your jurisdiction (e.g., grants, investments, bonds, and guarantees)? a. How difficult is it for Social Enterprises to obtain government...	Social Enterprises are widely supported by the government through different types of funding, mostly by grants, training technical assistance and concessions. For example, several agricultural cooperatives may apply and receive land concessions to produce idle lands, as well other monetary incentives to develop these small and medium Social Enterprises. The difficulties that Social Enterprises confront in their way to obtain government funding are mostly due to low resources availability and not policy lacking. Although there are no regulations on which type of Enterprises can obtain government funding, in practice these are mostly given to Social forms of Enterprises.
Are there any companies that are formed as a Social Enterprise listed on your jurisdiction’s leading securities exchange(s)?	The are no records of Social Enterprises listed on Honduran securities exchanges.
To what extent are publicly traded Enterprises required to disclose ESG related factors in annual reports/public filings in your jurisdiction.	Enterprises are not required to disclose ESG related factors in their annual reports.
How prevalent, if at all, are impact bonds in your jurisdiction?	Honduras has no impact bonds.
In your jurisdiction, are there any restrictions on foreign investments or donations that are unique to Social Enterprises (whether incorporated as for profit entities or as Nonprofits)?	No.
Is “crowdfunding” legal in your jurisdiction? Are there rules under applicable securities laws that make it easier for smaller businesses or Social Enterprises to take money from investors that are not sophisticated/accredited/qualified under a...	Crowdfunding is legal in Honduras since there is no explicit prohibition. This means that there are no regulations and therefore all entities that desire to do crowdfunding have the same opportunities to obtain resources from the public.
Are there any tax exemptions that are uniquely available for Social Enterprises? a. Please describe any tax exemptions that are available and whether they are partial or full.b. Are they dependent on the Social Enterprise utilized using a spe...	There are several tax exemptions available for Social Enterprises. The tax exemptions are based on their non-profit nature, but not all Non-profit organizations are treated equally from a tax exemption perspective. Exemptions depend on the type of Social Enterprise. Non-profit organizations are entitled to exemptions for income tax. NGDOs, religious organizations, Communities’ Associations and Water Administration Associations are also entitled to exemption on a Population Safety Contribution that affects financial transactions. NGDOs are entitled to sales tax on purchases directly and exclusively related to their projects and custom taxes on donations received by them. Regarding municipal taxes, Non-profit organizations are also entitled to exemption on the Real Estate municipal tax and the Industry, Commerce and Services tax, exclusively for income from donations. The exemption is not applicable to income from sales that the organization may carry out.
Are individuals or other organizations able to provide tax deductible donations to for-profit Social Enterprises? If they are, please describe any restrictions applicable to tax deductible donations?	No. There are no for-profit Social Enterprises in Honduras.
Are there any other tax benefits uniquely available for Social Enterprises? (e.g. deferrals, favorable tax rates, business deductions, etc.)	No.
Does your jurisdiction provide for reciprocal recognition of tax-exempt status that has been granted under the law of any other jurisdictions?	No.
Does your jurisdiction have Regulatory Sandboxes or similar policy frameworks for Social Enterprises? If it does, please describe.	Yes, the Framework Law of Public Policies in Social is a fairly broad general framework to regulate actions aimed at transforming human conditions, with emphasis on poverty conditions. There is also a policy framework, the “Social Protection Policy” its main objective is to gradually reduce poverty, extreme poverty, vulnerability and social exclusion of the population subject to the Social Protection Policy, through the articulation of strategic actions in the prevention, mitigation and overcoming of social, economic and natural risks. Promote social protection from a comprehensive and inclusive approach with social security, social assistance, food security, health services, education, labor market and to support in a special way social groups that for reasons related to their age, gender, multiculturalism, disability, sexual orientation and gender identity, serological condition or lack of protection are excluded, in a situation of high social risk or present damages that require special attention.
What government operational support, resources, training or services, are available for small businesses or Social Enterprises?	There are government grants and different government support for micro, small and medium businesses (known in Honduras as “MIPYME”). Programs such as the Guarantee Fund for the Reactivation of the affected MIPYMEs by the pandemic caused by Covid-19, acts as a mechanism to encourage access to credit for the reactivation of the economic activity of those businesses that have been affected by the decrease in their cash flows, derived from the restrictive mobilization restrictions ordered by the Government to prevent the spread of Covid-19, through the issuance of credit guarantees with preferential interest rates and conditions. The Honduran government also provides a number of grants as seed capital to help small businesses grow and operate. such as: reactivation and strengthening of the agri-food sector, a program of total occupation of industrial parks, financial and technical support to the MIPYMEs, tourism and rewarding the private companies for generating decent jobs.
Are there different compliance requirements for different types of Social Enterprises than for traditional Enterprises? Please provide examples if there are.	In general, no. However, Social Enterprises, in general, haven’t been included in different laws approved to fight money laundering. They are not required by law to perform due diligence on their suppliers or clients, keep a registry of them, develop a compliance program, appoint a compliance officer or report suspicious activities. The aforementioned statement is true unless the Social Enterprise engages in specific commercial activities. The National Banking and Insurance Commission, currently in charge of monitoring specific efforts against money laundering, receives a report regarding the operations of Social Enterprises from the Directorate of Registration, Regulation and Monitoring of Civil Associations, to evaluate the risk of their involvement in money laundering activities. However, Social Enterprises do not report directly to the National Banking and Insurance Commission, except for Private Financial Development Organizations because they are supervised by it.
Is there a dedicated government agency or department that oversees Social Enterprises? If there is, please describe its mandate and effectiveness.	Yes, the Secretary of Justice, Governance and Decentralization oversees and authorizes the different types of forms of social enterprises that exist in Honduras. Its mandate is quite broad, it has the responsibility of executing the National Decentralization Policy, strengthening the technical capacities of the Municipalities and Civil Associations, and the promotion, granting, registration, regulation, supervision and cancellation of the legal status of all entities and civil associations, provided that the special laws do not confer this power on other State bodies. Depending on the type of Social Enterprise, other government agencies intervene. The National Banking and Insurance Commission oversees Private Financial Development Organizations and the National Supervising Counsel of Cooperatives oversee the different types of Cooperatives.
Is there a different bankruptcy system available for Social Enterprises?	No.
What are the average time and filing fees to form an Enterprise in your jurisdiction?	The entire process from the preparation of the Act of the traditional Enterprise’s incorporation, which includes the Enterprise’s bylaws, to the obtention of the traditional Enterprise’s Honduran Tax ID, may take an estimated 7 business days. The fees, (excluding the different founding capital minimums for each kind of company) are approximately USD 200.
What government or third-party certifications or accreditations, if any, are available for Social Enterprises that allow for access to benefits e.g. funding, beneficial tax status, etc.? Please provide examples and briefly describe them as well...	A special certificate authorized by the Ministry of Economic Development is given to any company that adheres to the regime of the Law in support of micro, small and medium enterprises (MIPYMEs). This certificate allows them to be exempt from paying Income Tax for a period of five (5) years. They are also exempt from paying non -tax fees, fees and rights for permits of operation, construction, authorizations and environmental licenses. It also exempts the charge for the registration of any type that is processed before the Central Government and municipalities. The main standards to maintain them are that: The beneficiaries under this Law must submit the Declaration of Fiscal Sacrifice annually. Prohibitions: Legal persons that have partners, shareholders or social participants or natural persons who are already part of another commercial company dedicated to the same activity or who have been part of another company dedicated to a similar activity. Likewise, they should not enjoy the benefits that include legal persons within their social participation, regardless of their category and legal persons that integrate within their social organization as a partner, shareholder or social participant to natural persons who have been partners, shareholders or social participants of a legal entity that engages in a similar activity and was dissolved, liquidated or closed its operations from the effective date of the Law.
Please describe whether, in your opinion, startups and other entrepreneurial Enterprises generally can easily form and flourish in your jurisdiction.	Yes, Honduras is full of possibilities and great for startups. The room for improvement is wide, the low-cost investments for entrepreneurs, access to grants, seed capital programs and the incorporation processes are cheap and simple.
Please describe whether, in your opinion, Social Enterprises, in particular, can easily form and flourish in your jurisdiction.	The procedure to form a Social Enterprise is much more complicated and longer. Additionally, the costs are higher. The assistance of a lawyer is necessary, which increases the costs even more. The average process of approval can take 5-6 months, but this timeframe can occasionally extend due to bureaucracy. Once a Social Enterprise is legally created, many steps must be completed prior to receiving a tax exemption of the different types, some of which can be considered excessive. These steps or requirements must be carried out on an annual basis to renew the benefits. Many Social Enterprises are not well informed about the necessary procedures to receive tax exemptions and manage their tax matters in an informal manner.
Please describe whether in your opinion there are any laws that are obstructive to the formation of Social Enterprises (i.e. that actively disfavor or penalize, or otherwise discourage their formation) in your jurisdiction (for example, are Soc...	In our opinion, there are no obstructive laws for the types of Social Enterprises that apply in Honduran jurisdiction.
In your jurisdiction, are there any major fraud concerns or defects due to corruption or fraud that should be addressed? If there are, please briefly discuss the concerns or defects.	Over the recent years, more requirements of different nature have been imposed to Social Enterprises because they have been occasionally used as a façade to divert public funds before. Government agencies started to address these defects by monitoring Social Enterprises closely, including inspections to projects to verify that the Social Enterprise is really operating and not just a shelf entity used for the incorrect reasons.
What changes to the law do you think would be most beneficial to enabling Social Enterprises to flourish in your jurisdiction?	1. Offering more easy access to initiation loans, with competitive interest and financial benefits. 2. Simplifying the incorporation process (applied to civil associations, NGDOs, etc.) 3. Giving more opportunities for participation
What changes to the law do you think would be most beneficial to enhancing the social and environmental responsibility of Enterprises generally (whether or not Social Enterprises)?	Effectively implementing the existing public policies and legal frameworks equitably and with transparency and simplifying procedures to receive tax exemptions and other benefits.
Is there anything else you would like to add or guidance you would like to provide? Are there any questions we should have asked but did not?	No.

Social Enterprise Law Surveys

Back XLS

What jurisdiction(s) do you practice in?

Honduras

What are the most commonly used types of for-profit corporate organizational forms in your jurisdiction (e.g., corporation, limited liability company, benefit corporation, social purpose corporation, etc.) used by Enterprises operating a trade ...

The most common for-profit organizational forms utilized in Honduras are the corporation (Sociedad Anónima) and the limited liability company (“LLC”) [Sociedad de Responsabilidad Limitada], which are well understood and traditional in nature. In many ways, they are similar, but LLCs have partners' interests rather than shares, and they are also less flexible in terms of new partners.

Finally, Honduras has a cooperative corporation (“CC”) structure that is often used for producers, consumers, borrowers or users of the products or services offered by the cooperative. A CC must have a minimum of 20 partners.

a. Enterprises that seek financing from investors and will have multiple owners tend to form corporations. It is certainly possible to work with LLCs that have many members and investor backing, but it is less standard.

b. In Honduras there are no for-profit organizations forms used by Social Enterprises.

Do any of your jurisdiction’s traditional organizational forms require or permit the board or managers to consider, balance or prioritize interests other than shareholder value in decision making? What other interests, if any, are they required...

Corporations and LLCs have no requirements.

Does your jurisdiction have organizational forms specifically designed for Social Enterprises? If so:a. What type(s) of organizational forms are they?b. How do they materially differ from the most closely analogous traditional organizational ...

Yes.

a. There are different types of forms adopted for Social Enterprises:

NGDOs:
- Civil Associations
- Foundations
Religious Associations
Mutual Benefit Associations
Private Financial Development Organizations
Communities’ Associations
Water Administration Associations
Cooperatives

b. They materially differ from corporations or other for-profit organizational forms in the way they are created, to start with. Social Enterprises require that a special Secretary or other type of government agency approves the status as a legal entity, after reviewing that its bylaws comply with the different laws and their objectives are in harmony with the type of Social Enterprise. A corporation, on the other hand, is incorporated and furthered registered at a commercial registry, but needs no authorization by an authority to receive a legal status, merely a registration. Another difference is the way members are admitted to the organization. Corporations admit new shareholders through a stock purchase or transfer, while members of Social Enterprises are not holders of stock or interest. Social Enterprises must report activities and financial statements every year. Social Enterprises may carry out commercial activities as long as they are destined for their own sustainability and profits are never distributed to their members. On the contrary, corporations distribute profits to their shareholders through dividends. Some Social Enterprises prohibit board members to receive salaries for their appointment. Private Financial Development Organizations are authorized by the National Banking and Insurance Commission.

c. Social Enterprises are entitled to different types of tax exemptions, depending on the type of organization. These tax exemptions benefit the sustainability and operation of the Social Enterprise. Funders also benefit by deducing donations from the funder’s income tax, as long as the Social Enterprise is duly incorporated and has the status of a legal entity, as well as up to date with its tax obligations.

d. Restrictions are mainly based on the objectives of the Social Enterprise. For example, foundations must have the objective of working towards the benefit of a third-party beneficiary, while civil associations or mutual benefit associations may be formed to benefit or support their own members. If the objective diverges from the purpose that the organization should have by law, it will not receive the status of a legal entity or authorization to operate.

e. Yes. A traditional Enterprise can be incorporated in one week, while a Social Enterprise must obtain its legal status or authorization to operate from the responsible State authority. This authorization could take approximately 6 months. The costs of incorporation also differ, especially because the minimum founding capital needed for an Enterprise and a Social Enterprise is different. A corporation requires a minimum of approximately $1k, an LLC a minimum of approximately $200, a Foundation a minimum of approximately $2k and a Private Financial Development Organization a minimum of approximately $41k. Other types of Social Enterprises require no founding capital. Also, nowadays, a lawyer is not absolutely necessary to incorporate a traditional Enterprise, whereas you will need a lawyer to create a Social Enterprise, which will increase its costs.

f. Social Enterprise forms are very well known, they each have a special law to regulate its incorporation and operation and it is also well known what specific state authorities oversee their operations.

Are Social Enterprises permitted to be formed and operated as Nonprofits? If so: a. Are Nonprofits that are Social Enterprises treated differently under the law as compared to Nonprofits that are not Social Enterprises, whether from a corporat...

In Honduras, all Social Enterprises must be formed and operated as Nonprofits. There is no difference in Honduras between the two concepts. The use of Nonprofits for Social Enterprises is prevalent.

Does your jurisdiction allow for worker-owned Enterprises, such as cooperatives? If so, please describe any material benefits of, and/or restrictions on, using such forms.

Yes. Cooperatives are entitled to income tax exemption and other types of tax exemptions. However, they must pay a Social Contribution of the Cooperative Sector every year, which is 15% of the gross surplus. Cooperatives are democratic organizations controlled by their members, who actively participate in defining policies and decision making.

Cooperatives often have the possibility of adhering to government financing programs for the benefit of their members. However, the size of the cooperative is directly related to the possibility of growth. Smaller cooperatives often have trouble finding financing opportunities.

Are there unique reporting requirements for Social Enterprises? If there are, please describe them. Please also discuss what government bodies Social Enterprises are required to report to.

NGDOs, Religious Associations and Mutual Benefit Associations must report every year in February the latest, the activities carried out during the previous year, as well as submit a financial statement of the previous year. They report to the Directorate of Registration, Regulation and Monitoring of Civil Associations.

Private Financial Development Organizations must be audited by an external auditing firm every year. The auditing firm will report the audit results, including financial statements, to the National Banking and Insurance Commission.

Cooperatives must submit their financial statements to the National Supervising Council of Cooperatives.

In your jurisdiction, has case law and jurisprudence evolved to address Social Enterprises? If there is meaningful jurisprudence around Social Enterprises, please provide some brief examples.

No.

Does your jurisdiction have any ESG requirements for Enterprises generally? If it does, please describe.

No.

Does your jurisdiction have any ESG requirements specifically for Social Enterprises? If it does, please describe.

In Honduras, there’s a Special Law for the Promotion of Non-Governmental Development Organizations. Such law regulates any NGO that focuses on: protection of the environment, protection and promotion of human rights, construction of housing, generation of educational programs, health support, strengthening democracy, protection of victims of natural disasters, art promotion, etc.

Does your jurisdiction have any ESG requirements for investors? If it does, please describe.

No.

Are any major investor classes (e.g., pension funds, mutual funds, etc.) required to look at ESG issues when making investment decisions in your jurisdiction? a. If they are, please describe the requirements.b. If they are not, are they permi...

There are no investor classes that are required to look at ESG issues when making investment decisions in Honduras. They are nonetheless in their complete liberty to consider and assess these factors to make their investments. Honduras in the last years has been promoting Corporate Social Responsibility (CSR), which seeks the accomplishment of similar economic, social, and environmental goals, but might lack several features that ESG has.

Since CSR is seen as a previous step before implementing ESG, investors are continuously developing and enforcing actions that solidify this type of culture within the commercial and productive sectors.

What kinds of philanthropic funding do Social Enterprises in your jurisdiction commonly receive (e.g., grants, charitable investment, traditional investment)?

Social Enterprises in Honduras receive grants, donations, charitable investments, and traditional investments. It is also common that Social Enterprises subscribe to agreements with different companies and private or public entities to achieve specific projects in a way to keep their activities always ongoing.

How prevalent, if at all, are new for-profit impact investments in your jurisdiction (e.g. traditional instruments with impact terms, new investment instruments, aggregation with philanthropic capital, community based funding, etc.)?

In Honduras, for-profit impact investments are not prevalent. This jurisdiction has a long history in which most Social Enterprises work non-profit schemes.

What are the types of government funding and support available to Social Enterprises, if any, available in your jurisdiction (e.g., grants, investments, bonds, and guarantees)? a. How difficult is it for Social Enterprises to obtain government...

Social Enterprises are widely supported by the government through different types of funding, mostly by grants, training technical assistance and concessions. For example, several agricultural cooperatives may apply and receive land concessions to produce idle lands, as well other monetary incentives to develop these small and medium Social Enterprises.

The difficulties that Social Enterprises confront in their way to obtain government funding are mostly due to low resources availability and not policy lacking. Although there are no regulations on which type of Enterprises can obtain government funding, in practice these are mostly given to Social forms of Enterprises.

Are there any companies that are formed as a Social Enterprise listed on your jurisdiction’s leading securities exchange(s)?

The are no records of Social Enterprises listed on Honduran securities exchanges.

To what extent are publicly traded Enterprises required to disclose ESG related factors in annual reports/public filings in your jurisdiction.

Enterprises are not required to disclose ESG related factors in their annual reports.

How prevalent, if at all, are impact bonds in your jurisdiction?

Honduras has no impact bonds.

In your jurisdiction, are there any restrictions on foreign investments or donations that are unique to Social Enterprises (whether incorporated as for profit entities or as Nonprofits)?

No.

Is “crowdfunding” legal in your jurisdiction? Are there rules under applicable securities laws that make it easier for smaller businesses or Social Enterprises to take money from investors that are not sophisticated/accredited/qualified under a...

Crowdfunding is legal in Honduras since there is no explicit prohibition. This means that there are no regulations and therefore all entities that desire to do crowdfunding have the same opportunities to obtain resources from the public.

Are there any tax exemptions that are uniquely available for Social Enterprises? a. Please describe any tax exemptions that are available and whether they are partial or full.b. Are they dependent on the Social Enterprise utilized using a spe...

There are several tax exemptions available for Social Enterprises. The tax exemptions are based on their non-profit nature, but not all Non-profit organizations are treated equally from a tax exemption perspective. Exemptions depend on the type of Social Enterprise. Non-profit organizations are entitled to exemptions for income tax. NGDOs, religious organizations, Communities’ Associations and Water Administration Associations are also entitled to exemption on a Population Safety Contribution that affects financial transactions. NGDOs are entitled to sales tax on purchases directly and exclusively related to their projects and custom taxes on donations received by them.

Regarding municipal taxes, Non-profit organizations are also entitled to exemption on the Real Estate municipal tax and the Industry, Commerce and Services tax, exclusively for income from donations. The exemption is not applicable to income from sales that the organization may carry out.

Are individuals or other organizations able to provide tax deductible donations to for-profit Social Enterprises? If they are, please describe any restrictions applicable to tax deductible donations?

No. There are no for-profit Social Enterprises in Honduras.

Are there any other tax benefits uniquely available for Social Enterprises? (e.g. deferrals, favorable tax rates, business deductions, etc.)

No.

Does your jurisdiction provide for reciprocal recognition of tax-exempt status that has been granted under the law of any other jurisdictions?

No.

Does your jurisdiction have Regulatory Sandboxes or similar policy frameworks for Social Enterprises? If it does, please describe.

Yes, the Framework Law of Public Policies in Social is a fairly broad general framework to regulate actions aimed at transforming human conditions, with emphasis on poverty conditions.

There is also a policy framework, the “Social Protection Policy” its main objective is to gradually reduce poverty, extreme poverty, vulnerability and social exclusion of the population subject to the Social Protection Policy, through the articulation of strategic actions in the prevention, mitigation and overcoming of social, economic and natural risks. Promote social protection from a comprehensive and inclusive approach with social security, social assistance, food security, health services, education, labor market and to support in a special way social groups that for reasons related to their age, gender, multiculturalism, disability, sexual orientation and gender identity, serological condition or lack of protection are excluded, in a situation of high social risk or present damages that require special attention.

What government operational support, resources, training or services, are available for small businesses or Social Enterprises?

There are government grants and different government support for micro, small and medium businesses (known in Honduras as “MIPYME”). Programs such as the Guarantee Fund for the Reactivation of the affected MIPYMEs by the pandemic caused by Covid-19, acts as a mechanism to encourage access to credit for the reactivation of the economic activity of those businesses that have been affected by the decrease in their cash flows, derived from the restrictive mobilization restrictions ordered by the Government to prevent the spread of Covid-19, through the issuance of credit guarantees with preferential interest rates and conditions.

The Honduran government also provides a number of grants as seed capital to help small businesses grow and operate. such as: reactivation and strengthening of the agri-food sector, a program of total occupation of industrial parks, financial and technical support to the MIPYMEs, tourism and rewarding the private companies for generating decent jobs.

Are there different compliance requirements for different types of Social Enterprises than for traditional Enterprises? Please provide examples if there are.

In general, no.

However, Social Enterprises, in general, haven’t been included in different laws approved to fight money laundering. They are not required by law to perform due diligence on their suppliers or clients, keep a registry of them, develop a compliance program, appoint a compliance officer or report suspicious activities. The aforementioned statement is true unless the Social Enterprise engages in specific commercial activities.

The National Banking and Insurance Commission, currently in charge of monitoring specific efforts against money laundering, receives a report regarding the operations of Social Enterprises from the Directorate of Registration, Regulation and Monitoring of Civil Associations, to evaluate the risk of their involvement in money laundering activities. However, Social Enterprises do not report directly to the National Banking and Insurance Commission, except for Private Financial Development Organizations because they are supervised by it.

Is there a dedicated government agency or department that oversees Social Enterprises? If there is, please describe its mandate and effectiveness.

Yes, the Secretary of Justice, Governance and Decentralization oversees and authorizes the different types of forms of social enterprises that exist in Honduras. Its mandate is quite broad, it has the responsibility of executing the National Decentralization Policy, strengthening the technical capacities of the Municipalities and Civil Associations, and the promotion, granting, registration, regulation, supervision and cancellation of the legal status of all entities and civil associations, provided that the special laws do not confer this power on other State bodies.

Depending on the type of Social Enterprise, other government agencies intervene. The National Banking and Insurance Commission oversees Private Financial Development Organizations and the National Supervising Counsel of Cooperatives oversee the different types of Cooperatives.

Is there a different bankruptcy system available for Social Enterprises?

No.

What are the average time and filing fees to form an Enterprise in your jurisdiction?

The entire process from the preparation of the Act of the traditional Enterprise’s incorporation, which includes the Enterprise’s bylaws, to the obtention of the traditional Enterprise’s Honduran Tax ID, may take an estimated 7 business days.

The fees, (excluding the different founding capital minimums for each kind of company) are approximately USD 200.

What government or third-party certifications or accreditations, if any, are available for Social Enterprises that allow for access to benefits e.g. funding, beneficial tax status, etc.? Please provide examples and briefly describe them as well...

A special certificate authorized by the Ministry of Economic Development is given to any company that adheres to the regime of the Law in support of micro, small and medium enterprises (MIPYMEs).

This certificate allows them to be exempt from paying Income Tax for a period of five (5) years. They are also exempt from paying non -tax fees, fees and rights for permits of operation, construction, authorizations and environmental licenses. It also exempts the charge for the registration of any type that is processed before the Central Government and municipalities.

The main standards to maintain them are that:

The beneficiaries under this Law must submit the Declaration of Fiscal Sacrifice annually.
Prohibitions: Legal persons that have partners, shareholders or social participants or natural persons who are already part of another commercial company dedicated to the same activity or who have been part of another company dedicated to a similar activity. Likewise, they should not enjoy the benefits that include legal persons within their social participation, regardless of their category and legal persons that integrate within their social organization as a partner, shareholder or social participant to natural persons who have been partners, shareholders or social participants of a legal entity that engages in a similar activity and was dissolved, liquidated or closed its operations from the effective date of the Law.

Please describe whether, in your opinion, startups and other entrepreneurial Enterprises generally can easily form and flourish in your jurisdiction.

Yes, Honduras is full of possibilities and great for startups. The room for improvement is wide, the low-cost investments for entrepreneurs, access to grants, seed capital programs and the incorporation processes are cheap and simple.

Please describe whether, in your opinion, Social Enterprises, in particular, can easily form and flourish in your jurisdiction.

The procedure to form a Social Enterprise is much more complicated and longer. Additionally, the costs are higher. The assistance of a lawyer is necessary, which increases the costs even more. The average process of approval can take 5-6 months, but this timeframe can occasionally extend due to bureaucracy. Once a Social Enterprise is legally created, many steps must be completed prior to receiving a tax exemption of the different types, some of which can be considered excessive. These steps or requirements must be carried out on an annual basis to renew the benefits. Many Social Enterprises are not well informed about the necessary procedures to receive tax exemptions and manage their tax matters in an informal manner.

Please describe whether in your opinion there are any laws that are obstructive to the formation of Social Enterprises (i.e. that actively disfavor or penalize, or otherwise discourage their formation) in your jurisdiction (for example, are Soc...

In our opinion, there are no obstructive laws for the types of Social Enterprises that apply in Honduran jurisdiction.

In your jurisdiction, are there any major fraud concerns or defects due to corruption or fraud that should be addressed? If there are, please briefly discuss the concerns or defects.

Over the recent years, more requirements of different nature have been imposed to Social Enterprises because they have been occasionally used as a façade to divert public funds before. Government agencies started to address these defects by monitoring Social Enterprises closely, including inspections to projects to verify that the Social Enterprise is really operating and not just a shelf entity used for the incorrect reasons.

What changes to the law do you think would be most beneficial to enabling Social Enterprises to flourish in your jurisdiction?

1. Offering more easy access to initiation loans, with competitive interest and financial benefits.

2. Simplifying the incorporation process (applied to civil associations, NGDOs, etc.)

3. Giving more opportunities for participation

What changes to the law do you think would be most beneficial to enhancing the social and environmental responsibility of Enterprises generally (whether or not Social Enterprises)?

Effectively implementing the existing public policies and legal frameworks equitably and with transparency and simplifying procedures to receive tax exemptions and other benefits.

Is there anything else you would like to add or guidance you would like to provide? Are there any questions we should have asked but did not?

No.

Social Enterprise Law Surveys

Honduras

Social Enterprise Law Surveys

Honduras

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