"Letter of the Law": on-line registration of companies in Belarus
2 Jun 2011
Web portal of the Unified State Register of Legal Entities and Individual Entrepreneurs has commenced commercial operation. What shall be the way to register a company via Internet? Has our business been ready for such an innovation?
These questions were answered on the air of “Letter of the Law”, the author program of Denis Aleinikov, Senior Partner of Law Group “Argument”, by Galina Podrezenok, Head of the Department of the Unified State Register of Legal Entities and Individual Entrepreneurs of the Ministry of Justice of the Republic of Belarus.
The task of introduction of electronic state registration has been set in Directive No. 4. The Directive has been effective just very for a very short time. How have you managed to cope with the work?
We have just worked. The program for development of our automatic system AIS USR (Automatic Information System of the Unified State Register) has been built within the frames of the program “Electronic Belarus” by the Ministry of Justice jointly with the Ministry of Communications. The work on creation of the web portal for the purpose of submitting documents for the state registration in electronic form was being done during the whole last year. Thus, when the President signed Directive No.4 our portal had already been ready and we had commenced its commercial operation. So we had already done our work by that moment.
So you pursued a preemptive tactic?
Actually, adoption of Decree of the President No.1 and introduction of declarative approach for state registration made it clear that obligation to examine the documents has been removed from the registration authorities. Actually, we do not examine the package of documents today which has been manifold reduced. The applicant has full responsibility for the information given to ensure that it is accurate and complete. Consequently, using the declarative approach why not submit the same package of documents in electronic form? The applicant is anyway in charge of the documents submitted.
How shall any individual entrepreneur or legal entity get the registration technically? What shall be done?
The applicant shall prepare the same package of documents which is to be prepared in paper form within the frames of Decree No.1. Then he or she shall go to the portal egr.gov.by. The users still do not have access to the portal due to the fact that the respective normative legal acts need to be adopted (the latter have been developed already). As soon as they are adopted the portal shall be given access to. It shall consist of two parts: an open and a closed one. You can find all reference information, legal normative acts effective in this sphere in the open part of the portal even today.
The applicant shall need to go to the closed part. The applicant shall acquire the key for the electronic digital signature to enter our portal and fill in the application. The application forms have been developed in electronic form and are awaiting their approval. They are taken as the basis of the portal and one shall just feed his or her own data. Moreover, it will be even easier to do it in electronic than in paper form. Filling in the application you shall just answer the questions, for example: “What registration body one shall apply to?” You may open the directory in the portal and understand what body to apply to, so press the appropriate button. The portal has an activities classifier directory: so, you open it, look through and understand what activity you are going to conduct, then feed these data into the computer. Therefore, filling in the application is going to be simpler than doing it in paper form.
We shall arrange access to AIS passport. In principle, it has been arranged already, but there will be legal ground for that just after adoption of the Decree. The registration body shall mandatory check the passport data to identify the person submitting the documents, to check the validity of the passport, so it won’t be possible to mislead the registration body officers.
Our people got used to work with the physical documents on paper medium. What does the articles of association in rtf-format mean? This is paper which is printed out and without any signature, because the electronic digital signature is invisible. Could people who got used to work with paper obtain the articles of association with the stamp of the registration body in case of using the electronic registration system of the registration body?
They’ll definitely obtain it. You send all documents in accordance with the laws and wait for the notification of the registration body with the registration confirmation. In order to obtain all documents – the state registration certificate, the articles with the seal, registration note – you need to come to the registration body. We shall not send them back: we still have a one-way communication.
We have just started to register IE (Individual Entrepreneurs) and PUE (Private Unitary Enterprise) via the portal as the simplest forms. Let’s see the way it will work in Minsk, whether people would apply for the electronic registration and what problems may occur, so we shall update the portal if the need arises. So, it would be quite insane to launch the portal over the whole country in a single step. Let’s see first the way it will work.
Let’s assume, an entrepreneur has submitted all necessary documents and filled in the payment details. What are the terms for each step afterwards?
After you have submitted the documents and filled in the payment details, UCIA shall confirm the payment. Only then after UCIA has made the respective confirmation the documents shall be send to the registration body. The Decree stipulates that the documents shall be considered just after they have been received, as if the citizen would have come to the registration body. The same is there: the documents have been received, the registration officer begins to consider them the same day and sends the notification on acceptance of the documents and on registration or respectively, on refusal to register upon any certain ground.
Shall the notification be received per post or via the portal?
Via the portal. This notification shall be signed by the registration officer by means of the electronic digital signature.
During which time shall it be possible to obtain the certificate?
Decree of the President No.1 determines the 5-day term; nothing has changed in this respect. The portal was built in accordance with the principle of the Decree. Probably, we have made this work sooner because we have already had this legal normative act to base upon. If we were to wait longer for any other legal decision, such work could take a couple of years longer. The law on electronic digital signature is in effect, in accordance with which, one may work with EDS (electronic digital signature), and so we didn’t see any problems with that issue.
Where shall the potential founders who intend to establish a company, obtain the EDS medium from?
There is an agreement made with the Ministry of Taxes which is effective today. There is an information and publishing center which is to sell the electronic digital signature mediums. Upon the information available today, the value of the key for the natural persons shall be BYR 166 thousand and for the legal entities and individual entrepreneurs it shall make BYR 248 760. The company has a 15% discount if it makes use of the work done by the disabled people.
This key enables today to submit the documents for submitting the declaration to the Ministry of Taxes and reports to Belgosstrakh. I suppose, we may not dwell on the issue, we need to expand the state authorities circle to work with via electronic digital signature. I believe, we shall proceed with the work in that direction.
Won’t the natural persons say that all this shall raise the price of the registration procedure for the economic entities and individual entrepreneurs?
There is a choice for natural persons, and that’s the principal point. If he or she is willing to use the key of the electronic digital signature, he or she may arrange an appointment with the registration body and get the registration of his or her company in paper form. But we have a lot of smart entrepreneurs who would prefer working via Internet, so we are not entitled to deprive them of such an option, on the contrary, we shall provide them with such a possibility. The person has a choice. It’s like in a shop: someone has bought it for BYR 3.0 and someone for BYR 300. So, there is a choice and its’ the principal point.
What documents shall the person submit to obtain the EDS medium?
A person shall submit his or her passport. As soon as the normative documents are signed, the procedure of obtaining the key of the electronic digital signature shall be posted on the portal, the registration authorities shall also be notified for the purpose of posting this information on their sites. A detailed description on what, how and in what terms shall be given there. I don’t think that he or she will be required anything else apart from the passport and the payment.
I have been told by one businessman that he was more positive about his company and about its safety when the permissive approach of registration was in effect. The executive committees had to check the articles of association – they sent some lawyers three times back to improve the incorrectly prepared documents. And if the executive committee accepted the articles, so you could be sure that the articles was in line with the laws. We have a declarative approach now; nobody checks anything, so businessmen worry, whether everything is correct in the articles. Some of them do worry, but many of them just don’t care about anything, so there is such practice when people just extract the constituent documents from the internet. Then, without even reading them they fill in their surnames and submit to the registration authorities which are not entitled upon the law to check the content. And those people are going to send them via internet tomorrow. Won’t it devaluate the quality of the constituent documents? What do you think about that?
I believe, we need to conduct some educational work in this respect, and we do that already. We ask the registration authorities to give explanations: you are not entitled to refuse registration, but you are to explain the eventual legal consequences in case the articles of association has been written incorrectly. Some of them show understanding: when the officer of the registration body indicates any points to be likely to be problematic later, they decide to go to the lawyer and to improve the document. There was some euphoria when the declarative approach was introduced: people came to register the company just on the cuff. I faced a case when a person came to us two weeks after Decree No.1 was adopted and said: “I just passed by and was registered”. He came just to get an advice. Then he read the second part of the Decree on the responsibility for the validity of the data submitted to the registration body. Having read that after he was registered, the man didn’t know what to do.
It is the professionals who have to do their work. We may give explanations; we may try to convince people, to help them as we have just done by developing the draft articles for LLC. But this is a suggested form, which should be taken into account as the base and updated for certain conditions of business organization. All nuances shall be stipulated. We have made the simplest draft just for the purpose of making it easier for the people: the articles of associations which are submitted today to the registration body make us speechless sometimes. Professionals should work everywhere, so our entrepreneurs shall be responsible for the business and work they start to perform. If a person treated his articles carelessly and failed to prepare the documents in accordance with the requirements of the law for his own sake, the same treatment may be attributed to the activity he is intended to conduct as well as to the public benefit.
As far as the awareness-raising work is concerned, Decree No.1 has a norm which stipulates that in case of submitting any unreliable information the registration may be recognized null and void upon the court decision, so all and any revenues of the company from the very beginning of its activity shall be recovered to the budget. Who is aware about that?
I suppose we should explain this provision to the potential founders, and place this information on the title page of the USR web portal, for example, so that it would not be possible to get registration without reading this info. For example, it is the way they do it in computer programs: if you want to use it you need to press “OK” button if you agree with the license agreement which appeared before. I think that USR should do it similarly. We should make the person know that he may be charged with all his business for the poorly executed constituent documents.
This is a very good suggestion. I think we shall redesign the title page now and make it available for the people to get to know about the respective responsibility. The founder shall be aware about that, but he shall also be sure that he is responsible for the outcome.
Pursuant to the edict on control activity, a newly established business shall not be inspected during two years. Two years have already gone since the declarative approach was introduced, so if the inspections start their work, the consequences for those who had submitted the incorrect information for registration may have sad end.
EDS medium is in point of fact a USB device containing EDS, a certificate and keys. This device, as you have just said, will be sold upon submitting a passport. Won’t we create a situation when such devices shall be resold in the “black market” and someone will create pseudo-entrepreneurial structures by using them? Have you considered such a probability?
There may be such cases when we create something new. But I guarantee that all measures depending on the Ministry of Justice shall be assumed for the purpose of preventing such attempts. We will find out anyway, how, why and who has done it, whether in electronic or in paper form. We know the economic entities even now which submitted improper documents for the registration. It will be similarly with the EDS. The mechanism shall work anyway. Such attempts will take place, but before doing that, we shall think over the eventual consequences. We shall prevent such attempts with the electronic means.
I see some more problems with the use of electronic signatures in signing the documents. Will it be possible to register amendments to the constituent documents?
We have provided the possibility to introduce amendments to the articles of association, but we shall register only private unitary enterprise (PUE).
We may discuss this problem in the future. I know that in some countries with the registration possibility via Internet, it is prohibited to introduce amendments to the constituent instruments via electronic way. This measure is effective as countermeasure to raiding. For example, one of the founders made connection of EDS to his personal computer, drank some coffee, forgot about that and went home. Another founder passing came to the idea: “Let me make some amendments to the articles” and sent the information to the USR via his computer connected with the EDS medium. Then he sent the same via his own and it comes out that the amendments have been introduced. How shall the bona fide founder prove then that he had not signed any documents? Such questions do appear in practice. When they appear in resolving corporate disputes today the court may carry out a court handwriting expertise and determine whether the document had been signed by the person or not and get an answer of the expert. What is the way to carry out an expertise in order to prove that the person had not signed anything?
First of all, you’ll have a possibility to look through the information on the portal about the certain economic entity. If you have seen that someone has signed instead of you or you have been “withdrawn” as the founder of the company, so you may apply to court and challenge the matter.
We may challenge it but what about proofs?
Such an issue may be topical in case there are several founders. At the present moment we are saying that we intend to register just a unitary enterprise remotely because there is only one owner there. When there are several of them, another system shall be worked out and this is the work for the future. This is our task which we are to deal with in the near future. Let’s see for the start the way it will go what we have already done. If there will be no problems we’ll go further then.
Is it possible today for the representative of a legal entity to register a company?
If there are respective documents certifying that he is authorized to do so, then it’s possible.
What are the documents for that purpose?
You represent the company’s interests, so it means that you shall have a respective power of attorney from it.
Is presence of the power of attorney presumed by the portal or shall I send it to the USR?
No, you just declare that you have such a power of attorney available.
Such a trust based system is an interesting thing. For example, they are doing the same in American courts: a representative comes to the court and declares that he represents the interests of a certain client without submitting any power of attorney to the court. It has been presumed that he is authorized by the client and has a respective power of attorney. Nobody checks it, but if someone checks it then the responsibility upon the law shall be rather severe. Do you practice the same approach?
Yes, we do practice the same approach.
The portal commenced commercial operation today. When shall it be launched?
After the draft Decree is signed. It is ready now, we introduced it to the government on March 1, and it has been under consideration of the Administration of the President. According to the information available it shall be reported to the President by the end of May. I think if it will be signed we can start our work from July 1.
There are many projects in the world in the field of electronic government. Do you place an order for development of the portal with the foreign or domestic developers?
The portal developer is a Belarusian company subordinate to the Ministry of Communications and Informatization. This is a purely Belarusian product. The key thing in this work is the software solution and correct task formulation. The programmer will do everything, but it is quite a challenge to set the correct task: the executive committees, the region executive committees will have to work with the software, and working with a complicated system would be too difficult then. So we are working, upgrading, simplifying and removing things.
Do you intend to go further in implementing electronic procedures? Are there any post-registration procedures…?
There are plenty of ideas, but too little hands. We have one more automatic system – AIS of interaction by means of which the post-registration procedures are being carried out. The so called second line has just commenced commercial operation, the first line is getting registered, and the second is submitting the documents in electronic form for the liquidation in the simplified procedure. We shall ask the customs authorities, archives and banks: we will obtain the information on the closed and opened accounts from them. If any banks shall be involved in the work, it is possible to work with them further. For example, in case of seizure of accounts may be it would be possible not to send the economic entity to the bank while registration, but to make the bank reserve an account for it simultaneously with the registration. We have many thoughts in this respect and we still need to work in this direction.