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I N V E S T M E N T C O M PA C T
Company registration represents the beginning of an economic life cycle for
entrepreneurs. Entry of new business however may be simple or rather
cumbersome, the business registration process affecting the entire business
environment in any country.

Reforming the company registration in order to facilitate investment is a


complex operation, which involves simultaneous and co-ordinated changes at
the legal, institutional and operational levels. Recent technological developments
THE BUSINESS
have opened up new frontiers in the field of processing company registration
applications and the management of the company registration data base, allowing
REGISTRATION PROCESS
countries to rapidly improve and simplify their company registration procedures
and install a state of the art company registers. IN SOUTH EAST EUROPE
The countries of South East Europe (SEE) have identified the company
registration procedure as a critical area in their programmes to lower administrative
barriers and to foster enterprise development. A number of SEE countries have
recently implemented radical reforms of their company registration procedures, A PEER REVIEW
aiming at substantially reducing the registration time, costs and procedural
steps.

This report is based on the findings of a Peer Review on company registration


in the South East European countries conducted by the Investment Compact for
South East Europe in February 2005 as well on the work conducted by FIAS
(World Bank Group), the EBRD, the European Commission and the OECD. The
report is a reference tool for all who are involved in company registration and
for private sector development issues in South East Europe.

APRIL 2005

ISBN 92 64-01350-4
The Business Registration Process
in South East Europe

A Peer Review

April 2005
The Stability Pact for South Eastern Europe is a political declaration and framework agreement adopted in
June 1999 to encourage and strengthen co-operation among the countries of South East Europe (SEE) and to
facilitate, co-ordinate and streamline efforts to ensure stability and economic growth in the region. (see
www.stabilitypact.org)
The South East Europe Compact for Reform, Investment, Integrity and Growth (“The Investment
Compact”) is a key component of the Stability Pact under Working Table II on Economic Reconstruction,
Development and Co-operation. Private investment is essential to facilitate the transition to market economy
structures and to underpin social and economic development. The Investment Compact promotes and supports
policy reforms that aim to improve the investment climate in South East Europe and thereby encourage investment
and the development of a strong private sector. The main objectives of the Investment Compact are to:
– Improve the climate for business and investment.
– Attract and encourage private investment.
– Ensure private sector involvement in the reform process.
– Instigate and monitor the implementation of reform.
The participating SEE countries in the Investment Compact are: Albania, Bosnia and Herzegovina, Bulgaria,
Croatia, the Former Yugoslav Republic of Macedonia, Moldova, Romania, Serbia and Montenegro. Building on the
core principle of the Investment Compact that “ownership” of reform rests within the region itself, the Investment
Compact seeks to share the long experience of OECD countries. It provides region-wide peer review and capacity
building through dialogue on successful policy development and ensures monitoring of progress as well as
identification of practical steps to implement reform and transition.
The work of the Investment Compact has been actively supported and financed by seventeen OECD member
countries: Austria, Flanders (Belgium), Czech Republic, Finland, France, Germany, Greece, Hungary, Ireland,
Italy, Japan, Norway, Sweden, Switzerland, Turkey, United Kingdom and United States (see
www.investmentcompact.org). The European Commission (EC) has, through DG Enterprise and Industry,
contributed to the funding for this report.

THE SOUTH EAST EUROPE ENTERPRISE FORUM


The SEE ENTERPRISE FORUM is a partnership of national organisations active in the field of enterprise
policy and support of micro-small and medium sized enterprises, including the Ministries of Economy, the
Enterprise and SME Development Agencies, private sector and other non-governmental organisations.
The SEE ENTERPRISE FORUM, established in 2001 within the framework of the Investment Compact, aims
at promoting exchange of experiences, dialogue and the co-operation among the members of the SME policy
community in South East Europe and in the OECD countries, through regular country policy assessments, such as
the Enterprise Policy Performance Assessments, peer reviews, policy studies, workshops and seminars.
The SEE ENTERPRISE FORUM benefits from the support of the OECD Investment Compact and the
European Commission (DG Enterprise and Industry) and it has developed close synergies with the European
Charter for Small Enterprises. The European Bank for Reconstruction and Development (EBRD) and Foreign
Investment Advisory Service (FIAS) of the World Bank Group, the European Training Foundation (ETF) and
other international and bilateral organisations actively participate in the Forum’s initiatives.
The SEE ENTERPRISE FORUM is chaired by the Albanian Ministry of Economy, with the support of the
Albanian Enterprise Development Agency, for a one year mandate from February 2005.
3

Foreword

This report contains a review of the Business Registration Process in South East
Europe (SEE) and a presentation of the challenges faced by the SEE countries in the
implementation of reform in this important area.
All the countries of South East Europe have identified the company registration
procedure as a critical area in their programmes to lower administrative barriers and to
foster enterprise development. A number of SEE countries have recently implemented
radical reforms of their company registration procedures, aiming at substantially
reducing the registration time, costs and procedural steps. Others are planning to do so
and are examining different options by looking at the systems developed by OECD and
SEE countries.
Company registration reform is a complex operation, involving simultaneous and co-
ordinated changes at the legal, institutional and operational levels. Recent technological
developments have opened up new frontiers in the field of processing company
registration applications and the management of the company registration data base,
allowing countries to rapidly improve and simplify their company registration procedures
and install a state of art company registers. The experience of other OECD and SEE
countries that have already embarked on this road is extremely valuable, giving the
number of political, legal and organisational implications of company registration
reform.
Taking into account this complex process, the Investment Compact decided to
conduct a Peer Review on company registration at regional level. The peer review took
the form of a workshop organised by the SEE ENTERPRISE FORUM, a policy discussion
group bringing together representatives from the Ministries of Economy, the
Entrepreneurship and Small and Medium-sized Enterprise Development Agencies, the
entrepreneurs’ associations, NGOs and bilateral and multilateral organisations,
operating under the framework of the Investment Compact.
The workshop, held in Tirana on 8 February 2005, was hosted by the Albanian
Ministry of Economy and organised by the OECD Investment Compact with the support
of the European Bank of Reconstruction and Development and the European Commission
– DG Enterprise and Industry –. Representatives of the Ministries of Economy, the SME
Development Agencies and the Company Registrars of the SEE countries, as well as
representatives from Company Registries from OECD Countries, Ireland and the UK,
international organisations (EBRD, OECD, World Bank/FIAS) and the European
Commission exchanged views and shared experiences during the workshop.
Most of the material contained in this report builds on the proceedings of the Tirana
workshop, the work conducted in the region in the framework of various programmes and
initiatives supported by FIAS (World Bank Group), the EBRD, the European Commission

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4 – FOREWORD

and the OECD and country reports. This report was compiled by Mr. Boris Divjak,
Senior Consultant for FIAS and the OECD, in co-operation with the OECD Investment
Compact Team, and is intended to be a tool for all who are engaged in company
registration issues. Finally we would like to express our appreciation to all the OECD
and South East European participants to the Peer Review and to all who have
contributed to the preparation of the report.

Manfred Schekulin Rainer Geiger Milen Keremedchiev


Director, Export and Deputy Director National Coordinator of the
Investment Policy Department Directorate for Financial Fiscal Stability Pact, Bulgaria.
Federal Ministry for Economic and Enterprise Affairs, OECD Co-Chair, Investment
Affairs and Labour of Austria Co-Chair, Investment Compact Compact Project Team
Co-Chair, Investment Compact Project Team
Project Team

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5

Acknowledgements

The report has been prepared as part of the activities of the SEE ENTERPRISE FORUM, conducted
under the framework of the Investment Compact programme directed, at the time of the report
preparation, by Declan Murphy.

The report has been written by Boris Divjak, Senior Consultant to FIAS and the OECD Investment
Compact, in consultation with Antonio Fanelli, Principal Administrator, OECD Investment Compact,
and with the support of Georgiana Pop, Promotion and Communications Officer, OECD Investment
Compact and Adelina Vestemean, Regional Executive, OECD Investment Compact.

Edward Tersmette, Desk Officer for the West Balkans, EC-DG Enterprise and Industry) and
Francesca Pissarides, have contributed to the planning and the preparation of the workshop in Tirana. We
would like to thank all the participants in the Tirana workshop (see list in Annex 2) for their inputs and
contributions to the policy discussion and, in particular, to Paul Farrell, Registrar of Company, Ireland,
Mr. Declan Geany and Mr. Richard Wood of Enterprise Registry Solutions Limited (Ireland) and Mr.
John Murray of the European Business Registrar, for sharing their experiences in designing and
managing state of art company registers. We would also like to acknowledge the contribution of FIAS
(Foreign Investment Advisory Service) of the World Bank Group and the World Bank, the EBRD and
the European Commission for providing access to the report concerning the company registration
performance and reform in South East Europe.

Finally would like to thank Mr. Bashkim Sykja, Director of the Business Promotion Department, of
the Albanian Ministry of Economy and Mr. Gavril Lasku, Executive, Director of the Albanian SME
Development Agency for their support in the organisation of the Tirana workshop.

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7

Table of Contents

Executive Summary.......................................................................................................................... 9
Chapter 1 Introduction................................................................................................................. 11
Defining the procedures and the institutions................................................................................. 13
Structure of the report ................................................................................................................... 14
Chapter 2 Key Issues in the Business Registration Process ...................................................... 15
Chapter 3 Review of Business Registration in South East Europe .......................................... 21
Chapter 4 Performance Indicators.............................................................................................. 31
Chapter 5 Country Reviews, Assessment and Policy Recommendations ................................ 35
Albania.......................................................................................................................................... 36
Bosnia and Herzegovina ............................................................................................................... 38
Bulgaria......................................................................................................................................... 41
Croatia........................................................................................................................................... 44
FYR Macedonia ............................................................................................................................ 47
Moldova ........................................................................................................................................ 49
Romania ........................................................................................................................................ 51
Serbia ............................................................................................................................................ 54
Montenegro ................................................................................................................................... 56
References......................................................................................................................................... 61

Annex 1 Registration Steps by Country ...................................................................................... 65


Albania.......................................................................................................................................... 65
Bulgaria......................................................................................................................................... 67
Bosnia and Herzegovina ............................................................................................................... 68
Croatia........................................................................................................................................... 70
FYR Macedonia ............................................................................................................................ 72
Moldova ........................................................................................................................................ 74
Romania ........................................................................................................................................ 77
Serbia ............................................................................................................................................ 79
Annex 2 Abbreviations .............................................................................................................. 83
Annex 3 List of Participants........................................................................................................ 91
Annex 4 List of Contacts............................................................................................................. 83

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Tables

Table 2.1 Registration indicators in the EU .......................................................................20


Table 3.1 Reported company registration delays in working days.....................................26
Table 4.1 CoDB business registration data for the SEE countries .....................................33

Figures

Figure 1.1 Business entry and corruption ............................................................................ 12


Figure 1.2 Relationship between the days required to start a business
and a perceived level of corruption ................................................................. 13
Figure 4.1 Number of days required to start a business in selected SEE countries ............. 31
Figure 4.2 Cost to Start a Business (% of income per capita) ............................................. 32
Figure 4.3 Time to Start a Business..................................................................................... 32
Figure 4.4 Regional start-up indicators................................................................................ 34

Boxes

Box 1.1. The prospects of the former payment bureaus ...................................................16


Box 2.1 Legal Business Forms in the SEE ......................................................................18
Box 3.1 Do’s and Don’ts of a one-stop-shop concept .....................................................23
Box 3.2 Irish company registration system......................................................................29
Box 3.3 A suggested approach to commercial registers:
The experience of the European Business Register ...........................................29
Box 5.1 Enterprise Policy Performance Assessments .....................................................35
Box 5.2 Assessment of the Seven Dimensions of Good Practice ....................................37

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9

Executive Summary

Cutting unnecessary steps from the entry process have had an enormous success in
transition economies and developed countries alike. Many countries have opted to make
certain decisions in the registration process automatic subject to the fulfilment of specific
conditions.
Governments can go a long way with simple reforms. These include adopting better
information and intra-government communications technology – to inform prospective
entrepreneurs and to serve as a practical one-stop shop for business registration.
Moreover, the registration of the new legal entity, tax registration as well as
registration with other public agencies are being merged into one procedure. This
assumes a service-oriented government that will do the bureaucratic work on behalf of the
customer and a future tax payer, thus also simplifying its own operations and merging the
various separate registration processes under a single registration number.
The region of South East Europe has slowly embarked on this process, but with a
mixed speed and the rate of success. This report analyses the different country
backgrounds, the strategies their respective governments have opted for, what challenges
remain to be addressed and offering specific country-tailored policy recommendations
targeting the outstanding issues.
The performance indicators show not only the region lags behind the European Union
Member States, but also that among themselves they do not pursue enough know-how
transfer, information and experience sharing and with it some form of intra-competition.
The reforms are a fast moving process and provided there is a substantive political will,
legislative and institutional changes can literally be imposed overnight. This has enabled
swift shifts of certain countries upward on the ‘desirability scale’ leaving only a few to
seriously lag behind. Nevertheless, the reforms that are being prepared, mostly with the
technical assistance of the international organisations such as OECD and FIAS, the catch-
up strategies are expecting their swift launch. At present, the best performing states with the
shortest time required to register a business and the lowest associated fees are Romania,
Bulgaria and Montenegro, with Moldova and Serbia making a quick approach to the
leading group, while Croatia, Bosnia and Herzegovina, Macedonia and Albania lag behind.
Any fallback in business environment reforms is particularly worrying in the light of
the region’s aspirations to the EU’s full membership and the potential competitiveness
within such a large and dynamic market. In an environment where both supply and
demand are flexible, the investment is directed to those countries or areas where the
investment climate is more favourable.
The performance indicators clearly display that the region has much to undertake in
the sphere of business registration and that it should remain a development priority. These
features should turn into the region’s competitive advantage and it should aim to feature
comparatively better than the rest of the continent if it were to attract investment.

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Chapter 1

Introduction

Business registration represents the beginning of an economic life cycle for


entrepreneurs. Entry of new business however may be cumbersome or rather simple and a
number of international studies have demonstrated that how that area is regulated does
affect the entire business environment in any given country. Moreover, business
registration may also provide an angle to the entire economic portrait of that country and
either stimulate or deter investment.
Countries differ significantly in the way in which they regulate business entry.
Meeting government requirements to start operating a business in Haiti, an entrepreneur
must complete 12 procedures taking an average of 203 business days and pay 176% of
the country’s GNI per capita in fees. To do the same, an entrepreneur in Tunisia needs to
follow 9 different procedures, yet pay 11% of the country’s GNI per capita in fees and
wait a much fewer 9 business days to acquire the necessary launching permits. In
contrast, an entrepreneur in Australia can finish the process in 2 days by paying 1% of the
per capita GNI in fees and completing only 2 procedures.
The region of South East Europe has been undergoing economic transition with a
mixed success over the past decade and beyond. Business environment has not
represented a burning priority for a long period of time, as there is no specific reference in
the European Union’s acquis, nor have the governments initially realised the potential of
those reforms to the greater macroeconomic picture. As the investment climate became
ever more important, the region started catching up with the rest of the reforming world
and competed among themselves in a positive comparative race.
The consequences of the regulation of entry is a matter of what institution remains in
possession of the rents and how these can benefit the economic development of a country.
If the regulation of entry serves the public interest, it should be associated with higher
quality of goods and greater competition. Empirical global evidence demonstrates to the
contrary that a stricter regulation is far more often associated with less competition and
higher corruption.
In addition, studies show that the representative governments whose interests are
more closely aligned with those of the consumers appear to maintain a lower need for the
regulation of entry, perhaps because they have fewer market failures or better alternative
ways of dealing with them. The fact that better governments regulate entry less, along
with the simple interpretation of the evidence on corruption and the grey economy, point
to the following evidence: the entry is regulated because it benefits the regulators. In
contrast, the governments least subject to public accountability impose strictest
regulations, which benefit them and possibly the state-owned monopolies.

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12 – CHAPTER 1. INTRODUCTION

Richer countries regulate less. So do countries in the common-law tradition. In poorer


countries, market failures may be more severe, and therefore may increase the desire to
correct the failures by regulating entry. The temptation should be resisted because the
costs of government inefficiency may outweigh the benefits of stricter regulation.
Therefore, a stricter regulation of entry is not associated with higher quality products,
better environmental records, health standards, or greater competition. But stricter
regulation of entry is associated with sharply higher levels of corruption, and a greater
relative size of the unofficial economy.

Figure 1.1 Business entry and corruption

Note: A business entry with excessive bureaucratic procedures is closely associated with a higher corruption level (as measured by Transparency
International’s Corruption Perception Index).
Source: Djankov et al. 2001

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CHPATER 1. INTRODUCTION - 13

Figure 1.2 Relationship between the days required to start a business and a perceived
level of corruption

Defining the procedures and the institutions

The region is however infamous for a complex registration process, which in almost
all the countries contained 10 steps or more. The process involved the following steps:
x Check the availability of the company name, collect and fill out company
registration form(s) – ensuring that the company name has not been previously
used. Once confirmed, the founding documents can be submitted and the
bureaucratic procedure can begin.
x Deposit the legally required initial capital in a temporary bank account and pay
the registration fee; obtain deposit and payment evidence – the temporary bank
account served the single purpose of transferring the fees to the registration
authorities.
x Register with the Trade Registry/Local or Regional Court – the institutions that
conducted the central registration may have differed but this mostly involved
overburdened courts or similar authorities.

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14 – CHAPTER 1. INTRODUCTION

x Publish the company formation notice (e.g. in the Official Gazette) – which
formalised the existence of the company, for yet another token fee.
x Make a company seal – this bureaucratic relict was the symbol of the communist
era, but was also quite popular with the infamous Austro-Hungarian as well as the
Ottoman bureaucracies, which made it compulsory in every country of SEE.
x Register with the Statistic Office to get a statistic number – a classic step which
made the entrepreneur run around the government administration, instead of the
central registry informing the other agencies of the new firm’s existence and
merging the two different registration numbers.
x Open a permanent company bank account – which now finally enabled the firm to
start trading.
x Register the company with the tax office and customs office – sometimes a single
number, but often two different doors to knock on and two different registration
numbers to get. Registration with the customs was compulsory for the firms that
envisaged foreign trade.
x Register with the Social Security Office, Pension Insurance Fund and Health
Insurance Fund – this was a prerequisite to employ any labour, including to
register the leading entrepreneur – company director. Again, most often different
agencies and different registration numbers that had to be obtained.
x Obtain municipal/cantonal certificate that environment and workplace safety laws
are observed – an ex-Yugoslav requirement which involved the local
administration that forms a committee of inspectors, all very closely associated
with rent seeking, i.e. corruption. It could not be done upon breach of public
safety but as a pre-requirement to business operations.

Structure of the report

This review analyses the process of business registration in the countries of South
East Europe: Albania, Bosnia and Herzegovina, Bulgaria, Croatia, FYR Macedonia,
Moldova, Romania, Serbia and Montenegro (Serbia and Montenegro individually). It was
based on the desk research of all the materials publicly available on the company
registration from each of these countries, as well as the international publications,
primarily those of OECD, FIAS, Stability Pact etc. The review focused on the past
reforms in the business entry legislation and the respective institutional changes as well as
the current situation. It aims to combine the experiences of the observed countries and the
international organisations and produce comparable findings. Progress is being measured
by using the regional performance indicators, set by the international agencies and
measured using the same methodology in every country, as described later in the text.
Besides the introduction and its global comparative and analytical approach, the
report looks into the key issues in the registration process, which is a basic analysis of the
start-up procedures, and focuses on the situation in the countries of South East Europe.
Before reviewing the process in each country separately, the paper presents the regional
indicators comparing the countries among themselves.
The country case studies are divided in three parts: review of the process, an
assessment of the positive aspects and the remaining issues and finally the policy
recommendations which list the short to medium term reform priorities.

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Chapter 2

Key Issues in the Business Registration Process

Two procedures: notification of existence and tax and social security registration are
principally sufficient for business registration. As seen above, many countries impose
additional requirements.
The beginning of this text stressed that it takes two procedures, two days, and less
than 1 percent of annual income per capita to register a private limited-liability company
in Australia. It costs nothing to do the same in Denmark, and almost nothing (about 1
percent of annual income per capita) in Canada, New Zealand, Singapore, Sweden, the
United Kingdom, and the United States.
Four measures: the necessary procedures, the associated time and cost, and the
minimum capital requirements – capture various aspects of the registration process.
The number of procedures describes the external parties that the would-be
entrepreneur faces. One can think of them as tollbooths – at each procedure, the
entrepreneur may be stopped. In many countries, at each procedure involving government
officials, a bribe may be sought.
The number of days and the official costs associated with each procedure are easy to
interpret: the higher those numbers, the more cumbersome and costly the registration
process and the less likely it is that many entrepreneurs will register businesses.
The minimum capital requirement is the amount of capital that the entrepreneur needs
to put into a bank account before registration starts. The account is frozen during business
entry and sometimes remains so until the dissolution of the legal entity. This money
supposedly served the purpose of catering for the outstanding debts in case of the
business going bankrupt, but it was rarely sufficient to cover even a small proportion if
the sole purpose of establishing a business was money laundering. On the other hand, it
was extremely restrictive for the start-ups as it froze a substantial capital, which would
otherwise helped when it was most needed – at the beginning of the business operations.
Private limited-liability companies are the most prevalent business form around the
world. They are also desirable for economic reasons. Investors are encouraged to venture
into business when the potential losses are limited to their capital participation. Indeed,
evidence suggests that a rise in the number of limited liability dramatically increases the
number of companies seeking registration and also that limited liability is associated with
larger firm size. Today, limited-liability companies account for more than 55 percent of
registered businesses and 90 percent of output in OECD countries1.
Sometimes, as part of registration, new businesses have to acquire specific permits or
licenses, particularly at the local level, so they are included in the entry procedures list of
the respective countries. On top of these procedures, some businesses need permits and

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16 – CHAPTER 2. KEY ISSUES IN THE BUSINESS REGISTRATION PROCESS

construction approvals, utility connections, and product and process licenses before they
can commence operations and they can be significant obstacles for entrepreneurs.
However, the relevant public agencies are rarely being informed by the central
registration authority of the new enterprise’s existence and forwarded the single
registration number. To the contrary, the institution-centred laws envisage only the
possibility of the entrepreneur’s walk through the bureaucratic maze in an attempt to let
every institution know of the business registration and in order to get a permission and
another registration number from these authorities too. This not only imposes immense
costs on the would-be entrepreneur, but it also demonstrates that the administration has
not parted with the concept of the autocratic government that sees all its subjects as a
submissive source of income. In practice it imposes costs on everyone as an inefficient
administration sunning parallel registration systems can in no way be as fast and cheap as
those that have a central register forwarding registration information to all those
concerned and using a single number to track every entrepreneur and firm. This may also
gradually lead to the establishment of a business register, which not only serves the
purpose of identifying the defaulting entrepreneurs, but also as a positive business record
base. Some countries have turned this vast information database into a public, fee-based
commercial registry that may issue credit ratings, perform analyses and provide business
intelligence information, provided it involves legal information and violates no privacy or
confidentiality.

Box 1.1. The prospects of the former payment bureaus

In the countries of the former Yugoslavia the existence of the central clearance/payment
bureau (SDK, ZOP, SPP, ZPP as appropriate in the various republics) also acted as a source of
such information. It was abolished because it monopolised all the payments that the legal entities
were making and there was no choice of service. With the introduction of the pluralist
commercial banking system of payments, the bureaus ceased to exist and in all the former
Yugoslav republics, the remnants currently strive to shift to the profit-making private sector
activities with a greater or lesser success. In some countries they are indeed seen as a nucleus of
a partially public credit bureau, which will collect such information from the commercial banks,
as well as other financial institutions, perhaps expanding to the lease registry, registry of pledges
and property etc.

The countries observed have been steadily amending the registration legislation. In
some cases the entire process of starting up a business have taken between 13 days
(Macedonia) and 5 steps (Romania) at the time the detailed snapshot was taken, presented
in Annex 1 of this document. The early days of this decade represented the starting point
for most countries in reforming the registration agenda. It primarily came as a result of
several international initiatives, led by the World Bank’s FIAS2 analyses of the
administrative barriers to investment conducted nationally. The respective studies
mapped the entire life cycle, documenting business entry, operations and exit. References
to the business entry have swiftly been translated by the client governments into action
plans, which represented a blueprint for the reforms. Other international agencies, such as
OECD in particular, reinforced this effort by providing technical assistance and regional
discussion fora, which enabled the countries to absorb the best practices worldwide and
mutually compare the progress achieved.

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CHAPTER 2. KEY ISSUES IN THE BUSINESS REGISTRATION PROCESS - 17

Cutting unnecessary steps from the entry process, such as notary’s certification of all
incorporation documents or registration with the local chamber of commerce, introducing
single registration forms, a single company identification number, and silent consent in
approving registration (a non-response implies approval) have had enormous success. In
terms of the common directions of the reform, the region shared the practice to maintain
business registers in the courts. Most countries have opted to make certain decisions in
the registration process automatic subject to the fulfilment of specific conditions. All
court decisions on company registrations used to be made by a judge. However, many of
the decisions were rather pro forma and did not require the inputs of highly skilled
personnel. Therefore, consideration was given to making certain decisions automatic
subject to the fulfilment of specified conditions and the clearance of the clerks of the
court or in the specialised agencies. This shift of the workload to the clerks is practiced in
many other EU Member States. The process gave birth to a one-stop-shop registration
concept.
Governments can go a long way with simple reforms. These include adopting better
information and intra-government communications technology – to inform prospective
entrepreneurs and to serve as a virtual one-stop shop for business registration.
Moreover, the registration of the new legal entity and tax registration are merged into
one procedure. Reforms that require new legislation include introducing a general-objects
clause in the articles of incorporation (which allows a firm to change lines of business
without reregistering), eliminating the capital requirement, and removing notary’s
authorisations and court use from the registration process.
Registration ex-ante or ex-post is a very major issue to be considered in the course of
the reforms. Many regulators of the outdated registration system argue that the authorities
must safely conclude first that the business is not being set up to evade paying taxes or to
break environmental, safety or health standards. Only then it may be allowed to do
business. This way of thinking automatically assumes that the private sector is a bunch of
thieves with the sole aim to rob the country of its precious wealth. The progressive
regulators consider registration a mere market entry which will gradually start benefiting
the country and its society. It therefore must be encouraged to begin doing business. Only
if a serious suspicion exists that the entrepreneur is engaged in some illicit activities, or
may be breaching the minimum health, environmental or social standards, then an
inspection is being sent on site or their records analysed to ensure that business is being
done according to the country’s laws.
Such reforms are proving difficult to implement in most countries, as they face stiff
opposition from both judges and the legal and notary professions, but their beneficial
effects go far beyond business entry.
Likewise, licensing has become the most difficult aspect of the reforms once the
procedure has been redesigned and a central registry established, linking the central state
agencies. The licences are most often a matter of the local and regional authorities, where
it is legally difficult for the central administration to deregulate. Progressive countries
have therefore gone as far as engaging the local and regional level in the very core of the
reforms, organised workshops and trainings with the local bureaucrats to streamline, co-
ordinate and finally deregulate the licensing process at the local governments.

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Box 2.1. Legal Business Forms in the SEE

The region of South East Europe differs in the forms of the legal status of entrepreneurs, but in essence
they all follow common European formats and range from the basic sole entrepreneurship to the joint stock
companies. This textbox features the spectrum of legal forms by country while the paper focuses on the
commonalities, i.e. the most frequent forms of registered businesses:
Albania
Regulated by the Law No.7638 on Commercial Companies (1992); Law No. 7667 on Commercial Register
(1993). Possible legal forms: General partnership; Limited partnership; Limited liability company; Joint-stock
company; Limited partnership by shares.
Bulgaria
Regulated by the Commercial Law (State Gazette No. 48/18 June 1991). Possible legal forms: General
partnership "Sabiratelno drujestvo" (SD); Limited partnership "Komanditno drujestvo" (KD); Limited liability
company "Drujestvo s ogranichena otgovornost" (OOD); Joint stock company "Akcionerno drujestvo" (AD);
Limited partnership by shares "Komanditno drujestvo s akcii" (KDA).
Bosnia and Herzegovina
(Federation of Bosnia and Herzegovina) Regulated by the Corporate Law (Official Gazette of FBiH 23/99).
Possible legal forms: Unlimited Joint Liability Company (d.n.o.); Limited Partnership (k.d.); Limited Liability
Company (d.o.o.) and Joint-Stock Company (d.d.)
(Republika Srpska) Regulated by the Legal framework: Law on Enterprise (Official Gazette of RS 24/98).
Possible legal forms: General partnership; Limited partnership; Limited liability company; Joint-stock company;
Public company
Croatia
Regulated by the Law on Commercial Companies (Official Gazette No. 111, 15 December 1993). Possible
legal forms: General partnership "Javno trgovacko drustvo" (JTD); Limited partnership "Komanditno drustvo"
(KD); Limited liability company "Drustvo s ogranicenom odgovornoscu" (DOO); Joint stock company "Dionicko
drustvo" (DD). In addition the Law on Commercial Companies permits silent partnerships and economic interest
groupings.
Serbia and Montenegro
Regulated by the Law on Enterprises (FRY Official Gazette, No 29/1996). Possible legal forms: General
partnership (o. d.); Limited partnership (k. d.); Limited liability company (d. o. o.); Joint-stock company (a. d.);
Socially owned enterprise (d. p.); Public enterprise (r. p.)
Macedonia
Regulated by the Law on Trading Companies (Official Gazette No. 28/1996). Possible legal forms: General
partnership “Javno Trgovsko Drustvo” (JTD); Limited partnership “Komanditno Drustvo” (KD); Limited liability
company “Drustvo so Ogranicena Odgovornost” (DOO); Joint-stock company “Akcionersko Drustvo” (AD);
Limited partnership by shares “Komanditno Drustvo so Akcii” (KDA).
Moldova
Regulated by the Law on Enterprises and Entrepreneurship (No. 845-XII/3 January 1992); Law on Joint
Stock Companies (12 July 1997). Possible legal forms: General partnership; Limited partnership; Limited liability
company; Joint-Stock Company; Limited partnership by shares.
Romania
Regulated by the Company Law No. 31/1990. Possible legal forms: General partnership "societate in nume
colectiv" (SNC); Limited partnership "societate in comandita simpla " (SCS); Limited liability company "societate
cu raspundere limitata" (SRL); Joint stock company "societate pe actiuni" (SA); Limited partnership by shares
"societate in comandita pe actiuni" (SCA).
Source : SEEROPE Investment Guides 2003

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Particularly worrisome are the general licences that certify a business complies with
minimum requirements. Such standards are often relicts of the past bureaucracies which
used to prescribe obscure minimums for doing business (e.g. ceiling heights for offices,
thickness of walls etc.) which were once set up to discourage private initiative. These
days, such general licences have become the key rent seeking opportunity for several
local agency offices that form a committee that inspects the premises on site. Such
inspections have little to do with the safety and protection of the local
environment/citizens, as every hazardous activity requires a separate individual licence, a
separate inspection and a long procedure to become accredited for doing business. Even
should another business move into the same premise and conduct the same type of
business, they need to undergo the same licensing procedure yet again. Having
recognised the senselessness of this process, some countries in the region have moved
toward the elimination of such general permits.
Nevertheless, many other licences could be granted once the business is registered
and as it commences its operations, while these are exclusively limited to the specific
public hazards or types of commercial activity that should be supervised (arms
manufacturing and trade, waste etc.) but it makes little sense for a business that first has
to list every potential activity it may ever conduct at the point of business registration and
then procure dozens of individual licences whether or not it intends to perform such
business activities at this or any future point.
Licensing should not be a part of the registration process and condition the
commencement of the commercial activities, but can be performed at a later stage,
depending on the type of activity and the potential hazard it may bring.
In a sharp contrast, the European Union has been making considerable progress in
improving the process of administering business start-ups. In particular, many Member
States have:
x Improved the administrative efficiency of current procedures by introducing one-
stop-shops and statutory response times.
x Switched from a system based on authorisation to a system based on self-
certification; reduced the number of licences or approvals; and reduced the
number of procedures.
x Enhanced the involvement of users through the use of the Internet to provide
information, and publicity campaigns.
x Reduced the scale and complexity of the documents required to establish new
businesses.
x Reduced the level of mandatory costs.
The table below indicates the differences among the European economies underlining
a great disparity with the SEE region, when compared against it.

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Table 2.1 Registration indicators in the EU

Enterprise registration Average Highest Lowest EU’s


in the EU Benchmark
Typical Time (Elapsed business days) 12 35 1 3
Minimum Time (Elapsed business days) 3 7 1 1
Typical Cost (Euro) 250 1,572 0 0
Minimum Cost (Euro) 90 750 0 0
Number of procedures 8 15 1 4
Number of Official Forms and Documents 4 13 1 1
Number of Official Licences, Approvals, and 2 7 0 1
Confirmations
Source: Centre for Strategy and Evaluation Services (CSES)

The report will further show that the region lags well behind these figures and only
the leading countries fall within the highest European benchmark3. None of the countries
has yet even approached the European averages.

Notes

1. Jacobs 2002. There are three economic arguments for limited liability: it encourages investors to take
risks, it facilitates the distribution of risk among corporations and creditors, and it avoids high litigation
costs in case of debt recovery.

2. Foreign Investment Advisory Service – a joint service of the International Financial Corporation and the
World Bank. See textbox 3.

3. Moreover, the last such survey was undertaken in the EU in the late 1990s which is when these figures
were accurate and up-to-date. Since the EU Member States have been experiencing a further
improvement, the table above serves as an indication.

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21

Chapter 3

Review of Business Registration in South East Europe

This review analyses the process of business registration in the countries of South
East Europe: Albania, Bosnia and Herzegovina, Bulgaria, Croatia, FYR Macedonia,
Moldova, Romania, Serbia and Montenegro (Serbia and Montenegro individually). It was
based on the desk research of all the materials publicly available on the company
registration from each of these countries, as well as the international publications,
primarily those of OECD, FIAS, Stability Pact etc. The review focused on the past
reforms in the business entry legislation and the respective institutional changes as well as
the current situation. It aims to combine the experiences of the observed countries and the
international organisations and produce comparable findings. Progress is being measured
by using the regional indicators, as described later in the text.
Not only in SEE but also throughout the EU and in all other areas this dynamic
process and the lessons learned in one area are quickly being adopted by other countries.
The snapshot taken in this review reflects the situation as it is in April 2005. At the time
of publishing, some of the references in the text may have been completed, reflecting that
the reform process remains fluid.
This process, besides the intra-regional comparisons and an ever steeper mutual
learning curve, has been greatly assisted by several international agencies as stressed at
several points in the text. Most notable were the technical assistance provided by FIAS of
the World Bank and OECD among the multilaterals, but also certain support provided by
the European Commission and by the Member States bilaterally.
Nevertheless, the region of SEE altogether still has one of the most over-regulated
procedures for establishing a business entity. The lengthy and complex procedure has the
effect of increasing the cost of business start-up for domestic and foreign investors alike.
Private sector representatives alleged that unjustified requests for additional
documentation cause considerable delays and give the authority an often-used and
subjective tool for classifying an application as incomplete. In addition, the lack of
communication between the authorities and the applicants increase the delays because the
applicant is not automatically notified of the incomplete status of the application or the
specifics of the ‘missing’ documentation.
The number of authorities to be contacted, approvals to be obtained and documents to
be produced is considerably higher than that observed in many neighbouring countries.
In addition, the procedures are very rigid. Every applicant has to go through the same
process, no matter whether it makes sense or not for the particular applicant. All
procedures end with a mandatory approval from an authority. More flexible and effective
alternatives like binding declarations of the applicant or reporting requirements instead of
approvals are not in use.

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Since the steps of the registration procedure are largely sequential and interdependent,
a delay at any step, justified or unjustified, halts the entire process. This makes the
investor very vulnerable and dependent on each particular administrator.
The impact of these complex procedures is reflected in the high costs of doing
business in terms of the preparation of documents and the professional services required
for navigating the complex procedures. The main impediment to business is the length of
the preparatory phase before business operations can begin. Though each step might take
only days or weeks, it adds up. It is not uncommon for the entire approvals process to
take a year or more. During this time, valuable resources are idle, business plans become
obsolete, business partners and contacts turn away, and opportunities are lost. Therefore,
it should not come as a surprise that investors view the business registration and
establishment process as a major barrier to investment.
The business registration procedure appears to be overloaded by unnecessary but
mandatory approvals. The fact that the sequential nature of the process precludes the
simultaneous processing of most approvals renders the entire process even more
unacceptable. When compared with other countries in Central and Eastern Europe as well
as in the European Union, the approvals required and the procedure for business
registration can be considerably streamlined.
In addition to the unacceptable number of approvals and the range of authorities
involved in the process, many of the mentioned administrative steps require excessive
documentation.
Government officials are also given the authority to deny applications for
incorporating a business based on their evaluations of the merits of the business activities.
The government must eliminate investigations and subjective decision-making by judges
as to the merit of the business enterprise. No substantive decision by judges or
government officials should be required for incorporation. For instance, to create a
limited liability company, there should be no required filings beyond a simple filing that
is initially made to accomplish the incorporation itself. Currently, companies must adhere
to extremely detailed requirements for the formation and registration of their business.
Also, the role of the courts in the business registration process is undergoing review.
Contrary to the modern practice in many European countries, the court registration
process gives the court the role of a supervisory agency for business practices. A separate
institution, other than the courts is required to protect the business community from
businesses that do not fulfil the minimum requirements of the company legislation. The
company registry is designed to provide information to the public on the parties
responsible for the business and its activities as well as the minimum capital guaranteed.
It is not the business of the courts, for example, to examine foreign investment and other
approvals or licenses. It is also not the business of the courts to examine the classification
of the business activities. And it is certainly not the business of the courts to examine
whether the founders paid their taxes or other obligations.
The problem of excessive documentation and duplication is partly caused by a lack of
communication between the relevant authorities. Many documents must be submitted
over and over again to different authorities. The respective authorities do not make use of
the simple technique to exchange information among each other. In effect, the duplication
of documentation is not only to the disadvantage of the applicant but also of the
authorities. The workload of the administration increases unnecessarily. For example,
while separate statistical registration is common in much of central Europe, it is less

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common in Western Europe where statistical bureaus receive their information directly
from the company registries, and use tax identification numbers for tracking and data
purposes. Towards such simplification, the regional governments should continue to
emphasise the benefits of harmonising registrations across ministries and agencies.
Many lawyers in the region complaint about the lack of transparency of the
procedures. Although the laws and regulations describe usually the requirements for
applications, single administrators sometimes do not know the legal texts, or do not co-
ordinate within their authorities. Thus, requirements often change in an unpredictable
manner and these changes cause unnecessary delays.

Box 3.1 – Do’s and Don’ts of a one-stop-shop concept

Facing a complexity of the registration process, the concept of a one-stop-shop appears


like an appropriate solution. The basic idea is that an investor would only have to be in
contact with one single entity to obtain all the necessary paperwork in one streamlined and
co-ordinated process, rather than having to go through a labyrinth of different government
bodies. Such a one-stop-shop would effectively mean that one government agency has all the
authorities necessary to grant the various licenses, permits, approvals and clearances.

Practically all governments that tried to implement this form of a one-stop-shop


encountered significant resistance by the various government agencies responsible for the
different administrative procedures. Most importantly, other ministries and agencies fear that
the creation of such a concept would result in curtailing their authority and mandate, quickly
leading to intensive turf battles within the government bureaucracy.

Any mirroring of administrative capabilities would quickly turn the one-stop-shop into a
bureaucratic super-agency with massive staff and resource requirements. It is unlikely that
any such agency would be capable of providing fast and client-oriented services to the private
sector. Instead governments tend to rely on some form of co-ordination mechanism where the
various authorities maintain their existing mandates and responsibilities.

This, in fact, means that paperwork is simply collected at the one-stop-shop and
transferred to the main offices of the relevant authority just to pass through the same
administrative process as before. In such a situation the potential investor has gained nothing.
The ‘one-stop-shop’ has actually turned into a ‘one-more-stop’, as investors are now forced to
interact with one more entity in the process of implementing their projects.

A genuine one-stop-shop is the concept in which the procedures have been reengineered
and some steps actually cut out, while the remaining agencies maintain an electronic
exchange of data, so that the documents flow within the public system and do not force the
investor to run around the offices accomplishing the process. Besides, the management of the
one-stop-shop have the possibility of identifying shortcomings in the administrative
implementation of a country’s investment policy and to remove all these bottlenecks. Hence,
at the core of a one-stop-shop lies policy reform, rather than short-term, ad-hoc solutions to
problems investors face.

Source: Includes excerpts from F. Sader, 2002

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Another problem encountered by investors is an obsolete mindset of administrators.


Instead of a business-friendly attitude, it appears to them that the administration
sometimes still sees investors as intruders and problem-makers. Mistrust prevails and a
certain control mentality can be found in many authorities. It is not uncommon that single
administrators go beyond their competency because they suspect any kind of irregularity
that is entirely out of their scope of business. The administration appears to see itself
often as defenders of the state interest against hostile forces.
Reforms typically start by providing prospective entrepreneurs with all necessary
information, including the number and sequence of procedures, their time, and their cost.
This will minimise the time lost due to the complex and unclear procedures and it will
reduce the likelihood of bribes or unofficial padding of fees. The governments of SEE
have already begun making the relevant information available on the Internet, showing
exactly where and when to go, and what documents to bring. Such sites describe the
documentation for completing the registration process, and the additional requirements to
start a business. The associated fees, stamp duties, and notary costs are also listed. Where
Internet usage is lower, the information can be provided in leaflets or posted on the wall
of the registry office, which is particularly suitable for registration of sole
entrepreneurship, and is being conducted at the local level (municipal offices).
Other countries have recently started adopting new technologies to improve
communication and to share information among government offices. The regulators can
move to a single registration form and a single registration number. A service oriented
government will then do the administrative tasks for the client, thus stimulating business
entries and with it growth: it furnishes all other government agencies with the single
registration number. So, instead of the entrepreneur running around the offices, which
may be the rent-seeking points of contact, this is now done transparently, quickly and by
the regulator itself.
Many countries of SEE still require several types of forms to be filed, which can be
confusing and expensive. Countries also require multiple registration numbers, issued by
various agencies. A new business may need up to five separate registration numbers.
Administrative rules can be revised to allow for statutory response times, for posting
information on fee schedules, and for silent-consent rules. Silent consent means that if
entrepreneurs have not heard from the government agency within a given number of days,
approval is automatic and they may continue to the next procedure. A silent-consent rule
was recently adopted in Bulgaria leading to a one-stop-shop for company registration. In
establishing them, however, governments need to ensure that they dismantle other steps
for business registration, to avoid creating “one-more-stop shops.” One solution is to use
an already-existing government agency to process the application for business registration
(e.g. FINA as stipulated by the proposed Croatian law) and forward the information to
other agencies.
As Internet technology becomes widespread, registration can become electronic,
through a virtual one-stop-shop. A registrar office ideally establishes data transmission
links with statistics bureaus, tax administration, customs offices, chambers of commerce
etc. Online business registration has other benefits. In Serbia anyone may view the
register of company names on the website and confirm that the proposed company name
is unique.
Several legal reforms have produced good results. One is the adoption of a general-
objects clause in registration, so that entrepreneurs do not need to specify the precise

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nature of their business activity, which has been a very cumbersome and expensive
statistics exercise. This not only eliminates the need for court involvement – it allows for
the instantaneous, if expensive, purchase of off-the-shelf companies to create a new one.
The general-objects clause also makes it easier for companies to reregister.
A further and comprehensive reform of business entry regulations would eliminate
the capital requirement. In the early days of incorporating a business, minimum capital
was required for the privilege of obtaining limited liability. Some countries still justify
capital requirements – as protecting creditors, as protecting the company against
insolvency, and as protecting the public from activities that could reduce social welfare.
But this makes little sense. Why would a drug manufacturer have the same capital
requirement as a company that designs clothes? If capital requirements were
commensurate with risks of creditors, then they should differ across sectors. When in-
kind contributions become acceptable, as they are in almost all countries, no actual value
of minimum capital in the event of insolvency is of much use.
The use of notaries for the authorisation of documents related to business registration
can also be eliminated. Notaries are not part of the registration process in Nordic
countries, and seldom are in common-law countries. In contrast, notaries are almost
always used transition countries. Where notaries are needed to authorise documents, this
is frequently the most expensive part of the company registration. The service a notary
provides – checking the identity of company founders and company officers – is routinely
performed by public administrators for many other services. And clerks at the business
registry are as able as notaries to confirm identity.
A reform does not have to be expensive, because the fees from registration services
cover costs. Evidence of the cost effectiveness of such administrative registration is
available from the ongoing reform in Serbia and Montenegro. The cost of setting up a
system of administrative registration in Serbia and Montenegro is estimated at $1.5
million, with annual operating costs of about $1.1 million. If one compares this with the
projected annual revenues of $1.8 million from registering businesses, it is clear the
investment would be paid off fully in less than three years1.
Legal reforms involve rewriting the company law, but they would significantly speed
up business entry and reduce its costs. They would also free commercial courts (or local,
public courts as is the case of Bosnia and Herzegovina) from the large number of
registration and re-registration cases. Instead, judges could focus on their primary role –
resolving disputes.
The adoption of some or all of these administrative and legal reforms will generate
additional entrepreneurial activity, as evidence demonstrates in the more advanced
reformist countries, such as Romania and Bulgaria.
The European SME Charter, as a part of the international efforts to streamline and assist
the reforms has encouraged the evolution of company start-up costs, and the time taken and
procedures required for approving new companies, towards the most competitive standards
in the world as well as called for an increase on-line access for registration.
Montenegro due to its sheer size and flexibility managed a new, rapid and relatively
cheap company registration procedure, the fruit of its recent and thorough reform in this
area. Since last year’s Charter report on the Western Balkans, various countries have
introduced new legislation or taken measures to expedite company registration
procedures, in particular Serbia and Bosnia Herzegovina. Moldova has also made
considerable progress over the last twelve months.

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Based on the national reports, the current delays in working days for company
registration can be presented in the following table2:
This table is based on the data provided in the governmental national Charter reports.
It is fair to state that in many countries, entrepreneurs report longer delays than those the
government figures indicate.

Table 3.1 Reported company registration delays in working days

Country Bosnia- FYR


Albania Croatia Kosovo Moldova Montenegro Serbia
/procedure Herzegovina1 Macedonia
Registration 2-15 5 10-20 1-3 3-5 One stop 3-4 22-40
proper shop2
Additional 5-15 7-20 7-30 1-2 4-7 3-10 1-2 20-30
steps and
procedures
Licensing 22-30 10-60 30-60 3-7 10-15 8-15 52-65 176-
and permits 250
1. The data for Bosnia-Herzegovina reflects the new law which sets a maximum processing time of five days for proper registration. The other
data is based on the national report for Bosnia-Herzegovina which still reflects current differences between the constituent Entities of the
country. For this table the lowest and highest values of those Entity’s data have been taken into account and the result is only indicative, not
precise.
2. In Moldova various steps of registration and additional procedures are integrated into a one-stop shop procedure. The one stop shop is
however still incomplete with five remaining steps/institutions to be integrated over the course of next year. See targets.
Source: European SME Charter for SEE

From the current table however, the following can be derived:


1. in the absence of one-stop-shops and online registration, company registration
remains a time consuming process in most countries,
2. the really excessive delays are usually in the phase of permits and licensing,
3. the newly installed company registration systems in Kosovo, Moldova and
Montenegro ensure relatively swift registration procedures whereas in Serbia
such procedures are significantly slower although Serbia is reforming its
registration procedures. Croatia and Albania could still make improvements.

Indeed, since 2002 Moldova has boasted a rather modern and efficient registration
system which effectively operates as a one stop system incorporating various steps
(registration proper, fiscal and statistical codes and data) and the approval of the
company’s name into one integrated electronic system at the State Registration Chamber,
which connects various regional offices in a ‘real time’ computer network. With this
system, the number of formal steps was reduced from 13 to 2. In addition, a
modernisation of the licensing process was initiated through a new Law on 24 June 2004.
Economic entities are now exempted from the payment of notary services for the
mandatory legal certification of documents required to obtain a license, and the whole
process has been made simpler and faster: the number of activities which require a license
has been reduced from 112 to 47 and some licensing has been decentralised to local
authorities. The list of required documents has been also reduced (reduction from 255 to
126 for the 47 types of licensed activity i.e. an average of 3 per activity). New licensing
conditions have been elaborated for all types of activities.
Last year’s SME Charter report noted that company registration is still a slow and
expensive process in Serbia. Therefore, a new Law on Business Registration was adopted

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on 21 May 2004, as well as the Law on Business Registration Agency. These laws
regulate the streamlining of business registration, the setting up of a new, independent
registration agency and the introduction of a system of on-line registration. Once in force
and implemented, the law will simplify and concentrate registration in the Agency and
allow the acceleration of registration (proper) to within 5 days. Online registration will
require the additional enactment of the e-signature act in Serbia.
However, a stiff resistance by the tax administration was noted, linked to that of the
customs authorities to incorporate the single registration number. Likewise, the
commercial courts have objected to handing over of the registration responsibility and
there has been a legal parallelism ever since the new Law on registration was introduced.
These challenges represent a clear priority in the ongoing registration process’ reform.
Croatia simplified the registration of craftsmen last year. Through the establishment
of the Central Register of Crafts in the Ministry of Economy, Labour and
Entrepreneurship, the collection of data on registered craftsmen has been made faster and
more transparent. Electronically linked to the central register, 108 registration bodies
have been established locally, which makes the start of crafts relatively fast and efficient.
If the applicant fulfils all the legally prescribed conditions, the usual registration delay is
2 days, maximum 15 days. Moreover, a government facility for craft start-ups offers the
possibility of 100% coverage of the crafts registration costs. The Ministry finances the
whole amount through the programme Start-up for 2004. Taking into account the need for
an equally simplified procedure for other company start-ups, CEPOR, Croatia’s SME
Policy Centre, analysed the obstacles in launching new business enterprises and
formulated a recommendation for a cheaper and faster start-up process in Croatia as a
priority. The objective is to achieve by 2008 the following benchmark values: registration
time for companies: 3 days, number of forms: 5, only 1 official license. In order to
achieve these objectives, Croatia would also introduce the principle of “silent consent”.
Craft licences that are being issues by the Chamber of Crafts remain compulsory for most
businesses and extremely expensive to obtain, which unnecessarily complicates the
process for micro entrepreneurs.
Limited liabilities and companies still undergo an unchanged procedure, despite a
new one-stop-shop process being designed and the respective law going through several
readings in the parliament. The new agency – InvestCroatia aims to streamline the
government agencies’ work and enable a quick and cheap registration. A local branch of
FINA3 in Zagreb will serve the purpose of a pilot one-stop-shop project. Based on the
success of that phase and the lessons learned, the government and a number of
international donors have pledged to invest further means to providing technical
assistance and securing IT support.
Bosnia – Herzegovina has been characterised by stark differences between the
constituent Entities of the country. The European Union has called on the country to set
up a uniform company registration procedure as part of the 16 policy priorities that the
country must meet in order for the Commission to recommend the start of negotiations on
a Stabilisation and Association Agreement. In July 2004 a new Law on Registration of
Enterprises at State level was adopted by the Parliament, which seeks to regulate,
expedite and harmonise (between Entities) the procedures and formalities for company
registration. It also seeks to minimise registration delays to 5 days. With the passing of
the subsidiary Entity laws in early April 2005, the conditions have been met for the new
procedure to be introduced. Hardware and software are being installed at 16 registration
points countrywide and the new system is expected to start functioning by mid-

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June 2005. The main challenge is maintaining the uniformity of the system and the
compatibility of the software, so that the ‘real time’ exchange of data among the centres
can continue to flow beyond the pilot phase.
Montenegro is undertaking a pilot project in one municipality (to be subsequently
extended to three towns) to take stock of procedures, forms and formalities involved in
the attribution of licenses and permits, which constitutes the main cause for start up
delays. The project envisages to develop a standard uniform model (and when necessary a
new legal measure) for all Montenegrin municipalities. This new format would define and
simplify the procedure, the terms and the costs of issuing permits. Representatives of the
private sector will be involved in the development of this new model.
In Albania company registration is still a very costly affair and the system of profit
taxes, which involves advance payments, contributes negatively to this state of affairs and
to the growth of the grey sector in Albania. The country is now setting out to address
these problems.
In Macedonia, the new Law on Trade Companies, adopted by Parliament in April
2004, provides a new typology of companies and an easier and more transparent
registration procedure, limiting the court decision for registration to seven days. The new
law includes the use of a one-stop-shop system for registration, but the concept is not yet
implemented.
In Kosovo, the new Office for Permanent Business Registration, which, although
established in 2002 has until 1 May 2004 mainly been charged with re-registrations of
existing companies, is now operational for new companies and has effectively reduced
registration time from 10 days to 1 since June 2004. It is technically prepared for online
registration, but the e-signature law is not yet in place in Kosovo.
Various countries have quicker procedures for businesses with a smaller scope i.e.
sole proprietors, shops or crafts (Serbia, Croatia, Macedonia). In Macedonia this
includes the “silent consent” principle for these companies.
Online registration is not possible in any country, with the exception of embryonic
online registration systems in Croatia (for crafts), certain forms available on-line in
Serbia and Moldova.
Very few countries have moved towards setting up an on-line publicly accessible
register of businesses. Bulgaria and Serbia may have advanced a little further than the
others establishing their public registries (www.registryagency.bg and www.apr.sr.gov.yu
respectively). This is likely to follow the paths of the more advanced business registers or
the European Business Registry as described in the textboxes below.

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CHAPTER 3 REVIEW OF BUSINESS REGISTRATION IN SOUTH EAST EUROPE - 29

Box 3.2. Irish company registration system

Ireland has closely followed the 1st EU Directive on Company Law, which principally deals
with the maintenance of registers of companies. The Capital Taxes Directive is important from
the point of view of charging models and they both call for no profit from viewing data. The Re-
Use of Public Data Directive is however a more recent directive on the sale of data from public
databases, which allows cost of collection.

The aim of the Irish company registry was to do what is best from the point of view of the
Office: cut staff time on each task, cut elapsed time for the whole process and adapt services to
client groups. These benefits would then be passed back to the client in terms of a quicker,
cheaper and a less bureaucratic process. The registry primarily engineered the online filing for all
forms with electronic signature, or the forwarding of a signature page, including the pre-filled
annual return form for tax purposes.

In turn, the novelty encouraged filing and reduced internal processing – it eliminates re-
keying of data, scanning of documents and paper movement and brings the checking process as
close as possible to the client.

The registry (www.cro.ie) runs an online database, allows for credit card payments and
gains popularity by day with a number of features planned to be introduced.

Source : Presentation by Paul Farrell, Registrar of Companies – Ireland, on the occasion of the
OECD’s SEE Enterprise Forum, Tirana, February 2005

Box 3.3. A suggested approach to commercial registers –


The experience of the European Business Register

European Business Register (EBR) was born as an initiative by some of the public bodies
responsible for company registration and legal publicity, to create the telematic network between
them in order to provide easy and multi-language access to the official company data all over
Europe (12 languages available). It currently contains 14 Information Providers, 17.5 million
registered enterprises, almost 14 million active companies. By the end of 2004 all EBR Members
had switched from the old to the new registry system, which made it the official and a reliable
source of European companies register information. It involves 18 countries at present with an
aim to incorporate all Member States in the near future. The only requirement was that the
official business registers are represented and that these are willing to provide online access to
the BR Database. Online access is publicly enabled at: www.ebr.org.

Source : Presentation of John Murray at the Tirana Enterprise Forum, February 2005

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30 – CHAPTER 3. REVIEW OF BUSINESS REGISTRATION IN SOUTH EAST EUROPE

Notes

1. Jacobs 2002

2. The national reports also provide information on the costs of company registration but these could not be
made comparable for the purposes of the current report (differences in GDP, calculation methods).
Bosnia-Herzegovina lacks aggregate data in the national report.

3. Former SDK – the central payment clearance bureau with a countrywide network of branches.

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31

Chapter 4

Performance Indicators

Several external monitoring systems have been set up to provide the governments
with a better understanding of the constrains from the businesses’ point of view. It was
common to all of them that they polled the entrepreneurs mostly in the form of an
anonymous questionnaire and less often through a focus group meeting in a search of the
problems as the firms see them.
FIAS used its own instrument – Administrative and Regulatory Cost Survey (ARCS),
which has been run in most client countries, but the instrument is fairly compatible with a
much larger Cost of doing business (CoDB) database, which the World Bank runs in 145
at present. Thus the CoDB has become a more comparable global tool, while the ARCS
remains more in-depth and is being run to monitor specific developments in any given
area of the business life cycle.
Below is a snapshot extracted from several national ARCS, where the averages
presented in the chart portray a picture of an average business throughout the country,
based on the statistics sample provided by the official agencies. The data were compiled
when all of those countries were embarking on the registration reform process and
therefore most of the successive comparative scores offer a traceable progress in time.
The picture below indicates a very long business registration with almost every country in
the region and leaves a very uncompetitive image of the region, unfavourable for
investment.

Figure 4.1 Number of days required to start a business in selected SEE countries
(excluding outliers)

100 97

80
64
60
43 42
36 No. of
40
days
24
20

0
ria

ia

ia
ia

tia

ia
on

an
sn

rb
a

a
lg

ro

Se
Bo

ed

om
Bu

ac

R
M

Source: FIAS ARCS as of March 2003

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32 – CHAPTER 4. PERFORMANCE INDICATORS

Figure 4.2 Cost to Start a Business (% of income per capita)

70
59
60 Least Cost - Global
48 50
50 47
44

40
30
30 27

20
11
10
2
0
Australia Latvia Romania Bulgaria Serbia & Albania Macedonia, Croatia Bosnia &
Montenegro FYR Herzegovina

Source: World Bank CoDB, 2004.

Figure 4.3 Time to Start a Business

70 65.0
60 Shortest Time - Global
51.8
50

40

30
18.2
20 13.1 13.3 14.7
11.9
8.3
10
0.0
0
Denmark Bulgaria Romania Macedonia, Serbia & Latvia Croatia Bosnia & Albania
FYR Montenegro Herzegovina

Source: World Bank CoDB, 2004.

CoDB includes 22 high-income OECD economies as benchmarks, plus 33 from


Africa, 22 from East Asia and the Pacific region, 26 economies from Europe and Central
Asia, 21 from Latin America, 14 from the Middle East and North Africa and 7 from
South Asia. It emphasises domestic, small and medium sized companies by means of two
types of indicators: actual regulations (for example the number of procedures to register a
business); and regulatory outcomes (such as the time and cost to register a business).
CoDB is based on detailed assessments of laws and regulations, surveys of in-country
government officials, lawyers, and legal professionals involved in legal and regulatory
process, i.e. factual information. The data collection process is transparent and easily
replicable and it allows interactions with the local respondents, ensuring accuracy by
clarifying possible misinterpretations of the survey questions. The resulting data enables
valid cross country comparisons and benchmarking.
Business entry data is based on a survey that investigates the required procedures for
an average small-medium sized company needs to start operation legally. It looks into the
procedures for:

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CHAPTER 4. PERFORMANCE INDICATORS - 33

x obtaining all necessary permits and licenses.


x completing all the required inscriptions, verifications and notifications with all
authorities to enable the company to start operation.
x calculates the costs and time necessary for fulfilling each procedure under normal
circumstances.
x calculates minimum capital requirements to operate.
In so measuring the indicators track the procedures for a standardised company to
register a business formally. Detailed assumptions about the type of procedures are made:
x procedures are only recorded where interaction is required with an external party.
x founders complete all procedures themselves.
x voluntary procedures are not measured.
x non-mandatory lawful shortcuts are counted.
x industry specific requirements and utility hook-ups are not measured.
However, CoDB targets very specific businesses. The sample only includes limited
liability companies conducting general commercial activities in the capital city, that are
100% domestically owned, with start up capital of 10 times income per capita, turnover
of 100 times income per capita and between 5 and 50 employees, which do not qualify for
any special benefits nor does it own real estate.

Table 4.1 CoDB business registration data for the SEE countries

Number of Time Cost (% of income per Minimum Capital (% of income


procedures (days) capita) per capita
Albania 11 47 65 51.7
BiH 12 59 51.8 379.1
Bulgaria 10 30 8.3 134.4
Croatia 13 50 18.2 50.7
FYR Macedonia 13 48 13.1 138.4
Moldova 11 42 26.2 86.3
Romania 6* 27* 11.9 3.3
Serbia and Montenegro 10* 44* 13.3* 357.1*
Average New EU
9 56 20.4 137.9
Members**
Note: These indicators measure the procedures, time, costs and minimum capital requirements to register a business formally. ** The new EU
members include the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovak Rep., and Slovenia.
Source: World Bank (2003) Doing Business in 2004. These data were based on a broad collection of indicators from consultants in over 182
countries, through cooperative partnerships involving several departments of the World Bank, donor agencies, private consulting firms and
business and low associations. For more detail, consult http://rru.worldbank.org.
Methodological comment: Delegates from SEE countries have advised to interpret some of the data with caution, given the fact that SEE
countries are experiencing a rapidly changing business environment.
* Romania: Data from Romanian Centre for Economic Policies are 5 procedures and duration of 20 days for starting a business. Procedures 1, 2
and 3 can be launched simultaneously. While waiting for the issuing of the certificate of fiscal record (procedure 3), an entrepreneur can
accomplish the other two procedures (1 and 2). Moreover, in the same time-frame of 5 working days (procedure 3 – emergency process), an
entrepreneur can embark on an additional mandatory procedure, elaborating of the statute of the future company. As a result, this adds one
procedure, while reducing the length of the total start-up procedure with 2 days.
* Montenegro: The number of procedures is 5, the time 1-4 days and the cost 11.21% of income per capita according to the Ministry of Foreign
Economic Relations and EU Integration Minimum Capital: 1¼ IRUD/LPLWHG/LDELOLW\&RPSDQ\ .

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34 – CHAPTER 4. PERFORMANCE INDICATORS

In contrast to the older ARCS results, the CoDB shows an improvement for all
countries except Macedonia and Serbia. However, mixing the two methodologies is
slightly similar to mixing the apples and oranges, since the ARCS provides a
representative sample of the entire country, while CoDB targets very specific businesses.
Therefore, the difference is a result of the inputs, but possibly also of a good kick-start of
the reforms which have since lost their pace.
The table provides quantitative comparison of the region, as extracted out of the same
CoDB database.
The averages in SEE region in 2004 were 10.8 procedures, 43.4 days required to
register, 26% of GNI in related fees and 150% of GNI in minimum capital. These have
only marginally improved in 2005: Number of procedures remain at 10.5, it takes 42.4
days to register, which costs 18.8 % of GNI, while the minimum capital fell more rapidly
to 60% of GNI.1

Figure 4.4 Regional start-up indicators

60
54
51
47 48 49
50

40
32 Number of
30
30
28 Procedures

20
11 13 12 11 12
10 10 Duration
10
5 (days)
0
a
va

o
ia
ia

t ia
ia

YR

in
gr
an

an
ar
do

oa

ov
ne
,F
lg
m

lb
ol

eg
Cr
Bu

e
A

ia
Ro

t
on

rz
on

He
M
ed

d
ac

d
an

an
M

ia

ia
rb

sn
Se

Bo

Source: 2004 CoDB

This is particularly worrying in the light of the region’s aspirations to the EU’s full
membership and the potential competitiveness within such a large and dynamic market.
In an environment where both supply and demand are flexible, the investment is directed
to those countries or areas where the investment climate is more favourable.
The performance indicators clearly display that the region has much to undertake in
the sphere of business registration and that it should remain a development priority. These
features should turn into the region’s competitive advantage and it should aim to feature
comparatively better than the rest of the continent if it were to attract investment.
The next section describes the recent reforms and outlines the policy proposals to the
government agencies in charge of registration with a goal to improve the critical indicators.

1
WB’s “Doing Business in 2005: Removing Obstacles to Growth” comparative figures.

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35

Chapter 5.

Country Reviews, Assessment and Policy Recommendations

The country reviews below primarily rely on the findings of the FIAS’ Administrative
Barriers Studies prepared for the countries of SEE as well as the latest OECD’s
Enterprise Policy Performance Assessments, as noted in the reference list. The peer
review’s policy recommendations are a product of the reform priorities, to which the
governments have committed themselves in the process of reviewing the investment
climate and which have been integrated in their individual action plans.

Box 5.1. Enterprise Policy Performance Assessments

In 2002 the OECD and the EBRD launched the Enterprise Policy Performance Assessments (EPPAs) in the
framework of the OECD Investment Compact and the SEE ENTERPRISE FORUM. The EPPAs cover all the
countries of South East Europe (Albania, Bosnia-Herzegovina, Bulgaria, Croatia, FYR Macedonia, Moldova,
Romania, Serbia and Montenegro), assessing the quality of the government policy for the SME sector and providing
recommendations for action. Nine EPPA reports, one for each of the SEE countries, with Serbia and Montenegro
being assessed separately, and a Regional SEE Assessment Report were published by the OECD Investment Compact
in 2003 and disseminated throughout the SEE Region.
In 2004 the OECD Investment Compact and the EBRD, in co-operation with the European Commission,
conducted a new series of policy performance assessments, applying the same methodology as the 2003 reports. The
published EPPA reports are available on the OECD Investment Compact’s web-site: www.investmentcompact.org
The EPPAs are based on insights from entrepreneurs and SME owners, collected through focus group
discussions and interviews, contributions from SME experts, policy makers, representatives of the associations of
private enterprises, international and bilateral organisations dealing with SME issues, combined with the experience
and judgement of OECD and EBRD experts. Over 450 entrepreneurs and 250 experts and policy makers from the SEE
Region contributed to the 2004 EPPAs.
The EPPAs cover seven policy dimensions, at the core of enterprise policy:
x Institutional framework for SMEs policy.
x Rule of law and regulatory framework.
x Tax policy for small business.
x Financial instruments for new and small companies.
x Business consulting services for new and small enterprises.
x Business Incubators.
x Entrepreneurship, vocational education and access to technologies.
Extensive synergies have been developed between the EPPA and the European Charter for Small Enterprises.
The EPPAs provide regular and ‘reality check’ monitoring of the implementation of the best practices contained in the
European Charter for Small Enterprises, complementing the government report on the European Charter
implementation. In addition the EPPAs provide a set of policy recommendations and priority actions to the
government and small business community in those policy dimensions covered by the European Charter, helping
governments to adjust their policies, in line with the practical experience expressed by the small business sector, and
to identifying relevant policy targets for the European Charter process.

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36 – CHAPTER 5. COUNTRY REVIEWS, ASSESSMENT AND POLICY RECOMMENDATIONS

Albania

Review1
The business registration process in Albania is highly bureaucratic and time
consuming. Numerous forms and documents are required for the various pre-determined
steps towards registration. On average it takes several steps to register a company (from
getting a bank account and registering at the court, to licensing at the tax office) and
payment of several sets of fees for various licences and permits (e.g. health and safety). A
key stage for the registration of a company is the presentation of proof of all these steps
and payments to the District Court in Tirana, followed by its approval with a court
decision, which takes 23 days on average. While registration is open to anyone wanting to
establish a company, such registration can take place only at the Tirana District Court.
This requires businesses from other areas to travel to Tirana to register their businesses.
International best practice suggests that much of the registration process could be
accelerated and streamlined. This degree of centralisation neither results in efficient
practices nor does away with scope for corruption. However, the fact that all businesses
located outside the capital must register in the Tirana District Court, leads to significant
delays and costs which are borne by those companies. If the Tirana District Court is to be
retained, scope for on-line registration should be urgently prioritised.
Legal persons are required to submit the following to the district court: foundation
act, statute, certificate of payment of start-up capital, ownership/leasing contract for the
premises to be used. The court should make a decision within a month. A copy of the
decision goes to the Chamber of Commerce and Industry. The Trade Register documents
include a copy of the court decision, company contract / statutes, ownership / leasing
contract and certificate of the registration tax.
The documents needed in order to obtain a license include: statute of the company,
act of foundation of the company, the decision of the Tirana Court, attestation of the
Social Support Office, contract with the Labour Office, attestation of Social Security
Office, registration in Chamber of Commerce and Industry, tax for advertising, tax for
exercising the activity, cashier register, tax for the building, tax for renting the land, tax
for cleaning, opening of bank account and the attestation of the bank and hygiene/sanitary
permission from the Inspection Services.
[Licenses and permits are]“…
as costly as the officials wish them to
be.”

Most businesses do not need to re-register annually but some do, such as construction
companies. The documents submitted by the legal entities in order to re-register the
business include: the old license with two photographs of the company’s administrators,
the address of the firm, the contract with the social security office, the contract with the
labour office, all the tax bills paid in the preceding year, the bill for rent payment in the
preceding year, all the permissions renewed and submitted, the changes in the statute and
in other acts of foundation presented, after being incorporated in the trade register.
Following registration in the Trade Register the legal persons must present a request
for registration in the local tax office. They also present the court decision on the
company, the trade register certificate and the bank account details. After verification of

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CHAPTER 5. COUNTRY REVIEWS, ASSESSMENT AND POLICY RECOMMENDATIONS - 37

the above documents, an annual license and certificate form containing the VAT
identification number is provided by the tax office.
Apart from the costs of due diligence and those of lawyers in drafting the articles,
other costs include the fees paid to the different offices involved in the registration of a
company. These include the registration fees paid in the Office for the Registration of
Companies in the District Court of Tirana, the fees for the registration in the Chamber of
Commerce and Industry (annual fee), fees paid for the registration in the tax office,
including the local tax. Other costs are related to the notaries and translation, if the
documents are not in Albanian, and opening a bank account.
The notary services for registering an enterprise are officially about ¼ EXW WKH
estimated costs are ¼-¼ *XLGHIRU,QYHVWPHQWLQ$OEDQLD DQGWKHUHLVDOVRD
minimum deposit required in order to open a bank account, which varies from bank to
bank.
“With the registration of a
company, you come across the first
disincentive to start a business.”

According to the research, there has been little change since 2003 in the formalities
regarding the company registration and this is reflected in the ratings. The process is still
too lengthy, complex and costly. In addition, businesses participating in the focus groups
expressed concerns regarding unofficial procedures and ‘grease’ payments, as well as
other obstacles which hinder the process of company registration. The focus groups
reveal a situation in which no obvious improvements or changes have taken place since
2003 to the procedures for obtaining licenses and permits for business operations. Several
examples were highlighted of licenses being issued on the basis of personal contacts
and/or bias in favour of certain businesses. The discussions also covered the issues of the
costs of obtaining licenses and permits. However, the latest ARCS figures (a research just
finished in early 2005) shows that the required number of days to start a business have
dropped from 47 to 26 days, which is a remarkable improvement.

Box 5.2. Assessment of the Seven Dimensions of Good Practice

The analysis of SME business environment is made on the basis of assessment of the seven
dimensions of good practice: institutional framework for SME policy; rule of law and regulatory
environment; tax policy for small businesses; financial instruments for new and small businesses;
advisory services for new and small businesses; Business Incubators; entrepreneurship, vocational
education and access to technology. The ratings of dimensions of good practice in the 2003 and 2004
EPPA reports for each of the seven dimensions are expressed as follows: 1 = very poor, 2 = poor, 3 =
satisfactory, 4 = good and 5 = very good.

Rating given to the company registration process, according to the Enterprise Policy
Performance Assessment for Albania:

Formalities (number of steps, time needed, and cost) for new 2004 2003
company registration. 1.9 1.8

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38 – CHAPTER 5. COUNTRY REVIEWS, ASSESSMENT AND POLICY RECOMMENDATIONS

Assessment
An institutional survey conducted with the FIAS assistance, which aimed at a
collection of data internally, by means of filling out the so-called institutional templates
have portrayed a very specific picture in the Tirana District Court. Allegedly, the 30 day
legal limit to accomplish registration in the Commercial Register at the Court are now
being accomplished within two weeks despite a poor housing conditions for the register
and eight judges who deal with all the cases, irrespective of their nature who have to
make a decision on incorporation.
It becomes increasingly clear that a new Law on Commercial Company Registration
is required which will move the registration out of the courts. This reform will be
championed by the Ministry of Economy in close collaboration with the Ministry of
Justice. An option that is being studied is moving the register to another institution, such
as the Chamber of Commerce of Albania and the options are currently being studied. One
of them includes a French-styled one-stop-shops with a civil register only maintaining a
point of contact with the commercial courts in case of registration-related disputes.

Policy recommendations
1. Abolish the central Tirana District Court registration system and introduce a one-
stop-shop system.
2. Move away from active court approval for company registration.
3. Introduce a single registration form and on-line registration of enterprises.

Bosnia and Herzegovina

Review
The current capacity of the Courts serve to further impede and lengthen the business
registration procedures. A major problem is the fact that courts throughout BiH currently
have a major backlog of company registration files. This backlog stems largely from the
lack of capacity and the requirements for re-registration as a result of changes in the laws.

“Our change of business activity waited 14 months in the judge’s


office, we cannot say why because all of the documents required were
submitted.”
“We have had an injection of foreign capital in our company, and the
procedure to modify the company registration, reflecting the changes in the
ownership structure took two years, so we had to operate without a formally
legal situation for long time. Even now four years since the entrance of the
foreign partners, we still have not received the documents related to the
changes in the ownership of the company’s real estate assets.”

Under the current Entity laws (in the Federation of BiH and Republika Srpska), the
registration can take up to several months. This situation is bad enough. However, as the
privatisation process progresses, the workload of courts and other authorities increases
immensely. The courts and authorities are being swamped with new applications and
applications for changes. The current system is unable to keep up even the very
unsatisfying performance delivered today. Therefore, reform measures have been
prepared to revamp the registration process altogether. A working group was formed

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CHAPTER 5. COUNTRY REVIEWS, ASSESSMENT AND POLICY RECOMMENDATIONS - 39

between the two Entities, the Brcko District and the State-level Ministry of Justice to
design a new legal/procedural solution. The work of the committee took almost two years
and it started with the obvious premises.
There was going to be an elimination of the unnecessary procedures. Application with
the Federal Ministry of Defence in the Federation and the FDI-Approval in the Entities
and the State appeared very obsolete and the steps were taken out.
Then the necessary procedures are being streamlined. The involved authorities are to
be better interlinked and exchange data and information in a formalised manner to
decrease the workload of the administration and to relieve the private sector from
unnecessary duplication. With a reasonable system to exchange collected data, the burden
for investors as well as administrators will be diminished to a great extent. For example,
many of the statistical data can also be provided by the courts to the Statistical Office.
Another feature will be a single, state-wide identification number for businesses. This
single ID number should be used for all their contacts with administrative agencies. This
system is also useful for public authorities as it simplifies the management of databases
and the sharing of information. The same taxation registration number will automatically
be assigned as part of the business registration process.

“All registration procedures should be finalised inside


just one institution, so that entrepreneurs will need to contact
only that one office. All the other institutions involved should
be linked through internet and other IT tools and should
exchange information directly.”

All documentation requirements was being reviewed with the objective of


rationalising the various requirements. The purpose of every document has been
thoroughly examined and subjected to a number of questions (e.g., Is it really necessary
to submit this document? Can it be received from another authority? Is the documentation
requirement covered by the objective of the procedure?). In many cases, documentation
requirements are outdated, irrelevant and duplicative.
Finally a unique country-wide one or two-page registration form will be used to
gather all of the information required to incorporate and register a new company.
Businesses need only provide the information necessary for registration once to a central
processing unit, eliminating duplicate requests for information from companies.
Currently, all court decisions on company registrations must be made by a judge. Certain
decisions will be automatic subject to the fulfilment of specified conditions and the
clearance of the clerks of the court. This shift of the workload to the clerks is practiced,
for example, in Germany and many other EU Member States.
There are several advantages to be derived from harmonising the registration
procedures across Entities. First, administrative costs decrease with a more centralised
approach. Second, transparency and consistency of the procedures are increased, thereby
minimising confusion and cost to the investors.
Usage of a specialised intranet does not yet allow an external access and an on-line
application, but it will enable applicants to download forms and to search for company
names more efficiently and cheaply. However, submission of business registration
applications via the internet should be introduced. Nevertheless, the capacity for the

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40 – CHAPTER 5. COUNTRY REVIEWS, ASSESSMENT AND POLICY RECOMMENDATIONS

electronic exchange of data between the various authorities has been designed. If a business
owner has already submitted requested information to a different branch of the
administration or another agency, the administration will have the capacity to access this
information electronically. Later, this database can be used for electronic filing of
registration forms, financial reports, tax returns, and other statistical data, thereby reducing
or eliminating the need for business owners to appear in person. It can also be used to pay
the necessary fees associated with the registration process. Use of this technology will
facilitate the formation of new enterprises by foreign and domestic investors.

Rating given to the company registration process, according to the Enterprise Policy
Performance Assessment for Bosnia and Herzegovina:

Formalities (number of steps, time needed, cost, and overall rating) for 2004 2003
new company registration (certification of existence).
Overall rating 1.7 1.8
overall impression 1.6 N/A
number of steps 1.9 N/A
time 1.4 N/A
cost 1.8 N/A

Assessment
UK’s Department for International Development is providing assistance to the BiH
authorities with the aim to simplify, streamline and harmonise the business (Ltd. and
joint-stock companies) registration process countrywide. This project has been linked to
an adjustment operation of the World Bank, providing budgetary support to the entity
government, subject to fulfilment of a number of conditionalities. One of them is
reduction of the number of registration steps from 14 to 7 at most and the time required to
register from approx. 70 days on average to 15 at most.
The DfID project is aiming at bringing the registration process to a one-stop shop that
will link all the procedures into one and require 5 days for its completion. The database
and the registration offices will remain in the courts, but will be brought down from the
judges down to a technocrats’ level. The project has taken almost one and a half year in
adopting the new legislation required for the process and adjusting the parallel laws,
including the commercial one. The institutional settings will follow the new legal
solutions. This legislation is now unique for the whole country as is the very process and
the database. The forms required for registration and the data are virtually the same across
the entities and in the Brcko District.
The new registration process is envisaged to commence by mid-2005. The
registration numbers will be common to the entire country and the database will be
updated in real time, enabling all registration offices to access it anytime. Licensing will
no longer be a requirement for registration, but a separate process for very specific goods
and services that will be undertaken following the business registration. This should
prevent double registration, fictitious firms, tax evasions etc. and the benefit for
businesses will be a simple and harmonised entry to the market.
Yet, certain other steps are still being investigated and may potentially be removed
too:

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x Creation of a company stamp – a relict from the former socialist times when
companies where state-owned and perceived themselves as semi-authorities signing
with a "seal" (stamp). However, modern economies do not know this feature and a
signature of an employee is considered sufficient in the business world.
x Compulsory inspection and certification by Cantonal Economy Ministry in the
Federation and municipality in the RS – while mandatory inspections of certain
businesses are inevitable (producers of food stuff, dangerous materials or other
activities, which are dangerous or inconvenient for the public) it is not justified to
have mandatory inspections of each and every company. Companies should be
obliged to obtain the necessary inspection certificates for their particular business
activity.

Policy recommendations
1. Implement the electronic firm registration system in courts covering the entire
country.
2. Introduce a single code number for each enterprise, in order to save time and costs
to entrepreneurs submitting the same basic information to different bodies.
3. Move towards a standardisation and a reduction of current company registration
fees across all of BiH.
4. Separate the inspection process from business registration and abolish the general
licensing of the local level (municipalities and cantons) before an enterprise can
commence its operations.

Bulgaria

Review
Annex 1 of this paper describes the various steps involved in the registration process
for the three most popular forms of business entities in the regional economies, i.e.
limited liability companies, joint ventures and joint stock companies.
The results of the FIAS’ ARCS suggest that enterprise registration is one of the least
problematic administrative procedures encountered by businesses. The ARCS shows that
only 4% of respondents found that “Registering a new enterprise” was a “major” or “very
severe” regulatory constraint.
Certainly, questions must still be resolved regarding the efficacy of having enterprise
registration procedures handled by the courts and the purpose of having a number of
different separate registration regimes: with the court, the tax office, the statistics
institute, and often the municipality (see the discussion below on municipal trade
permits).
x First, there should simply be a notification regime whereby the enterprise is
required to submit certain minimal data (possibly address, main activities, etc.) to
the municipal authorities. Provided that there is a legitimate policy purpose for
municipalities being informed of the businesses operating in their administrative
territories, both of these options seem viable. The first one (notification regime)
could be implemented in the short-term.

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x A second option raised was that there should be improved exchange of


information from those institutions that should already have this type of
information (the Commercial Registers, the Tax Registers or the regional
Statistics Offices, for example) with the municipalities. This option may require
some additional actions, perhaps even legislative amendments, but these issues
should not be insurmountable because of concerns about confidentiality or
incompatibility of databases, as some workshop participants claimed. The
electronic exchange of information among public institutions is a common
method of reducing the number of procedures that an enterprise has to undertake,
and such systems exist in many countries.
“Registering a company is a simple task; it is
afterwards that the problems begin.”

“We have the court, tax, NSI and BULSTAT


registration, but if we want to register any new site we have
to go through the same registration process all over again...”

Business representatives consider the registration process for company start-ups


relatively easy, quick and fairly cheap. Compared with December 2002 the evaluation
improved (3.5) and is above the average (on the scale 1-5). This is also one of the best
rated categories among all issues discussed by the focus groups, even though some
concerns were expressed about the costs and the number of bureaucratic formalities
involved. Court registration of a new company is relatively quick and takes between 7
and 14 days. The registration with BULSTAT and the Tax Administration takes longer
and requires additional formalities.
Additional problems appear for entrepreneurs in smaller municipalities and to register
a business they must travel to district cities, which makes the overall procedure more
expensive and time-consuming. Introduction of one-stop shops and the provision of
services via Internet could considerably enhance the registration process for these
entrepreneurs. They also point to the benefits it could have for reducing corruption. On
the other hand they note that access to Internet is still a problem for many SMEs and the
implementation of one-stop shops has slowed down (data from the Foundation of the
Local Government Reform shows that at present the one-stop shop model has been
introduced in 70 municipalities).

“The whole process is much


easier if we use the services of a lawyer
– we pay a fee in the range from BGN
40-50 to BGN 100 and the company
will be registered within a week – the
fee is insignificant.”

Many entrepreneurs resort to the use of legal services for company registration, which
as they claim, may save time and costs (as far as registration is concerned the costs are
reported relatively as low). The majority however remain cautious with respect to the use
of specialised law firms.

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In order to enhance business start-ups and facilitate business activity, as well as to


reduce the scope for corruption, the new Law on Cadastre and Property Register (2004)
introduces the ‘silence is consent’ and one-stop shop principles. The ‘silence is consent’
principle relates to the issuance of licenses for one-off deals or transactions and applies
only if the relevant law does not stipulate otherwise. In the absence of an administrative
decision within the term provided by the law the applicant must inform the administration
that it will undertake the steps to start the relevant business activity. From this moment
onwards the administrative authority has 14 days to issue a decision. Should the
administration continue to be silent, the deal may be carried out. With respect to one-stop
shops the Law requires that the authorities optimise, where possible, their interactions
with the business with the view to avoid multiple applications and procedures.
Experts tended to be more critical of the situation and consider business start-ups in
Bulgaria still quite problematic, in particular compared with the best practices in the area.
Even though company registration received a positive rating from entrepreneurs, there is
still scope for improvement. In particular, electronic registers, transferring the registration
from courts to administrative bodies, such as the local authorities (as a primary service of
one-stop shops) would be beneficial to local businesses.

Rating given to the company registration process, according to the Enterprise Policy
Performance Assessment for Bulgaria:

Formalities for new company registration 2004 2003


overall rating of the registration process 3.5 2.1
number of steps for registration 3.4 N/A
rating of the time needed and cost 3.5 N/A

Assessment
The Bulgarian registration process clearly is in a transition phase at present. The fact
that BULSTAT offices have already undertaken measures to simplify registration
procedures by combining the company registration through BULSTAT with the social
security registration illustrates that the need for simplification has been acknowledged.
But in order to make this transition as smooth and uncomplicated as possible, a number of
additional steps would need to be undertaken:
x Tax registration now needs to be incorporated such that investors truly face just
one registration process.
x The new instructions for implementation need to be adopted as soon as possible.
x Re-registering of existing branches and divisions should be made as painless as
possible, preferably by making the process automatic without any direct
involvement of the entities themselves, or alternatively by granting them a
transition period of at least one year.
x Computer connections between the various registration offices and other
government agencies – such as social security and the Ministry of Finance –
should be fully utilized in gathering the needed information.
x Additional staff and computer equipment would need to be made available to
avoid excessive queuing and waiting periods.

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In addition, steps need to be taken to eliminate the case overload in the court system.
Presently, company registration is under the jurisdiction of the civil court in Bulgaria.
The Government of Bulgaria might want to consider establishing a commercial court to
handle matters related to business activities. Should this not be feasible, judges dealing
with business matters should undergo appropriate technical training and subsequently
only deal with such matters. Designating judges solely in this specific area would build
competency through experience. Although the problem of capacity to handle these issues
will likely diminish with time, both judges and investors would benefit from a
coordinated and targeted skill enhancement program.
Finally, a smooth and investor-friendly functioning of the registration process
requires attention to detail. The court should review average processing times and set
goals to be met for the upcoming year. Transparency can be significantly enhanced
through the adoption of public postings at the registrar’s offices of all requirements to be
fulfilled and processing times.
The Concept paper for improving administrative services through one-stop shops and
the E-government Strategy were further developed by the Government in implementation
of these provisions. The documents seek to simplify the administrative procedures for
citizens, businesses and the state administration, reduce the possibilities for corruption and
reduce time and costs spent on administrative activities. They foresee to optimise the use of
the Internet, with a minimum set of services to be launched on Internet by 2005 – 12
services for citizens and 8 for businesses. To this end, a number of legislative measures are
foreseen to ensure an effective implementation of the E-government Strategy.

Policy recommendations
1. Transfer the responsibility for company registration to a non-judicial administrative
body i.e. introduce administrative procedures for company registration and create a
uniform national register of commercial companies in order to harmonise the
procedures, which at present differentiate among the 29 commercial courts.
Develop the procedures, reduce cost and improve transparency.
2. Introduce a single code number for each enterprise, in order to save time and costs
to entrepreneurs submitting the same information to different bodies.
3. Develop the use of Internet services – E-government (at present 8 business services
are available on Internet).
4. Evaluate the pilot “one-stop-shop” initiatives with a view to establishing such a
system throughout the country.
5. Publish, evaluate, and simplify the regulatory regimes that affect business start-ups,
re-registration and de-registration.

Croatia

Review
In order to establish a business entity in the Republic of Croatia, it is necessary to
register with the Commercial Court, the State Statistical Office, the Tax Authorities and the
Customs Authorities (if the company intends to participate in foreign trade). Typically, a
local lawyer or other legal representative oversees these registration activities, and deals
with the public notaries, commercial auditors and the registration courts.

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Croatia’s company registration process is relatively straightforward but also relatively


expensive, especially if a lawyer is used to expedite the process. Most of the basic
registration requirements are in line with standard practice throughout the EU. It is
important to note that the government seems to be trying to further normalise these
processes by moving toward a universal identification number to be used throughout the
different offices and ministries of the government. The registration process could also be
improved by the use of better electronic systems. The problems faced in obtaining
licences, permits and certificates remain and are a critical obstacle to establishing new
companies. Inter alia, the silence is consent principle has not yet been adopted and the
online registration of enterprises is not yet available. Likewise, there is still no single
reference number for each enterprise. Simple improvements of this kind could permit
easier information access and speedier processing of applications. By offering these
services online, the reliance on local counsel would be eased, and the whole company
registration process would become more transparent.

“I think that the registration procedure depends on your


relationships with the local bureaucracies, and these should
speed up the registration procedure to avoid us hiring
experienced lawyers who know how to ‘grease’ it.”

“Registration is not an obstacle. However, it could be


organised more efficiently, for instance electronically to ease up
the whole process.”

“To establish a company engaged in trading or retail


activities is relatively easy, but to establish one in production is
difficult.”

Many investors felt that the only way they were able to register their companies
promptly was to have a local lawyer with connections. With a well-connected lawyer, the
registration process at the Commercial Court can take as little as two days. Companies
that attempt the process on their own face delays of up to six months. Croatia does not
compare particularly well with other countries in this area.
One of the main reasons for the time-consuming standard company registration
process is the overburdened commercial court system. In particular, there is a shortage of
judges who must deal with simple matters such as company registration as well as actual
court cases. One way to improve the process would be to reassign company registration
from judges to special clerks, which could help alleviate the backlog of pending cases,
and release judges for more urgent matters. The need for public notaries at many stages of
the process, however, adds to the system’s inefficiency and delays, and therefore creates
opportunities for abuse. The registration process with the Statistical Office is not
considered to be overly bureaucratic or difficult by investors, but every amendment to the
registration documentation requires a separate additional payment. This is a step that can
typically and relatively simply be incorporated into a one-stop-shop system.
So, inconsistency and inefficiency in the application of the procedures for company
registration remains so that company registration is much more time-consuming than in
the other transition countries.

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Rating given to the company registration process, according to the Enterprise Policy
Performance Assessment for Croatia:

Formalities for new company registration procedure. 2004 2003


2.6 2.7

Assessment
Croatia’s company registration process should be made even more customer-friendly
with particular attention paid to shortening the time required and reducing the direct and
indirect costs involved. This could be achieved by focusing on the standardisation of
forms, moving towards a single registration number, and increasing computerisation. The
new draft law on registration, establishing InvestCroatia must deal with all the
outstanding issues.
The Government of Croatia might want to consider the following specific steps in
order to improve the company registration process within the new draft law on
commercial registration:
x Establish time limits. Croatia could benefit from setting definite time limits for
company registration, whereby if an applicant has no response from the courts
within 30 days, then registration is automatic.
x Reduce the various costs of company registration. Also, although the financial
cost of specifying additional activities is relatively small, this is a rather
cumbersome requirement, and should be eliminated.
x Exploit the information technology in order to expedite the various procedures
involved in company registration. For example, by using internet possibilities,
investors could be given the possibility of downloading the necessary forms and
conducting name searches.
x Co-ordinate various business establishment procedures (e.g. company, statistical,
tax and pension fund registration) in order to shorten the overall process. Croatia
could also drop the requirement to make a company seal, as it serves little purpose.
x Define a list of sectors where authorization is required before (or indeed after)
investing. This information should be made easily accessible to investors
(including on the internet) along with general company registration information.
This would help speed the process of business establishment, and make it more
transparent. Where additional sectoral licensing procedures are identified, the
government should then focus on simplifying them to the extent possible.
x Improve the procedures for issuance of licences, permits and certificates by
introducing the ‘silence is consent’ rule by law within the operation of
InvestCroatia registration points. The emphasis should be on the elimination of
the need for licenses and permits to start operating a business, except for those
needed on health, safety or building permit grounds.

Policy recommendations
1. Introduce the 30-day maximum rule for company registration and ensure that it
operates effectively.
2. Introduce on-line registration of enterprises via the e-Government programme.

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3. Establish the one-stop-shop approach to registration throughout the country in


tandem with the drive to develop the business enterprise zones.
4. Introduce a single reference number for each enterprise.
5. Publish, evaluate, and simplify the regulatory regimes that affect the setting-up phase
of businesses, as well as the procedures for re-registering and terminating enterprises.

FYR Macedonia

Review
According to the information provided by respondents to the FIAS’ Administrative
and Regulatory Costs Survey, 82% of companies have dealt with at least one of the
registration procedures (such as initial registration of a business or registering changes in
business by-laws or charter) since 1998.
The total time spent undergoing registration procedures is, on average, 48 calendar
days, of which about 37 days, or almost 79%, are taken up by processing of documents in
the institutions. One can see that the major part of time is spent in waiting for a
government institution to process submitted documents.
According to the ARCS results, the longest duration of the procedure is in the court,
which is noticeably more than the registration in other institutions (on average
43 calendar days and 36 days for processing the documents by the institutions). Focus
groups reveal that the duration of the registration procedure may also depend on the
informal relationships among the founder, lawyer and court, which may quicken the
procedure. In comparison with the duration of company registration in other countries in
the region, Macedonia falls in the middle.
The registration procedure in order to start-up new enterprises remains the most
noteworthy bureaucratic hurdle in Macedonia. The Ministry of Economy has a long
standing commitment to establish a national network of one-stop-shops, but little progress
has been made in this field until recently. Article 611 of the Company Law states that
“the Minister of Economy shall prescribe within three months the secondary regulations
for the one-stop-shop. It should be established by no later than 31 December 2004”. Steps
are currently being taken to deliver this commitment, which is likely to feature the
Central Register and its regional offices as the basis for the registration network. More
generally, the Government has published a comprehensive Programme to Stimulate
Investment in Macedonia (2003) with clear deadlines and responsibilities, but it is unclear
whether the Ministry has the capacity to implement the Programme as anticipated.

“Entry barriers are necessary in certain industries


and we know that in specific sectors there are many steps
for registration. But what is not logical is why we have to
wait that long for each step!”
“Registration is not the most difficult part. The
business environment is unclear and unfriendly – that is the
problem.”

The regulatory regimes for business entry are in the process of being simplified.
Business entry is now quicker and more simple for small traders and handicrafts, and the
principle of ‘silence is consent’ has been introduced in the Handicrafts Law. The exit

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barriers are not high, as long as companies have no outstanding financial obligations and
the liquidation procedure last about one month. However, where there are liabilities such
as to other legal persons, VAT, social security system (pension fund and health
insurance), personal income tax, un-paid salaries, etc. assets must first be sold in order to
recover the debts. In such cases, the exit process is longer (more than one year).

Rating given to the company registration process, according to the Enterprise Policy
Performance Assessment for Macedonia, FYR:

Formalities (number of steps, time needed, and cost) for new 2004 2003
company registration. 2.4 2.3

Assessment
The Macedonian Ministry of Economy has been championing the new Company
Law, making progress with the one-stop-shops etc. However, small enterprises are largely
unaware of the Ministry’s activities, and are oblivious to progress being made. This calls
into question the dissemination strategy, as well as its capacity to monitor implementation
progress and ensure that other institutions, not least other ministries, deliver according to
their commitments.
The one-stop-shop reform has not been implemented, despite being discussed for
many years in FYR Macedonia, however, the Ministry of Economy is committed to
having this system in place in early 2005. Progress is being made, such as a possible use
of the Central Register and its regional offices as the basis for the new registration
system, but it is unclear if the government has the capacity and resources (human
resources, financial, know-how) for efficient implementation of the one-stop-shop
system, using the experience of other countries.
With the exception of the Handicrafts Law, no progress has been made in
implementing ‘silent consent’ in relation to company registration, licenses and permits,
etc. The private sector remains highly critical of the situation and greater effort should be
made to simplify the licensing and permits procedures, combined with the introduction of
the principle of silent consent.
The main observations and recommendations expressed in this chapter on registration
procedures are as follows:
x The coming into force of the new Law on Trade Companies, which governs, inter
alia, enterprise registration, has been delayed. Although it is important to ensure
public input in the decision-making process, it is also important that confusion
and delay be minimised, particularly for legislation as important as the Law on
Trade Companies. The Government should provide clear explanations of why the
coming into effect of the Law has been delayed and what are the issues under
consideration. There should be ongoing monitoring of the effectiveness of the
reforms, including the time it actually takes to register a company.
x As long as the secondary legislation regulating the entry of companies into the
court register has not been adopted yet, this might prolong the introduction of the
new system for an uncertain period of time. Even while public input is sought into

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the Law on Trade Companies, the government is urged to undertake drafting of the
secondary legislation and disseminate that for public input as well.
x Business are required to visit a number of institutions during the registration
process and receive different numbers for court, statistical and tax registration. To
ease administrative requirements for both the government institutions involved as
well as the business community, the one-stop-shop principle must consider
introducing a single number for the entire registration process and consider
combining the systems of enterprise registration at court and tax registration to
reduce the number of procedures.
x There are indications that there is not sufficient provision of information relating
to registration procedures, therefore the distribution of information and gathering
of feedback from enterprises relating to registration procedures should be
improved.

Policy recommendations
1. Evaluate, simplify and publish the regulatory regimes that affect the registration, re-
registration and termination of businesses.
2. Introduce a single code number for each enterprise.
3. Create a one-stop-shop system throughout the country.
4. Introduce the principle of ‘silence is consent’ as soon as possible.

Moldova

Review
In the past several years the Moldovan Government has made a significant effort to
simplify business registration procedures. More important, the provisions of the new Law
on State Registration of Enterprises and Organisations passed in March 2001, brought
about several favourable innovations to the registration process. First, according to the
new law, the registration procedure is centralised in the State Chamber for Registration,
part of the Department of Informational Technologies. Second, the new Law clarifies the
set of documents needed to register a business, reducing the number from between 7 and
13 to 5. Third, the business address of a business entity, according to the new law, is the
one indicated in founding documents.
Starting in November 2002 new enterprises undergoing registration at the State
Chamber for Registration receive a National Identification Number of a Legal Entity,
which automatically becomes their fiscal code and is stored in the electronic Registry of
Legal Entities. The information in the registry is then used by the tax and statistics
administration to issue fiscal and statistical codes respectively, thus simplifying the
registration procedure by requiring only a single submission of the necessary documents
at the State Chamber for Registration. Transition to the new system is envisaged to be
gradual: enterprises registered before November 2002 are not required to re-register in
accordance with the new regulations. Instead they will receive a National Identification
Number when they address the State Chamber for Registration to re-register or make
changes to their registration documents. The unique code is provided to companies within
minimum one working day and costs 54 MDL or around $4 for an individual enterprise,
250 MDL or around $20 – for the legal persons, 900 MDL or around $74 – for financial

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institution and insurance associations. The duration of registration lasts 15 working days
(3 weeks). The services of registration as well as other services can be supplied urgently,
in 1-5 days, for a double fee.

“Yes, the law says that if you have all the


necessary papers you can register a business in 2
days, but you need several months to get all those
papers”
“Registration procedure has been significantly
improved in the last 3 years. Today, registration of a
new firm is much simpler, much faster and much
cheaper…”

The impact has been mixed. While it took less time to renew registration for a
business in 2002 than it did in 2001, both initial registration and subsequent changes to
registration documents have not yet captured the recent policy changes. Eighteen percent
of respondents indicated that the registration procedures became less complex, equal to
the share of those who perceive registration to have become more constraining, showing
that the policy for registration may be evolving in the right direction. Centralising the
registration activity at the State Chamber for Registration reduced the unofficial payments
from $119 in 2001 to $84 in 2002. A breakdown by size of firm, however, suggests that
improvements in the registration procedures are reported mostly by medium-size and
large enterprises. Small businesses, especially individual enterprises, observed an
increase in registration complexity. The centralisation of the registration process should
begin to eliminate the unnecessary intermediaries that provide registration services.
In Moldova, besides the Licensing Chamber, there are 6 other institutions still
involved in issuing licences for certain types of activities: the National Bank, the National
Committee of Movable Property, National Agency for Energy Regulation, National
Agency for Informational and Telecommunications Regulation, the Audiovisual
Coordination Council, the Public Local Administrative Authorities, all very often adding
to the requirement list.

Rating given to the company registration process, according to the Enterprise Policy
Performance Assessment for Moldova:

Formalities for new company registration. 2004 2003

overall rating for the registration process 2.9 2.5


number of steps for registration 10 10
overall rating for the time required for registration 2.7 2.5

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Assessment
As mentioned also above, an important number of reform steps were done by the
Republic of Moldova, but as soon as one streamlining activity is introduced, a new
normative act is approved creating a State Agency or introducing a new license. It seems
therefore that Moldova is not really progressing, as all in all, the number of agencies or
normative acts remains constant.
The creation of the Licensing Chamber three years ago simplified the procedure of
licences delivery, but did not lead to co-ordination among ministries and other licensing
agencies. Ministries remain the most important licensing institution, as no territorial
representation exists in Moldova, and entrepreneurs often have to come to the Capital to
be authorised. This is the real case of small rural enterprises. It is a permanent loss of time
and money for businesses, constantly discouraging the development of small businesses
at the rural level.
The market entry/exit procedures should be very simple and rapid, but this is still not
the case. The one-stop-shop facility – for obtaining various authorisations and permits –
was created as a real possibility to improve the situation by simplifying the procedures of
starting a business and registration of a company. Despite the good intention, the activity of
the one-stop-shop does not seem to be greatly appreciated by the business representatives.
The procedures are still too complicated and too costly both in terms of time and money.
Inspections and controls of SMEs are frequent and followed by important fines. This is
where the greatest steps forward are anticipated and urgently required.

Policy recommendations
1. Streamline market entry procedures. Coordinate the various public institutions in
delivering authorisations, permits and licenses and thus reduce the time and costs of
start ups by 40 %.
2. Implement the ‘silent consent’ in order to speed up the licensing procedures.
3. Further refine the one-stop-shop to integrate the remaining administrative
barriers/steps (various authorisations and permits).

Romania

Review
Recently the Trade Registry, through the Ministry of Justice, has initiated a process of
reforming the registration procedure. To this purpose, the new Law adopted in September
2004 aimed at simplifying the registration and authorisation procedures. The registration
time was reduced to three days, and authorisation will be carried out on the basis of a
statement of personal liability. The own liability statement is considered as being an
important tool for business registration. According to the new modifications in the
registration system, all businesses are registered on the basis of own liability statement –
reducing the registration time significantly.
Special authorisations will be required for businesses whose activity has an impact on
health and the environment and will be delivered by the respective ministries. However
these authorisations are not being delivered through the one-stop-shop and to date no time
limits have been set for the authorisations. Businesses have to directly approach the
agencies in order to get the licenses. The delivery time can vary according to internal

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procedures established by the Ministries. Reducing the registration time to three days is
an improvement, but for a small section of the private sector, as the additional special
authorisations extend the registration time to approximately one month.
It is necessary to monitor the implementation of this new system, in order to create
the best conditions for promoting new investors in Romania, both domestic and foreign
and for developing the current SME framework.
Prior to the new Law being introduced, the companies that had to go through
registration/re-registration during the last two years had to spend 28 days undergoing the
process. The process was longer for Bucharest (54 days) than for any other region,
mainly because of one procedure – obtaining the certificate (45 days). Overall, obtaining
the certificate takes longer than any other procedure (26 days), followed by drafting
articles on notary (17 days). Total payments made by the companies which had to go
through registration/re-registration accounted for an average of approximately
4.6 million ROL (140 USD). The highest amounts were spent for obtaining the
certificate: 2.8 million ROL (85 USD) and for the notary: 2.1 million ROL (60 USD).
Overall, operating changes in the registration certificate, i.e. modifying or adding
some articles, still appear to be taking longer than obtaining sectoral licences. Operating
changes takes longer because the businesses involved are required to obtain additional
authorisations and to produce more documents, and notarial procedures that take up time.
Total payments for different authorizations (fire, labour, health, sanitary) are not very
high. They cost under 1 million ROL.
Companies likewise had to spent more time obtaining a certificate from the Chamber of
Commerce (17 days) and with notary than on some other procedures. Time spent with the
Chamber of Commerce for obtaining the certificate was found the highest in Bucharest.

“Regulations and procedures are good but when the human


factor intervenes they are a disaster”.

Most entrepreneurs considered that the company registration procedure has been
simplified, particularly by introducing the one-stop-shop system, yet characterised by too
much bureaucracy.
The legislative proposal includes the shortening of the registration period for the
enterprises not needing authorisations, but at the same time, paradoxically, provides a
lengthier procedure for all other firms2. Moreover, the new proposal aims at using the ‘silence
is consent’ approval procedure in order to strictly respect the legal deadlines for registration.

Rating given to the company registration process, according to the Enterprise Policy
Performance Assessment for Romania:

Formalities for new company registration: 2004 2002

overall rating of the registration process 2.8 1.8


average number of steps for registration 2.7
rating of the time and costs 3.0
impression 2.8

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Assessment
To some extent, for some businesses, the one-stop-shop does not mean one
centralised point for information and registration, as they personally have to go and ask
for authorisation from a varying number of government agencies.
No major reduction/simplification of such licenses has taken place in the last year.
One possible explanation may rest in the fact that there has been a marginal increase in
regulatory transparency. Another explanation might be that the two instruments used for
reducing the burden of issuing permits, the personal liability statement and the silent
approval procedure, are better known than last year, and entrepreneurs are generally
happy with their effects. However, for both procedures there are also some criticisms
mostly related to their implementation.
The silent approval procedure was criticised in terms of its actual implementation. A
report issued by the Agency for Governmental Strategies at the end of 2003 seems to
confirm that the public administration had a rather adverse reaction to the implementation
of the ‘silence is consent’ procedure3. The report indicates that instead of using the
administrative silence in order to approve several permits or licenses, the administration
prefers to answer in writing to all demands, just to eliminate any possible uncertainty
related to the effects of the new procedure. On the positive side, a major effect of the
procedure is that it helps enforcing the 30-day deadline for having a response from the
public administration.
The personal liability statement procedure was also criticised as it allows rogue
entrepreneurs to function on the basis of their own declaration, while practicing unfair
competition and even being a menace for the consumer or for the environment. At the end
of the day, nevertheless, the introduction of the two simplified procedures is a major step
forward, widely acknowledged by the entrepreneurs.
The establishment of a one-stop-shop of all the institutions involved in the
registration and deliverance of authorisations would streamline the process for the
business environment. Further improvement of the registration process is not only
desirable, but also possible. Firstly, the registration duration can be reduced for a large
category of firms from 10 to at least 5 days, as all these enterprises do not need anymore
ex-ante authorisations, so that 5 days of paperwork just to obtain a number from the
Ministry of Public Finance and a procedural stamp from the delegated judge at the Trade
Office should be more than enough.
The overall market entry duration can be reduced by at least 5 more days, if the Trade
Registry and the Ministry of Public Finance would internalise their communication about
the fiscal record of the entrepreneurs. Currently, the entrepreneurs are literally
intermediating between the two institutions, which is unacceptable in a business friendly
environment.
Moreover, the new legislation for the registration of enterprises of September 2004
should be re-analysed to see the rationale for the prolongations in the registration
procedure for enterprises requiring ex-ante authorisation. As a result of the new
regulation, for the enterprises needing ex-ante authorisation the registration duration is
increasing from 20 days to 30 or even 40 days.

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Policy recommendations
1. Undertake an assessment to establish whether the transition to consolidation of the
one stop shop system under the Department of Justice is going smoothly.
2. Introduce on-line company registration and use the existing legislation regarding
the electronic signature.
3. Use the ‘silence is consent’ procedure more and eliminate the multiple
interpretations of procedures and regulations. Also, monitor the implementation of
the ‘silence is consent’ procedure.
4. Co-ordinate the Ministry of Public Finance and the Trade Registry in order to
internalise the issuing of the fiscal record needed for company registration.
5. Move away from using fees for licenses to fund Ministries and develop a central
system of funding.

Serbia

Review
In 2002 the Government amended two laws regulating the status of enterprises and
shops – the Law on Enterprises and the Law on Entrepreneurs. Amendments to the Law
on Enterprises simplified the procedure to start a business by removing inspection
approvals as a condition for beginning the business. Changes in the Law on Entrepreneurs
simplified the procedure for opening shops by abolishing a number of redundant
procedures. Related data suggest a 10 percent increase in the number of active small firms
as well as sizable increase in the number of shops.
Serbia has moved towards creation of a unified business register that includes all
business activities covered under the current two Laws. To unify the legal authority, a
new Serbian Business Registration Law creating a single registry replaced the Yugoslav
Law on Enterprises, the Yugoslav Law on the Procedure for Insertion in the Court
Register, and the Republican Law on Private Entrepreneurs.
The organization of Serbia’s registration system is high in cost and low in efficiency.
Three Serbian organizations with different mandates and capacities – 13 commercial
courts, 131 municipalities, and the Republican Statistical Office – administer business
registration under different legal mandates. Considering Serbia’s needs and the capacities
of various institutions, the preferred and the chosen option was the expert registration
agency. The business registry is located with the collateral registry in a new business
service agency created as an independent authority accountable to the Serbian
Government. The new agency may absorb some resources of the current Solvency Centre
in the National Bank of Yugoslavia.
While the registration process may take up to a few days, companies should be
permitted to begin activities as soon as they file the required information with the
registration authority.
The new Serbia’s database is publicly accessible, updated continually, and accessible
by Internet. Electronic registration will be incorporated into the design at a later stage. A
system should be in place for real-time access to the database by inspectorates and others
who need the information, such as tax, customs, pension, and social security authorities.
Updating information in the easiest way – electronically, by telephone, or by mail – is the

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CHAPTER 5. COUNTRY REVIEWS, ASSESSMENT AND POLICY RECOMMENDATIONS - 55

key to maintaining data quality. The challenge for Serbia is co-ordination so that pension,
social security, customs, and tax systems all use the same identifier – registration number.

“I had to do registration pursuant to the


new Law. A pleasant surprise – I finished it in
only one day.”

At the core of the proposed new unified business registry is its administration by an
independent expert agency, called Agencija za privredne registre (Agency for Commercial
Registries) that is committed to supporting the needs of businesses, and is accountable to
the government for delivering timely and quality information to serve public needs such as
inspections. The APR was founded according to the Law on the Agency on Commercial
Registries adopted on 21 May 2004 and launched its operations on 4 January 2005. It now
administers the business registry, the pledge registry and the lease registry. The Agency
takes over the registration from the courts and the municipalities and registers businesses
through a network of service centres strategically sited around Serbia and through on-line
and mail registration. While the decision on the final number of service centres must
depend on a thorough cost accounting, 30 Centres located in the largest municipalities and
using the payment clearance (ZOP) information network would ensure that no place in
Serbia would be more than 45 kilometres from the nearest Centre.
The most commonly used legal form of enterprises in Serbia is the limited liability
company. The contributions to the share capital may be made in the form of cash or
contributions in kind. However, the minimum cash share capital was set unnecessarily
high at an equivalent of US$ 5 000. Such a rationale has much less relevance or
application in a modern market economy as creditors should be primarily protected by
appropriate debt covenants and by laws prohibiting fraudulent conveyance. The new
Enterprise Law has lowered minimum capital requirement to EUR 500, and there is no
requirement of capital maintenance, as required in open joint stock companies.

Rating given to the company registration process, according to the Enterprise Policy
Performance Assessment for Serbia, Serbia and Montenegro:

Formalities (number of steps, time needed, and cost) for new company 2004 2003
registration (certification of existence). 2.7 1.0

Assessment
The cumbersome system of business registration has become a particular target for
policy measures that are relatively easy to implement. Priority measures underway are
discussed below.
The Serbian Parliament took a major step when it adopted in May 2004 a new
business registration system that, once operational in 2005, will be one of the most
modern and streamlined in Europe. Serbia’s present system of business registration is
highly decentralized and legalistic. Currently, 16 commercial courts register companies
and 161 municipalities register entrepreneurs, while a central database is maintained by
the Republican Statistics Office. Moreover, the registration drains resources away from
the adjudication of commercial law because it is located in the commercial courts and
requires judges to review and approve all corporate filings. Serbia took important steps in
2002 to streamline business registration for companies and entrepreneurs.

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The new system is supposed to reduce the average time needed for company
registration from over 40 days to less than 10. An independent and user-friendly business
registration agency needs to be established by the Ministry of Economy to facilitate this
entry process and provide a “one-stop shop” for company, leasing and collateral
registration. Reforms in these areas should lower the cost of the financing new
investment—a crucial element of any entry decision. The reduction in the number of days
in the period 2002-2003 is due to the changes in the Company Law, which made pre-
registration inspections unnecessary for all but hazardous types of business. A further
decrease is projected in 2005 assuming a successful introduction of the new system.
This Law requires that the economic court send all its documentation and electronic
database information on economic entities to the Agency for Commercial Registers by
March 15, 2005 at the latest. Related surveys show that entrepreneurs support the
establishment of the Agency counting on a major simplification in the registration
procedure and reduction of costs.
In summary, the capacity to implement the reform of business registration, in
particular the shift from the courts and municipalities to the Business Registration
Services Agency is a critical challenge. The objective is not only to provide a better
infrastructure for opening a business but also to get out of the way as far as judicial
prerogatives for opening a business are concerned. Therefore, the move of this function
from the courts to the agency will not only make registration easier but will also remove a
psychological barrier to entry. More practically, it will decrease the load of the
overburdened commercial courts.

Policy recommendations
1. Develop the software and introduce the system for on-line registration, planning its
extension to the whole country.
2. Monitor the introduction of the single code number for each enterprise.
3. Move towards the creation of a one-stop-shop system throughout the country, as in
the case of other SEE countries such as Romania.

Montenegro

Review
Montenegro has recently and successfully made reforms regarding one important
administrative barrier to investment, namely the business registration process. The
original procedure involved 38 steps, four agencies, nine different physical locations, and
a minimum elapsed time of 45 days and a total cost of about 5000 euro. This has been
streamlined to four steps, three days and a one euro cost. The outcome has been a
reported doubling of business registrations over the last year, most of which have been
drawn from previously unregistered businesses in the ‘grey economy’.

“The procedure is less complicated, less time


consuming, and less costly, compared to under the old
law. It is now possible to register a firm in two days,
which is even less than the law says.”
“I finished my re-registration in 15 minutes.”

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Comments by the SME owners and managers on the new Enterprise Law and, in
particular, the procedures for new company registration were unanimously positive; and
were rated even more positively by experts. The Enterprise Law requires re-registration
every year for every firm in Montenegro. Still, it appears that no matter when the firms
register, SME owners and managers do not regard the procedure for registration or re-
registration as being problematic. The average rating has improved significantly since the
previous study.
There have been some recent initiatives to simplify the licensing and permit
procedures, such as setting up one-stop-shops at the municipal level and setting a
maximum number of days within which municipalities must issue licenses. However, the
research confirms that significant administrative burdens relating to licensing procedures
remain:
x The overall regulatory and legal framework is believed to be over regulated at the
local government and municipal level.
x The procedures for obtaining licenses, permits, certificates etc. required for
business operations are still “unsatisfactory”, time consuming, complicated and
subject to arbitrary decision-making by local administrators, and corruption is still
a problem.
x “On-line” company registration is still not available.
x A generalised system to provide a single code number for each enterprise is not
yet in place.

“The same information and documentation are


collected sequentially by different agencies with no co-
ordination; unnecessary and often voluminous information
is demanded.”

Rating given to the company registration process, according to the Enterprise Policy
Performance Assessment for Montenegro, Serbia and Montenegro:

Formalities for the new company registration procedure: 2004 2003


3.7 3.4
overall impression of the company registration process 3.7 N/A
number of steps for new company registration 3.9 N/A
time taken for new company registration 3.6 N/A
costs of new company registration 3.7 N/A

Assessment
The changes introduced in the new regulations on improving the business
environment are already showing some positive results. The number of registered
companies has increased significantly. From the end of 2002 to the end of March 2004
the number of registered Joint Stock Companies increased by over 50%, the number of

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Limited Liability Companies by 100%, and registered branches of foreign firms by 500%.
Under the new Business Insolvency Law that came into force on 1 July 2003, 145
insolvency cases have been initiated. 85 cases have been completed, while 60 cases are
still pending. The On-line Pledge Register was created after the adoption of the Pledge
Law. By October 2003, the pledged property was valued at more than 3 million euro.
Following the introduction of the Enterprise Law, company registration has become
relatively cheap, quick and effective. Montenegro’s new law received unanimous
approval from the participants in the focus groups, with most of the credit for this law
being given to the SME associations for initiating and contributing to the process.
Yet, based on the research, a number of issues still exist: the procedures for obtaining
licenses, permits and certificates and the quality of the programme for reducing
administrative barriers are still assessed as being “poor”. This is because SME owners
and managers participating in the research perceive the procedures to be overly
complicated and time consuming and they are still encountering much corruption. Less
than a third of the SME owners and managers and only two of the experts consulted were
aware of the governments programme to reduce barriers to doing business.
The adoption of new legislation to regulate the role of the municipalities and foster
the process of decentralisation in Montenegro, giving local government more power and
influence on economic development is very much welcomed. However, separate research
confirms the major administrative burdens relating to licensing procedures that remain at
local level and that this is an area in need of urgent reform and simplification4. There
have been some recent initiatives to simplify the licenses and permits procedures.
Initiatives are underway to set-up one-stop-shops at the municipal level and set a
maximum number of days within which municipalities must issue licenses. The pressure
for these changes is high and results from the non-transparent and rent-seeking behaviour
that persists in the licensing environment. However, the latest pilot project conducted in
the port city of Bar indicates that the procedures may even be becoming more
complicated (CEED 2004). This highlights the need for a public-private partnership
approach to be taken to improve practical implementation and facilitate better co-
ordination.

Policy recommendations
1. Evaluate pilot one-stop-shop initiatives with a view to establishing such a system
throughout the republic, as in the case of other parts of SEE, such as Romania.
2. Introduce a single code number for each enterprise in order to save time and costs to
entrepreneurs submitting the same basic information to different bodies.
3. Approve a new regulation streamlining and harmonising issuance of permits and
licences (shortening the total procedure to no longer than 10 days).

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Notes

1. Quotes on the margins of the country analyses are an outcome of the focus group meetings held as a part
of the EPPA review process in every country and represent recent views of the managers who attended
such meetings in response to the questions specifically targeting business environment and within that
the registration process itself.

2. It is true though that, according to the Trade Registry statistics, the firms needing ex-ante authorisations
are less than 20% from the total number of companies. Nevertheless, an increase of the registration
duration is contrary to OECD good practices.

3. Given the fact that the mentioned report was issued only a couple of months after the adoption of the
Law introducing the ‘silent approval’ procedure, it is possible that it has captured the ‘usual’ hostility of
the bureaucracy when pressured with reforms. Unfortunately, no other investigation on the
implementation of the ‘silent approval’ has been pursued since, in order to measure whether the public
administration has become more comfortable in applying the new procedure.

4. Analysis of the Business Registration Process in Montenegro, CEED, 2004.

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61

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Annex 1

Registration Steps by Country

Albania

Procedure 1. Search for a unique company name


Time to complete: 1 day
Cost to complete: no charge

Procedure 2. Deposit the initial capital in a bank and obtain a bank statement
Time to complete: 1 day
Cost to complete: no charge
Comment: Deposit of the initial capital may also be completed in front of a notary public. A fee of Lek
4.000 (approx $ 38) applies.

Procedure 3. Notarize the incorporation documents


Time to complete: 1 day
Cost to complete: Lek 10,500
Comment: Costs include: Notarization of Articles of Incorporation - Lek 2,500
Notarization of Statute - Lek 2,500
Notarization of request to court for company’s registration - Lek 2,500;
A special proxy to an attorney – Lek 3,000.
Concerning the draft of Articles of Incorporation and Statute, the legal fee varies greatly depending on
the quality of legal services, from $100 to over $1,000. The aforementioned professional fees are mostly
charged in Euros.

Procedure 4. File the documents with the Office for the Registration of Companies in the District Court
of Tirana and obtain a registration number
Time to complete: 20 days
Cost to complete: 1,500
Comment: Attached to the request and deposited in the register’s appendix are the following: articles of
incorporation, constitution act signed in the presence of a public notary; the act for the appointment of
the administrators; documents reflecting the capital disbursement, etc. Registration fee is paid directly to
the Commercial Registry.

Procedure 5. Register the company with Labour Inspectorate Office


Time to complete: 1 day
Cost to complete: no charge

Procedure 6. Register with the Public Institute of Social Security for social security and health insurance
Time to complete: 3 days
Cost to complete: no charge

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Comment: The total contribution to the social security is 41.9%, out of which, the employer pays 30.7%
and the employee pays 11.2%. Such contributions cover illnesses, the pregnancy period and after-birth
period, pensions, health insurance, work accident indemnities and unemployment fund.

Procedure 7. Register for the membership with the Chamber of Commerce and Industry
Time to complete: 1 day
Cost to complete: Lek 20,000 (annual fee)
Comment: On the basis of the Law 7804, dated 10/03/1994 “On the Chambers of Commerce and
Industry,” the membership in the Chamber is compulsory for tradesmen, commercial companies and
state enterprises.

Procedure 8. Pay the local fees and tariffs and obtain a final statement on the payment of local fees and
tariffs to the office of Alba Post SHA
Time to complete: 1 day
Cost to complete: Lek 42,000
Comment: Lek 20,000 once, national tariff on company’s registration; environmental tax paid una tantum
at the moment of the initial registration with the tax authorities: Lek 20,000 (commercial activity) –
70,000 (production activity) per year. Billboard fee depending on the type of activity exercised and its
impact on the environment: Lek 1,200 (in Albanian) - 3000 (in foreign language) per year: Property tax:
Lek 200/sq.m per year, (assuming 100 sq.m. in space), payable only in case the company is the owner of
the immovable. Alba Post SHA is a state-owned company, which provides mailing services. Companies
need to pay local fees and taxes via Alba Post. Obtain the payment evidence.

Procedure 9. Register with the tax office and obtain a company tax number
Time to complete: 7 days
Cost to complete: included in the previous
Procedure
Comment: File the payment evidence of taxes.

Procedure 10. Register in VAT sector and obtain the VAT number and Fiscal Certificate
Time to complete: 8 days
Cost to complete: no charge
Comment: The company should submit the court decision on the establishment of the company, Articles
of Incorporation, Statute, Contract with Institute of Social Securities, membership certificate issued by
Chamber of Commerce, final statement on the payment of local fees and tariffs and should declare a
forecasted turnover of the company to be achieved during the current fiscal year. Companies with a
turnover more than 8 million Lek per year is required to register for VAT. At the end of such Procedure,
the company is provided with a VAT number and a Fiscal Certificate.

Procedure 11. Make a company seal


Time to complete: 3 days
Cost to complete: Lek 3,000-5,000

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Bulgaria

At the initial registration of the company name in Bulgaria, investors must check if
the chosen company name is “free”. According to the new Statistical Act, the inquiry is
being done at the BULSTAT office (previously done by a company called “Information
Services” owned by the National Statistics Institute), with BULSTAT issuing a certificate
for the registered name. Following this, the equity capital will have to be deposited in a
bank account, and the subscription or the underwriting process needs to be completed.
The contract of incorporation then needs to be prepared and approved by the company
board prior to initiating the actual registration process at the court.
Company registration takes between 5 and 30 days. The registration procedure at the
Sophia Court is longer than that at the other district courts due to the volume of
applications. Total costs for registering a business entity in Bulgaria range from a
minimum of 113.1 leva to 1,804.4 leva. On average, the cost for registering a limited
liability is approximately 320 leva.
Even though investors did not cite the registration procedure as particularly
cumbersome, there is an unnecessary duplication in some areas. The Government has
moved in the right direction by unifying all registration numbers under the single
BULSTAT number. But despite the introduction of BULSTAT as the new registration
process, investors are still required to register separately for tax purposes and have to
submit the same or similar information to the tax authorities. This needlessly adds to the
reporting requirements investors face in Bulgaria.
As mentioned above, according to the new Statistical Law, investors will be issued
the same number (BULSTAT) for all registrations, i.e. social security, and tax. However,
it is not entirely clear how the new law will be implemented since the Instructions for
implementation have not yet been issued. This law will be retroactive requiring branches
and divisions to receive a new number. Branches officially receive a new 13-digit code.
According to the general procedure, the new cards must be received in person by the
manager or authorized person. At the Courts where significant backlog already exists due
to a large case volume (i.e., Sofia) this would most likely worsen the situation
significantly. Investors should not be burdened by additional requirements because the
Government decided to improve the administrative environment.
Issues regarding the day-to-day operations of the court emerged as well. Namely, the
Court closes during August for vacation. An emergency court sits during this time, but
only for critical cases. Company registrations cease during this period. For offices which
are already experiencing a backlog (i.e. Sofia), this just further increases the overload.
It is also not uncommon for the State Gazette to publish court decisions with delays of
several months. Investors have stated that company representatives (or a lawyer) should
regularly check at the secretariat in person – which is not required by law, but appears to
be a practical necessity – whether the court decision has been issued.

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Bosnia and Herzegovina

Procedure 1. Stipulate a founding act and have it notarized in the municipality office
Time to complete: 1 day
Cost to complete: negligible

Procedure 2. Obtain a statement from the commercial bank that full amount of the capital has been paid
in; pay the registration fee to the budget account of the cantonal court
Time to complete: 1 day
Costs to complete: no charge

Procedure 3. Obtain the statement of tax authorities that the founder/s have no tax debts
Time to complete: 1 day
Costs to complete: no charge

Procedure 4. Court registration with canton court


Time to complete: 15 days
Costs to complete: KM405 (registration fee) + KM178 (publishing fee)
Comment: By law regulated forms need to be filled out; it is possible to buy these forms in a stationery
shop or the court (KM15) to be prepared in accordance to regulations on registering the legal entities in
the court register; after registration in the court register of the newly established company, the court itself
informs the Official Gazette to announce already prepared notice. Companies are automatically
registered for the membership of the chambers of economy at state, entity, canton and regional levels.
Since the beginning of 2004 the membership of the Chamber of Economy of the Federation of Bosnia
and Herzegovina and the Chamber of Economy of the Republika Srpska is voluntary.

Procedure 5. Buy a company stamp


Time to complete: 1 day
Costs to complete: KM40
Comment: it is necessary to submit a copy of the court registration.

Procedure 6. Application for resolution on intended activities to the competent municipality


Time to complete: 1 day
Costs to complete: KM300-1000

Procedure 7. Application for utilization permit to the canton Ministry of Commerce


Time to complete: 15 days
Costs to complete: KM150
Comment: The application should be submitted to the Canton Inspections (all the inspections are
gathered at one place) and depending on the scope of business of the company the relevant inspector or
inspectors will perform control at the business premises of the company and issue the Approval to
Perform Business. In case the scope of business of that company is trade the trade inspector and
employment inspector shall perform control. For this permit it is necessary to submit (besides the copy of
resolution on the intended activities) a copy of the court registration, evidence of the possession of
business premises, appropriate permit for electric power issued by an authorized institution (the landlord
should have had obtained the last document), copy of registration forms for employees.

Procedure 8. Apply for company identification number with the competent tax office
Time to complete: 15 days
Costs to complete: no charge

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Comment: When filing the application for obtaining the statistical and taxpayer number, simultaneously
with the competent tax authority (in accordance to Regulations on Obtaining Identification Numbers
(Official Gazette FBiH No. 39/02)), the newly incorporated company shall, together with the application
form submit the photocopy of the court resolution (registration) and the lease contract of business
premises, the resolution of the competent municipality on the intended activities (this resolution shall
confirm that certain activities may be exercised at a certain address) and the utilization permit (issued by
canton Ministry of Commerce). The competent tax office shall also nominate the committee (for
company inspection) which shall confirm that the company exists at the specified address, and based
upon the report of this committee the taxpayer’s and statistical number shall be obtained.

Procedure 9. Open a company account with a commercial bank


Time to complete: 1 day
Costs to complete: no charge

Procedure 10. Enrol the employees in health insurance with Health Insurance Institute (Zavod za
zdravstveno osiguranje )
Time to complete: 1 day
Costs to complete: no charge
Comment: Submitting the copy of the concluded employment contract and the copy of the Registration
Set of the Company at the Court Register of Companies.

Procedure 11. Enrol the employees in pension insurance with Pension Insurance Institute (Zavod za
penziono osiguranje )
Time to complete: 1 day
Costs to complete: no charge
Comment: Submitting the copy of the concluded employment contract and the copy of the Registration
Set of the Company at the Court Register of Companies.

Procedure 12. Adopt and publish a rule book on matters of salary, work organization, discipline and
other employee regulations.
Time to complete: 1 day
Cost to complete: no charge, KM250 minimum if made by a lawyer, depending on complexity.
Comment: The procedures apply to employers who hire more than 15 workers. A company’s body
authorized to issue internal regulations shall pass these rulebooks and does not have to submit them
anywhere.

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Croatia

Procedure 1. Notarize memorandum of association


Time to complete: 1 day
Cost to complete: HRK 4,000
Comment: Cost depends on the number of founders, HRK 3,500-5,500.

Procedure 2. Deposit founding capital in a bank account


Time to complete: 1 day
Cost to complete: no charge

Procedure 3. Pay court application fee


Time to complete: 1 day
Cost to complete: see below

Procedure 4. Register the company at the Commercial Court


Time to complete: 18 days
Cost to complete: HRK 400 + 810 (publication fee)
Comments: The Court of Registration must make entries in the court register in accordance with the
Companies Act (Zakon o trgovackim drustvima) where they are substantiated by submitted documents
from a public notary and an auditor, and a proof of the ownership of rent contract for business premises.
If all the conditions prescribed by law are fulfilled, the Court is obliged to register a company. Before the
company is entered into the Register, it may operate as “provisional company”, upon adoption of the
memorandum of association. The company automatically becomes a member of the Chamber of
Commerce at registration. The court forwards the registration data to the Official Gazette (Narodne
Novine) of the Republic of Croatia and a daily newspaper (Vjesnik). According to the changes of
Company law (effective as of 01 January 2004), it is only obligatory to have the registration data
published in the Official Gazette, but the company can choose to publish the incorporation of company in
the Vjesnik with a fee of HRK450.

Procedure 5. Have official seal made


Time to complete: 1 day
Cost to complete: HRK 150
Comment: Official seals are readily available throughout Croatia at special seal-making shops. The seal
itself must contain the name of the company, and its registration number issued by the court. This seal
must be used on all official documents (including invoices, receipts and so on) issued by the company.

Procedure 6. Register with Statistical Office for activity code and matriculation number
Time to complete: 1 day
Cost to complete: HRK 55
Comments: The Company has to obtain Statistical File Number with the State Office for Statistics
(Drzavni zavod za statistiku), in a form of "Information on classification of the business entity pursuant
to the National Classification of Activities". The Statistical File Number can be obtained personally (in
which case the Procedure is completed on the same day) or by mail (in which case the
Procedure takes 2 weeks).

Procedure 7. Open a bank account


Time to complete: 2 days
Cost to complete: HRK175

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Comments: The Company has to open the Croatian Kuna (HRK) account with a bank operating in
Croatia.

Procedure 8. Obtain Municipal certificate that environment and workplace safety laws are observed
(Zupanijski Ured)
Time to complete: 20 days
Cost to complete: HRK 70 (revenue stamp) + cost of each report depending on type of company’s
business activity HRK 200-300
Comments: Local authorities are entitled to levy a business name tax of HRK180-520. Zagreb local tax is
18%.

Procedure 9. Register with Porezna uprava (Tax Authority) for VAT and employee income tax
withdrawals
Time to complete: 1 day
Cost to complete: no charge
Comment: Upon registration of the company with the Commercial Court Register and fulfilling the
obligations with the State Bureau of Statistics, the company needs to register with the competent Tax
Authority in accordance with the registered seat of the company. Information is inserted directly into the
computer system along with the entry into the register of corporate profit taxpayers. This Procedure
includes submitting the documents obtained from the Court Register and the State Bureau of Statistics.
The company whose total annual income exceeds HRK 85,000 must register itself as the entity within the
VAT system of taxation to the competent Tax Authority, based on the Company's registered seat.

Procedure 10. Inform the competent employment office on the employment of workers
Time to complete: 1 day
Cost to complete: no charge

Procedure 11. Register with Croatian Pension Insurance Fund (Hrvatski zavod za mirovinsko osiguranje,
HZMO)
Time to complete: 1 day
Cost to complete: no charge
Comments: Companies need to register its employees within 15 days from commencement of operation.
This Procedure requires submitting certain documents regarding the Company (Decision on the entry of
the company in the Commercial Court Register) and filling in official forms. No fees are required. If all
the required documents are submitted, this Procedure is completed on the same day. It can be done by
mail, but first the company must collect the necessary forms from the authority.

Procedure 12. Register with Croatian Health Insurance Fund (Hrvatski zavod za zdravstveno osiguranje ,
HZZO)
Time to complete: 1 day
Cost to complete: no charge
Comments: Companies need to register its employees within 15 days as of the date of the execution of
the Employment Agreements. Together with the registration of the company’s first employee a company
must register itself as a compulsory contributions payer. This Procedure also requires submitting certain
documents regarding the Company (i.e. Decision on the inscription) and filling in official forms. No fees
are required. It can be completed within one day, if all the required documents are submitted. It can be
done by mail, but first the company must collect the necessary forms from the authority.

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FYR Macedonia

Procedure 1. Check the uniqueness of the company name and pick up a company registration form
Time to complete: 9 days
Cost to complete: D 400
Comment: Company registration forms can be bought at any bookstore which is selling administrative
materials.

Procedure 2. Deposit the legally required initial capital in a bank and pay the registration fee; obtain
deposit and payment evidence.
Time to complete: 2 days
Cost to complete: no charge
Comment: Except the bank commission charged by the bank of the shareholder which transfer the capital
there are no other charges. Each shareholder needs to make a single basic contribution upon
incorporation of the company. The basic capital must be expressed in a round number divisible by one
hundred.

Procedure 3. Notarize the company deeds and other documents.


Time to complete: 1 day (1 hour)
Cost to complete: D 2,000 (assuming five signatures are to be certified)
Comment: The following documents are also notarized:
- Statement given by the company founders, members of the management board and of the supervisory
board through which the persons are listing to the register court the undertaken activities for company
formation according to the law and confirming that the company has been founded in accordance with
the law.
- Statement given by the company founders that within the last year they have not been shareholders in
another company which went into bankruptcy or in liquidation.

Procedure 4. Procure extracts of the criminal record of the first directors.


Time to complete: 2 days
Cost to complete: D 800
Comment: The extracts from the criminal records are not to be notary certified but are also required to be
presented in original issued by the relevant authorities. Competent authority for issuing extracts from
criminal records is the competent Primary court in which area is the residence of the person for which is
to be issued extract from the criminal record.

Procedure 5. Registration with the Trade Registry.


Time to complete: 9 days
Cost to complete: D 2,700
Comment: Company founders can prepare registration documents themselves. If professional service is
used, a fee of EUR 500 is charged for establishing this company form (with company capital of USD
17,800) for all lawyers activities undertaken in one period up to one month.

Procedure 6. Publish the company formation notice in the Official Gazette.


Time to complete: 1 day
Cost to complete: D 900
Comment: According to Macedonian law the notice for company formation is only to be published in the
official gazette.

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Procedure 7. Make a company seal.


Time to complete: 1 day
Cost to complete: D 600-2,400
Comment: Minimum D 600 in case of wooden seals and minimum D 2.400 in case of automatic seals.
The client can choose the kind of seals he/she orders. The original of the court decision for company
registration is required.

Procedure 8. Register with the Statistic Office to get a statistic number.


Time to complete: 2 days
Cost to complete: D 960

Procedure 9. Notarize the company registration certificate.


Time to complete: 1 day
Cost to complete: D 2,200

Procedure 10. Open a bank account.


Time to complete: 3 days
Cost to complete: D 2,200
Comment: Need to present notary certification of the whole company registration.

Procedure 11. Register the company with the tax office.


Time to complete: 14 days
Cost to complete: D 400
Comment: Need to present notary certification of the whole company registration.

Procedure 12. Register with the Social Security Office.


Time to complete: 1 day
Cost to complete: D 100
Comment: Fill out and file appropriate forms.

Procedure 13. Inform the Employment office for hiring employees.


Time to complete: 2 days
Cost to complete: D 200
Comment: It is necessary to submit the appropriate fulfilled forms plus employment contract and forms
for notification of the social security to the employment office.

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Moldova

Procedure 1. File all the documents with the State Registration Chamber for the registration of the
company; obtain all Identification numbers
Time to complete: 15 days
Cost to complete: about L 562 + 0.5%*capital + L 250 stamp fee
Comment: File Registration applications; name and address of the founders and the directors (copies of
the passport/identity card); Documents confirming the legal address of the company (right establishing
documents: ownership certificate, lease contracts or guarantee of the future lease or other); documents
confirming the payment of state taxes and fees. As a rule, all other documents are filled in by
Registration Chamber employees. Where the founder of the company is a legal entity (company) the
submission of a Tax Inspectorate certificate is necessary, confirming the absence of arrears towards the
state budget (time needed for certificate issuance – from 1 to 3 days) and the copies of its incorporation
documents. Pursuant to the new order of registration of the companies, the Minutes of the founders’
meeting; The Charter and the Contract of company incorporation shall be drafted by the State
Registration Chamber, but the founders can revise them before signing and ask for additional provisions
to be included. They also shall provide the Chamber with the information regarding the share capital of
the company, list of activities and other additional information that the founders may wish to have
included in the statutory acts. Lately the State Registration Chamber has also combined the Charter and
the Contract on incorporation into one document named Constitutive Act, that is issued to the company
upon the completion of the registration Procedure, instead of the Charter and the Contract on
incorporation. The Constitutive Act can be authenticated by the State Registrar, which is the State
Registration Chamber representative, if all founders or their representatives sign the Act in presence of
the State Registrar. The Constitutive Act after being drafted by the Chamber may also be signed by the
founders outside the Chamber, in such case the constitutive act shall be authenticated by the notary and
then submitted to the Chamber. State Registration Chamber will verify the company name with the
National Terminology Center regarding its conformity with the legislation on languages.
The state taxes and fees include:
i. the state fee for registration – 250 lei
ii. the fee for preparation (editing) of the incorporation documents – 108 lei
iii. the fee for consultation – 27 lei
iv. the fee for certification of the signatures by the state registrar – 36 lei
v. the fee for statistic numbers – 12 lei vi. the fee for publication – 54 lei
vi. the fee for the extract (for permanent bank account) – 36 lei
vii. stamp fee – 0.5% of the capital
viii. fee for the official stamp of the company – 350 lei
The State Registration Chamber also makes up the registration with the Department of Statistics for a
Statistical Code.
The term of registration may be reduced up to: 3 days with additional payment of 358 lei; 4 days with
additional payment of 268.5 lei; or 5 days with additional payment of 179 lei. The State Registration
Chamber issues to the founders the Registration Form and this Form shall be registered and signed with
the local Fiscal Inspectorate. The State Registration Chamber performs this Procedure independently,
therefore this Procedure shall be completed by the founders only if the State Registration Chamber
requires to do so. As a step to implement the initiative to create a unique "State Register of legal
entities", the government introduced a unique state identification number for enterprises and
organizations on 14 July 2003. All enterprises and organizations are required to apply for the unique state
identification number (IDNO) at the territorial offices of the State Registration Chamber. All the
enterprises and organizations should have had IDNO applied before 15 April 2004. In order to obtain the

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IDNO the following documents shall be presented by already registered companies: state registration
certificate, certificate of the fiscal number attribution, certificate of the statistical number attribution. All
the newly registering enterprises companies receive the IDNO upon registration. Beginning 1 January
2004 the Registration Certificate shall replace the certificate of the fiscal code. Therefore, the registration
number and the fiscal number are identical. Beginning 15 April 2004 this number is IDNO. The
enterprises, in the agreements and other documents they issue, still use the registration number and fiscal
number but also indicate the IDNO, so the enterprises shall gradually get accustomed to using only the
IDNO number.

Procedure 2. Open a temporary bank account and deposit at least 40% of the registered capital of the
company; pay the registration fee
Time to complete: 1 day, included in the previous procedure
Cost to complete: up to 250 lei
Comment: The fee amount depends on the bank chosen by the founders.

Procedure 3. Obtain the Registration Certificate and Constitutive Act; obtain an official stamp from the
Department of Information Technologies
Time to complete: 1 day, included in the previous procedure
Cost to complete: no charge
Comment: Company files the order for the company stamp at the same time with the subscription of the
registration documents. The Registration Chamber usually requires the company to get its first stamp
from the Department of Information Technologies, which is affiliated to the Chamber. Subsequently, the
stamp shall be issued on the day of company registration, together with the registration certificate and
other documents. Cost: 226 lei, plus additional 15 lei for the check-up of the name in the terminological
centre, plus additional 9 lei – as state tax on stamp manufacturing. Total – 250 lei

Procedure 4. Register with the local Fiscal Inspectorates of the Ministry of Finance for VAT
Time to complete: 1-3 days
Cost to complete: no charge
Comment: Only the company that is supposed to deliver VAT taxable goods and/or services for an
amount exceeding 200 000 lei during 12 consecutive months is obliged to register with the local Fiscal
Inspectorate in order to obtain a VAT number. The VAT number is different from the IDNO.

Procedure 5. Register the company with the Statistics Department of Republic of Moldova
Time to complete: 1 day
Cost to complete: 12 lei
Comment: After the registration is completed and the company is given the Certificate of the Attribution
of the Fiscal Number, the company shall register with the Statistics Department of Moldova. The
Department will attribute to the company the statistics number according to the activities established in
the Constitutive Act of the company.

Procedure 6. A notary certifies the company’s bank account signature cards required for the conversion
of bank account
Time to complete: 1 day
Cost to complete: L 90-150
Comment: This Procedure consists of the certification of the signature sample cards for the bank. The
cards must contain the signatures of the director and of the chief-accountant.

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Procedure 7. Convert the company’s temporary bank account to a permanent one


Time to complete: 1 day
Cost to complete: no charge
Comment: Need to present to the bank the notary-certified copies of the Certificate of Registration, the
incorporation documents, excerpt for the bank confirming the director, notarized signature cards, and a
copy of the enterprise’s stamp. The notary certification of the whole package of documents costs up to
180 lei, based on the calculation of 6 lei per page.

Procedure 8. Obtain the permission from the State Inspectorate of Labour


Time to complete: 7 days
Cost to complete: no charge
Comment: In accordance with the Decree of the Government of the Republic of Moldova # 75 dated
2 February 1999 all the economic agents are obliged to obtain a permit from the Sate Inspectorate of
Labour. The permit is issued on the basis of an expert’s decision. All the costs and expenses of the
expert’s examination are borne by the economic agent (the amount of the stated costs is not fixed and
may vary from one company to another); in order to obtain such permits, at least one employee of the
new company – usually the manager or the human resource specialist – must attend special paid training
courses for several weeks. As a matter of practice, the newly registered company can start operations
without this permit, but obtain it in due course.

Procedure 9. Register the company with the Social Security Fund


Time to complete: 1 day
Cost to complete: no charge
Comment: The State Registration Chamber is obliged to submit the registration decision to the Social
Security Fund for registering the company with the social security fund within the term of 15 days from
the moment of registration and pay social security contributions.

Procedure 10. Register the company with the National Medical Insurance Company
Time to complete: 2 days
Cost to complete: no charge
Comment: In accordance with the Law of the Republic of Moldova “On obligatory medical insurance”
# 1585 dated 27 February 1998 all the companies on the territory of the Republic of Moldova are
obliged to conclude medical insurance contracts of their employees with the National Medical Insurance
Company. The mentioned law entered into force 1 January 2004.

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Romania

Procedure 1. Obtain a certificate from the Trade Registry proving the availability of the proposed
company name and make a reservation of the name.
Time to complete: 1 day
Cost to complete: ROL 308,000
Comment: The certificate obtained is valid for a period of 3 months.

Procedure 2. Deposit funds in a bank, obtain a document confirming the bank deposit of sufficient funds.
Time to complete: 1 day
Cost to complete: bank commission ranges from zero to ROL 200 000.

Procedure 3. Obtain a certificate of fiscal record from the company associates and the legal
representatives from the public finance department of municipality.
Time to complete: 5 days
Cost to complete: ROL 50,000 for standard process, ROL 200,000 for expedite process
Comment: Companies are required to apply for the certificate from the general department of public
finances of the respective county or the Bucharest municipality, in which the tax payer has its residence
or registered office. The certificate is only valid for 15 days. The procedure takes 10 working days for the
standard process and 5 working days for an emergency case.

Procedure 4. Register with the Unique Office (Biroul Unic) of the Trade Registry (Registrul Comertului)
(BASC), Bucharest Tribunal. Also obtain a court registration, publish a notice, and register for statistical
purposes and social security.
Time to complete: 20 days
Cost to complete: ROL 342,000 (stamp duty) + ROL 3,500,000*150% (registration fee for expedite
service, including ROL 850,000/32 lines publication of certificate) + ROL 125,000 for filing with the
Trade Registry + ROL 392,500 liquidation fund fee Comments: The Government Emergency Ordinance
no. 129/2002 (Romanian Official Gazette no. 746/11.10.2002) places the National Office of the Trade
Registry within the Ministry of Justice, the respective body no longer functioning within the Romanian
Chamber of Commerce and Industry. According to the law, together with the performance of the
registration, an excerpt of the certificate of the appointed judge is sent, per officio, to the general
direction of public finances of Bucharest, as well as to the Regie autonome (Official Gazette) for
publication in the Official Gazette, part IV. As of 2001, the necessary authorizations for the functioning
of commercial companies (the authorization for the prevention and extinguishment of fires, the sanitary
authorization, the authorization for labour protection etc.) are obtained directly from the trade registry,
except for the cases stipulated by the law. The registration certificate also comprises the unique number
of fiscal registration, granted by the Ministry of Public Finances. The issuing of the fiscal registration
number attests to the fact that the respective company is recorded as a payer of the value added tax,
corporate tax and income tax. The Government Decision no 1344/2002 created the possibility to issue the
certificate of registration in a shorter period, only for the situation in which no operational authorizations
are needed, with a supplementary cost as follows:
x 50% of the taxes, for the issuing of the registration certificate within 5 days;
x 30% of the taxes, for the issuing of the registration certificate in minimum 6 days
and maximum 10 days.
The Procedure takes 20 days for standard Procedures and 7 days for expedite service.

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Procedure 5. Register the employees’ contracts with the Territorial Labour Inspectorate (TLI)
Time to complete: 1 day
Cost to complete: no charge
Comment: Prior to the adoption of the new Labour Code, each employee had to have a "labour book"
("Carte de Munca"), used as the main employee's official document which indicated the duration of
employment, seniority with one employer, seniority in the same position/specialty, salary history and
other relevant information. Individual labour contracts had to be registered with the Territorial Labour
Inspectorate ("TLI") within 20 days after execution. The labour books of the employees were kept and
filled in by the TLI. For this service, the TLI charged the employer a commission of 0.75% of the
monthly salaries fund (the total aggregate amount of employees' gross salaries), payable before the end
of the next month. Proof of salary payment and of monthly payment of employment-related taxes, such
as contributions to the social security fund, to the supplementary pension fund and to the unemployment
fund were to be submitted monthly, by the 25th day of each month. In practice, the TLI required the
employers to have 10 employees before it authorized the employer to keep the labour books.
N.B. As of 8 September 2004, a new law amended the registration procedure by separating registration
(as judicial Procedure) from ex-ante authorisation (as an administrative procedure), and by changing the
legal duration of the procedure. Processing time stipulated by the amendments is 3 to 20 days. The
minimum registration fee now stands at approximately USD 40. All required documents and fees are
published on the relevant websites as well as in the Official Gazette.

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Serbia

Procedure 1. Buy registration forms, form RJR-1, form OP, forms M1 and M4 at the paper shop
Time to complete: 1 day
Cost to complete: CSD 390 = CSD 300 (court tax) + CSD 20 (registration form) + CSD 5 (form RJR-1)
+ CSD 5 (form OP) + CSD 20 (forms M1, M4) + CSD 20 (forms E1, E3) + CSD 10 (form ROD1) +CSD
10 (form OU)

Procedure 2. Notarize the decision or contract of incorporation and lease contract at the Basic Court
Time to complete: 1 day
Cost to complete: CSD 4525
Comment: Cost depends on the amount of capital and the value of the lease. Send at least 4 copies to the
Municipal Court, as the court will keep at least one copy, one copy will be filed later with the
Commercial Court, and the filer will want to retain at least 2 originals. The cost is set at a maximum of
CSD 3,275; however an additional CSD 1250 can be paid for the court clerk to come to the business
premises to certify a document. The authorized founding representative must personally certify his/her
signature on the “OP” signature specimen form at the Municipal Court, which costs CSD 275 per form.
However, if the authorized representative is a foreigner, the certification of a signature should be
performed at the Embassy of Serbia and Montenegro in the country of his/her origin. New Law on Court
Taxes was adopted by the Serbian Parliament in March 2004. Cost: For every notarization request, CSD
25; For every signature verification, CSD 50; For every proxy (power of attorney) signature verification,
CSD 250.

Procedure 3. Open a temporary bank account; Pay founding deposit or its part and all other fees
Time to complete: 1 day
Cost to complete: no charge
Comment: In order to open a temporary account, the decision or contract of incorporation must be
submitted to the chosen bank. At least half of the initial capital is payable in advance, the rest within in a
period of 2 years from the after registration. The founding deposit is paid to a temporary account at one
of the commercial banks. After the completion of registration, the funds are transferred to a Giro-account
of the enterprise and may be used in business transactions. Obtain the payment slip from the bank.

Procedure 4. Obtain the registration certificate from the Commercial Court


Time to complete: 30 days
Cost to complete: CSD 4,000 (CSD 1500 + CSD 2500)
Comment: The payment of CSD 1500 is paid for registration application on the account of the competent
Commercial Court. The payment of CSD 2500 is to be made to the Public Enterprise “Official Gazette of
the Republic of Serbia” for publishing the advertisement on incorporation. The following documents
need to be submitted:
x Set of registration forms (forms Nos. 1-45 filled completed and signed by the
authorized representative, and form No. 7 blank);
x Contract of incorporation (Deed of Establishment) or Decision on the company
founding with authentic signatures of founder(s) notarized by the Municipal
Court;
x Articles of Association;
x Decision on the appointment of a director by the founders.

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x Information on the founder(s) (i.e. registration documents, if the founder is a legal


entity or ID No. and proof of registered residence, if the founder is a physical
person. If such documents are in a foreign language, they must be translated into
Serbian by an authorized court translator (approximate cost: CSD 500 per page);
x Certified signature of the director on the OP form (or deputy director or other
authorized person);
x Evidence of payment of the founding deposit;
x Text of the advertisement to be published at the company founding;
x Lease or ownership proof or other evidence of use of the business premises;
x Evidence of payment of the court fee;
x Evidence of payment of publication fee in the Official Gazette;
x Optionally, power of attorney if filling is made by an attorney at law.
The court will examine if the request complies with current legislation and whether the following
documents are attached to it.

Procedure 5. Make Stamp and seal


Time to complete: 1 day
Cost to complete: CSD 2500
Comment: It costs between CSD 1500 to 4,000, depending on the number of words, design, etc. In order
to make a stamp, the copy of the registration ruling must be submitted to the stamp-maker. The
procedure takes from 1 to 2 days.

Procedure 6. Obtain the registration number and code of the enterprise from the Republic Statistical
Agency
Time to complete: 5 days
Cost to complete: CSD 1,000
Comment: Law on Administrative Taxes was amended on April 22, 2003, effective as of May 1, 2003,
increasing the cost from CSD105 to CSD1,000. Fill out, sign and stamp and submit the RJR-1 form,
along with the copy of the registration ruling and set of registration forms Nos. 1 through 4. Upon the
receipt of the completed application, the Agency issues the document entitled “Information about the
Classification Carried Out for the Unit to be Classified According to Activity Classification”. The
payment of taxes and procedure should be completed within two days. Once the registration number is
granted, each company is listed according to its basic activity. The procedure takes from 2 to 7 days,
15 days maximum.

Procedure 7. Obtain PIB – tax identification number at the Municipal Hall; Certify the signatures (3
copies) for opening bank account
Time to complete: 7 days
Cost to complete: CSD355
Comment: A completed, signed and stamped PIB form, copy of the registration ruling, copy of the
statistic ruling must be submitted to the tax authorities of the municipality where the company’s seat is
registered. RUJP Office has a seat in every Municipal Hall. One needs to submit copy of the registration
certificate from Commercial Court and copy of the registration certificate (with number and code) from
the Republic Statistical Agency. Municipal tax for the certifications of the signature (3 copies) to open a
bank account, is at least CSD 105, and the Republic tax is CSD 250 . Payment can be done in each of the
Municipal Halls. The Procedure takes from 7 to 10 days.

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ANNEX 1: REGISTRATION STEPS BY COUNTRY - 81

Procedure 8. Open a permanent business account with the commercial bank


Time to complete: 1 day
Cost to complete: CSD400 (signature certification and republic tax)
Comment: The documentation needed for this step varies from bank to bank. The following documents
are generally submitted:
x Certified copy of the Commercial Court registration by the Municipal Court, with
forms Nos. 1 through 4;
x Application for opening the permanent account;
x Contract for depositing funds;
x List of authorized signatories issued by the court, for residents, or equivalent, for
non resident-Verified copy. The OP form;
x Extract of Republic Statistics Bureau (copy)-residents only;
x Tax Number PIB-residents only;
x The specimen card for legal entities (that bank provides)-original;
x Copy of the contract of incorporation;
x Copy of the Articles of Association;
x Photocopy of the ID card of the founders.

Procedure 9. Register the employment contracts with the Employment Organization/Fund


Time to complete: 1 day
Cost to complete: no charge
Comment: Submit and certify forms M1 new (application for insurance) and M1 old (application for
insurance and application for establishing the working relation), E1 (application on vacancy for working
place) and E3 (application for establishing or ending of working relation) and ROD 1 (application on
beginning/ending/changing the terms of the contribution payers) and worker’s id card and employment
contract.

Procedure 10. Obtain certificate from the PIO Fund (pension fund)
Time to complete: 2 days
Cost to complete: no charge
Comment: Submit forms M1 (used for reporting the insurance for the employee) and M4 (used for
obtaining a registry number of the taxpayer and payment of contribution), E1, E3 and employment
contract for inspection. If this application is not submitted within 8 days from the commencement of
employment, a Statement on Lateness must be submitted, explaining the reasons for the delay. The
registry number is issued within 24 hours and requires two visits to the Fund.

Procedure 11. Obtain certificate from the Health Fund


Time to complete: 1 day
Cost to complete: no charge
Comment: Submit medical examination record (medical ID card) and a certificate on the performed
medical examination.

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83

Annex 2

Abbreviations

APR Agency for Commercial Registers


ARCS Administrative and regulatory cost survey
CoDB Cost of doing business
BiH Bosnia and Herzegovina
BULSTAT Bulgarian Statistics bureau
CEED Centre for Entrepreneurship and Economic Development
CEPOR Centar za poduzetniþNLUD]YRM
CSD Serbian Dinar
CSES Centre for Strategy and Evaluation Services
D Macedonian Denar
DfID Department for International Development
EBR European Business Registry
EPPA Enterprise Policy Performance Assessment
EU European Union
FBiH Federation of BiH
FDI Foreign direct investment
FIAS Foreign Investment Advisery Service
FINA Financial agency in Croatia (former SDK)
FYR Macedonia Former Yugoslav Republic of Macedonia
GNI Gross Naitonal Income
HRK Croatian Kuna
HZMO Croatian Pension Insurance Fund (Hrvatski zavod za mirovinsko osiguranje)
HZZO Croatian Health Insurance Fund (Hrvatski zavod za zdravstveno osiguranje)
IDNO Unique state identification number
KM Convertible Mark in BiH
MDL Moldovan Lei
OECD Organisation for Economic Co-Operation and Development
PIB Tax identification number
PIO Pension Insurance Fund in Serbia (Penziono-invalidsko osiguranje)

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84 – ANNEX 2: ABBREVIATIONS

ROL Romanian Lei


RS Republika Srpska (BiH entity)
RUJP Tax administration in Serbia 5HSXEOLþNDXSUDYDMDYQLKSRUH]D
SDK, ZOP, SPP, ZPP Clearance/payment bureaus in ex-Yugoslavia
SEE South East Europe
SME Small and medium sized enterprises
TLI Territorial Labour Inspectorate
VAT Valua added tax
WB World Bank

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Annex 3

List of Participants

Workshop on Company Registration


Tirana, 8 February 2005
Key Contacts in SEE Ministries and Agencies

Albania Mr Anastas Angjeli


Minister of Economy

Mr Luan Shahollari
Deputy Minister of Economy

Mr Bashkim Sykja Tel: +355 (4) 364 673


Director of Business Promotion Department Fax: +355 (4) 222 655
Ministry of Economy bsminek@yahoo.com

Mr Gavril Lasku Tel: +355 4 364 610 (139)


Executive Director Fax: +355 (4) 234 605
SME Development Agency lasku@hotmail.com

Dr Fatos Dega Tel: +355 (4) 678 334


Advisor to the Minister Fax:+355 (4) 226 785
Ministry of Economy Fdega@minek.gov.al
Driar@abissnet.com.al

Mr Genc Boga Tel: +355 4 251 050


Managing Partner Fax: +355 4 251 055
Boga & Associates gboga@bogalaw.com

Ms Elida Reci Tel: +355 (4) 254 820


Public Private Finance Institute Fax: +355 (42) 548 20
ereci@yahoo.com

Mr Ilir Rembeci Tel: 355 4 254 603


Executive Director and National Coordinator Fax: 355 4 235 704
National Centre of Regional Development Agency ilirrda@albmail.com

Ms Eda Terezi M.Sc. Tel: +355 4 36 46 73


Economist Fax: +355 4 222 655
Business Promotion Department eda_ter@yahoo.com
Ministry of Economy

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Bosnia and
Herzegovina

Ms. Natasa Vukovic, Tel: +387 33 223 505


Advisor to the Minister Fax: +387 33 223 507
Ministry of Justice Andjelka.cosic@mpr.gov.ba

Ms Zorka Pudar Tel: +387 33 223 505


Adviser to the Deputy Minister Fax: +387 33 233 507
Ministry of Justice Andjelka.cosic@mpr.gov.ba
Zorka.Pudar@Mpr.Gov.Ba

Mr Ivica Miodrag Tel: +.387 33 444 303


Head of Department on Development and Fax: +387 33 206 141
Entrepreneurship sme-s@bih.net.ba
Ministry of Foreign Trade and Economic Relations
Bulgaria
Mr Svetlozar Tonev Tel: +359 887 867 463.
Secretary General Fax: +359 2 94 20 494
Bulgarian Registrar Agency Tonev@Justice.Government.Bg,
Ministry of Justice

Croatia
Mr Ivo Radkovic Tel: +385 (1) 6106253
Advisor Fax: +385 (1) 6109 118
Investment Facilitation Division ivo.radkovic@mingorp.hr
Ministry of Economy, Labour and Entrepreneurship

Mr Robert Markt Tel:+385 1 610 67 46


Advisor Fax:+385 1 610 9118
Investment Facilitation Division robert.markt@mingorp.hr
Ministry of Economy, Labour and Entrepreneurship

FYR
Macedonia
Mr Sasha Shindiloski Tel: +389 2 3093 541
Head of Department for Enterpreneurship Support Fax: +389 2 3084 472
Ministry of Economy Sasa.sindiloski@economy.gov.mk

Mr Zlatku Blerim Tel: +389 2 3093 542


State Adviser for Enterpreneurship Support Fax: +389 2 3084 472
Ministry of Economy Blerim.zlatku@economy.gov.mk

Mr Vladimir Sarac Tel : +389 2 3120 132


Director Fax : +389 2 3135 494
Enterprise Promotion Agency sarac@apprm.org.mk

Romania
Mrs Adriana Luminita Iacob Tel: +402 1 32 060 13
Deputy Director Of Bucharest Trade Register Romania Fax: +402 1 32 05 8 29
onrc@onrc.ro

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Ms Raluca Martin, Tel: +40 21 336 14 51


Expert, Strategy Policy and SME Analysis Department. Fax: +40 21 336 34 13
National Agency for SMEs and Cooperatives (NASMEC) raluca.martin@mimmc.ro

Mrs Cornelia Simion Tel: + 40 21 311 24 80


Director of the Department for the Improvement of the Fax: +40 021.311.24.80
Business Environment Ministry of Economy and cornelia.simion@minind.ro
Commerce

SERBIA AND MONTENEGRO

Republic of Mr Igor Brkanovic Tel; +381 11 36 16 604


Serbia SMEs Expert Fax: +381 11 363 13 60
Ministry of Economy officemsp@mpriv.sr.gov.yu

Mr Dragisa Okolisanov Tel: +381 11 333 14 00


Director Fax: +381 11 333 14 10
Business Registration Agency, officemsp@mpriv.sr.gov.yu
Ministry of Economy

Mrs Mirjana Jovanovic Tel: +381 11 33 46 601


Director of the Serbian Agency for the Development of Fax: +381 11 33 46 107
Small and Medium-Sized Enterprises and smes@net.yu
Entrepreneurship.
Republic of
Montenegro
Mr Zarko Djuranovic Tel: +381 81 406 310;
Director Fax:+381 81 406 323.
Department for the Development of Small and Medium- zarko.djuranovic@euroinfo.cg.yu
sized Enterprises

International/Other Organisations

EBRD Ms Francesca Pissarides Tel: +44 (207) 338 60 30


Senior Economist in the Office of the Chief Economist Fax: +44 (207) 338 6155
PissariF@ebrd.com

European Mr Jan Eric Frydman Tel: +32 2 296 75 51


Commission, Deputy Head of Unit Fax: +32 2 296 98 53
DG International Affairs jan.frydman@cec.eu.int
Enterprise
and Industry Mr Edward Tersmette Tel: +32 2 299 3139
Desk Officer South Eastern Europe Fax: +32 2 296 98 53
edward.tersmette@cec.eu.int

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Delegation of Mr Lutz Salzmann Tel:+355 4 228 320 / 230 871


the European Ambassador Fax: +355 4 230 752
Commission Head of Delegation Lutz.salzmann@cec.eu.int
in Albania
Ms Maritxell Martinez Martinez Tel: +355 4 228 320
Political and Economic Affairs Fax: +355 4 230 752
European Commission Delegation in Tirana maritxell.martinez@cec.eu.int

Foreign Mr Boris Divjak Tel: +385 91 767 05 94


Investment Consultant for South Eastern Europe Fax: +385 1 66 00 687
Advisory bdivjak@teol.net
Service
(FIAS),
The World
Bank Group

Registry Mr David Walke Tel: +44 2920 76 35 06


Advisers Managing Director Fax: +44 2920 64 61 01
Limited david@registryadvisers.com

World Bank Mr Constantinos Stephanou Tel: +1 202 473 9179


Financial Economist Fax: +1 202 522 2755
Poverty Reduction and Economic Management/Finance & cstephanou@worldbank.org
Private Sector Europe and Central Asia Region

Ms Greta Minxhozi Tel. (355) 42 405 87/88


Sr. Country Operations Officer Fax. (355) 42 405 90
World Bank Office gminxhozi@worldbank.org
Tirana, Albania

Enterprise Mr Declan Geaney Tel: +353 87 9692858


Registry General Manager Fax: +353-1-6715301
Solutions dge@ersl.ie
Limited Mr Richard Wood Tel: +353 87 6488447
(ERS) Ireland Director Fax: +353-1-6715301
raw@ersl.ie
Mr John Murray Tel: +353 87 1201 877
European Business Register Fax: +353-1-6715301
jmm@ersl.ie

Company Mr Paul Farrell Tel: +353 (0) 1 804 5200


Registration Registrar of Companies Fax: + 353 (0) 1 804 5222
Office, paul_farrell@entemp.ie
Ireland

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Stability Pact Mr Michael C. Mozur Tel: +32 (2) 401 8709


for South East Deputy Special Co-ordinator Fax: +32 (2) 401 8712
Europe michael.mozur@stabilitypact.org

Mr Bernard Snoy Tel: +32 (2) 401 87 15


Director of Working Table II bernard.Snoy@stabilitypact.org

UNMIK Mr Naser Grajcevci Tel: +381 38 504 604


Director of Department for Private Sector Development ext 6840
Policy Fax: +381 38 504 604
Ministry of Trade and Industry ext 6849
Naser.grajcevci@eumik.org

Mr Skender Ahmeti Tel: +381 38 504 604


Permanent Secretary of the Ministry of Trade and ext 6840
Industry Fax: +381 38 504 604
Ministry of Trade and Industry ext 6849
Skender.ahmeti@eumik.org

Mr Hysni Terziu Tel: +381 38 504 604 ext 6840


Chief of Division for Strategy and Enterprise Policy Fax: +381 38 504 604 ext 6849
Ministry of Trade and Industry Hysni.terziu@eumik.org

USAID Mr Nikolay Yanev Tel:+359 2 989 96 61


Legal Expert Fax:+359 2 987 09 74
USAID Bulgaria Commercial Law Reform nyanev@clrp-bg.org
Program/Bearing Point rsotirova@clrp-bg.org

Organisers

OECD Mr Declan Murphy Tel: +33 (1) 45 24 97 01


Programme Director, Investment Compact for South East Fax: +33 (1) 45 24 93 35
Europe Declan.Murphy@oecd.org

Mr Antonio Fanelli Tel: +33 (1) 45 24 97 07


Principal Administrator, Investment Compact for South Fax: +33 (1) 45 24 93 35
East Europe Antonio.Fanelli@oecd.org

Ms Adelina Vestemean Tel: +40 (21) 312 32 56


Regional Executive, Investment Compact for South East Fax: +40 (21) 312 54 41
Europe avestemean.ic@etol.ro

Ms Susan Hodgson Tel: +33 (1) 45 24 76 37


Assistant Fax: +33 (1) 45 24 93 35
Investment Compact for South East Europe susan.hodgson@oecd.org

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Annex 4

List of Contacts

Investment Compact for South East Europe


Country Economic Teams

Albania
Mr. Bashkim Sykja (CET Leader) Tel.: (355 4) 36 46 73
Head of SME and FDI Unit Fax: (355 4) 22 26 55
Ministry of Economy bsminek@yahoo.com
Bulevardi “Zhan d’Ark” 3
Tirana

Bosnia and Herzegovina


Mr. Dragisa Mekic (CET Leader) Tel/Fax: (387 33) 220 546
Assistant Minister Dragisa.Mekic@mvteo.gov.ba
Ministry of Foreign Trade and Economic Relations of BiH
Sector for Foreign Trade Policy and Foreign Investments
Musala 9
71000 Sarajevo

Bulgaria
Mr. Pavel Ezekiev (CET Leader) Tel.: (359 2) 985 55 00
President Fax: (359 2) 980 13 20
Invest Bulgaria Agency p.ezekiev@investbg.government.bg
31 Aksakov Street, 3rd Floor
Sofia 1000

Croatia
Mr. Vladimir Vrankovic (CET Leader) Tel : (385 1) 6106 994
State Secretary Fax : (385 1) 6109 120
Ministry of Economy, Labour and Entrepreneurship vladimir.vrankovic@mingorp.hr
Ulica grada Vukovara 78
10000 Zagreb
Croatia

FYR Macedonia
Mr. Fatmir Besimi (CET Leader) Tel.: (389 2) 3093 408/412
Minister Fax: (389 2) 3084 472/471
Ministry of Economy fatmir.besimi@economy.gov.mk
Jurj Gagarin 15
1000 Skopje

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Moldova
Mr. Valeriu Lazar (CET Leader) Tel : (373 2) 2 23 26 48
Minister of Economy and Commerce Fax : (373 2) 2 23 40 64
Ministry of Economy vlazar@moldova.md
Piata Marii Adunari Nationale, 1, Government Building
Chisinau

Romania
Mr. Cosmin Dobran (CET Leader) Tel: (40 21) 230 7570
Counsellor to the Minister Fax: (40 21) 230 7961
Ministry of Foreign Affairs cosim.dobran@mae.ro
33 Aleea Alexandru
Bucharest

Serbia and Montenegro


Montenegro
Ms. Slavica Milacic (CET Leader) Tel.: (381 81) 225 568
Special Advisor for Economic Affairs Fax: (381 81) 225 591
Office of the Prime Minister slavicam@mn.yu
91000 Podgorica

Serbia and Montenegro


Serbia
Dr. Miroljub Labus (CET Leader) Tel.: (381 11) 361 55 66
Deputy Prime Minister Fax: (381 11) 361 75 97
Nemajina 11 labus@g17plus.org.yu
11000 Belgrade

Serbia and Montenegro


0U3UHGUDJ,YDQRYLü (CET Leader) Tel.: (381 11) 311 42 40
Minister Fax: (381 11) 311 18 18
Ministry of International Economic Relations web@info.gov.yu
Blvd. Mihaila Pupina 2
11070 Belgrade

Stability Pact for South Eastern Europe

Mr. Fabrizio Saccomanni Tel: (44 207) 338 74 98


Chairman, Working Table II Fax: (44 207) 338 69 98

Ms. Mary O’Mahony


Senior Expert
Tel: (32 2) 401 87 09
Working Table II
Fax : (32 2) 401 87 12
Rue Wiertz 50
mary.omahony@stabilitypact.org
1050 Brussels
Belgium

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LIST OF CONTACTS – 93

Business Advisory Council for Southeastern Europe

Mr. Nikos Efthymiadis (Chairman)


Sindos Industrial Area of Tel.: (30 231)/798 226; 798 403
Thessaloniki, P.O. Box 48 Fax: (30 231)/797 376; 796 620
57022 Thessaloniki, ne@efthymiadis.gr
Greece

Mr. Aldo Fumagalli Romario (Vice Chairman)


SOL S.p.A.
Tel.: (39 039) 2396 225
CEO & Managing Director
Fax: (39 039) 2396 264
Piazza Diaz n° 1
a.fumagalli@sol.it
I- 20052 Monza
Italy

Mr. Muhtar Kent (Board Member)


Efes Beverage Group Tel.: (90 216) 586 80 11
Esentepe Mahallesi, Anadolu Caddesi No.1 Fax: (90 216) 586 80 16
81440 Kartal Istanbul Muhtar.kent@efespilsen.com.tr
Turkey

Mr. Manfred Nussbaumer (Board Member)


Chairman , Board of Directors
Tel.: (49 711) 78 83 616
Ed. Züblin AG,
Fax: (49 711) 78 83 668
Albstadtweg 3, D-70567 Stuttgart,
HV-VS.Hildebrand@zueblin.de
Germany

Mr. Christian A Hufnagl (Board Member)


Deutsche Telekom AG Tel.: (49 61) 72 969 257
Im Langenfeld 2d Fax: (49 61) 72 969 258
D-61350 Bad Homburg vdH hufnagl@telekom.de
Germany

Ms. Maria Bozoudi (BAC Secretariat)


Manager Tel.: (30-231)/257261; 257262
Business Information & Clearing Center Fax: (30-231)/257261; 257262
P.O. Box 1575 biccgr@the.forthnet.gr
54006 Thessaloniki, mbozoudi@biccgr.org
Greece

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94 – ANNEX 4. LIST OF CONTACTS

Co-Chairs of the Investment Compact Project Team


Austria

Mr. Manfred Schekulin


Tel: (43 1) 711 00 51 80
Director, Export and Investment Policy
Fax: (43 1) 711 00 15 101
Federal Ministry of Economic Affairs and Labour
manfred.schekulin@bmwa.gv.at
Stubenring 1
A-1010 Vienna

Bulgaria

Mr. Rumen Ovcharov


Minister of Economy and Energy Tel: +(359) 2 940 7530
12 Al. Batenberg str Fax: +(359) 2 981 0980
Sofia 1000

OECD

Mr. Rainer Geiger


Deputy Director, Tel: (33 1) 45 24 91 03
Directorate for Financial, Fiscal and Enterprise Affairs Fax: (33 1) 45 24 91 58
2, rue André Pascal rainer.geiger@oecd.org
75775 Paris Cedex 16
France

Mr. Antonio Fanelli


Tel: (33 1) 45 24 97 07
Principal Administrator, Investment Compact for South East Europe
Fax: (33 1) 45 24 93 35
2, rue André Pascal
antonio.fanelli@oecd.org
75775 Paris Cedex 16
France

THE BUSINESS REGISTRATION PROCESS IN SOUTH EAST EUROPE: A PEER REVIEW – ISBN- 9264013504 © OECD 2005
OECD PUBLICATIONS, 2, rue André-Pascal, 75775 PARIS CEDEX 16
PRINTED IN FRANCE
ISBN 92-64-013504
Couv Business Registration 26/09/05 16:37 Page 2

I N V E S T M E N T C O M PA C T
Company registration represents the beginning of an economic life cycle for
entrepreneurs. Entry of new business however may be simple or rather
cumbersome, the business registration process affecting the entire business
environment in any country.

Reforming the company registration in order to facilitate investment is a


complex operation, which involves simultaneous and co-ordinated changes at
the legal, institutional and operational levels. Recent technological developments
THE BUSINESS
have opened up new frontiers in the field of processing company registration
applications and the management of the company registration data base, allowing
REGISTRATION PROCESS
countries to rapidly improve and simplify their company registration procedures
and install a state of the art company registers. IN SOUTH EAST EUROPE
The countries of South East Europe (SEE) have identified the company
registration procedure as a critical area in their programmes to lower administrative
barriers and to foster enterprise development. A number of SEE countries have
recently implemented radical reforms of their company registration procedures, A PEER REVIEW
aiming at substantially reducing the registration time, costs and procedural
steps.

This report is based on the findings of a Peer Review on company registration


in the South East European countries conducted by the Investment Compact for
South East Europe in February 2005 as well on the work conducted by FIAS
(World Bank Group), the EBRD, the European Commission and the OECD. The
report is a reference tool for all who are involved in company registration and
for private sector development issues in South East Europe.

APRIL 2005

ISBN 92 64-01350-4

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