Commercial Law: Dominican Republic

Introduction to Commercial Law

• Commercial law and corporate law are explored in a legal podcast.
• The podcast discusses the importance of commercial law and its differences from common law while considering it's evolution in the Dominican Republic.

Differences Between Commercial and Common Law

• Commercial law governs relationships between merchants and commercial activities.
• Common law covers general rules applicable to all people and legal situations.
• Commercial law adapts to the needs of commerce, while common law remains more stable and general.

Evolution of Commercial Law in the Dominican Republic

• Commercial law’s development has been ongoing, influenced by historical, economic, and social factors.
• Colonial Era: Commercial law was governed by Spanish and French legislation, including the Ordinances of Bilbao and the French Commercial Code, adapted to local conditions.
• Independence and the 19th Century: The Dominican Republic adopted its own Commercial Code in 1884, based on the French Commercial Code, this code formed the basis for Dominican commercial law and regulated commercial activities throught the 19th and 20th centuries.
• 20th Century and Modernization: Dominican commercial law encountered modernization, with special laws enacted for banking, insurance, and property sectors.
• Late 20th and Early 21st Centuries: Efforts were made to update and harmonize commercial law with international standards, which led to new laws on commercial companies, competition, consumer protection, and e-commerce.
• Present: Dominican commercial law constantly evolves to adapt to globalization and the digital economy, promoting reforms to facilitate investment, innovation, and legal security in commercial transactions.

Current Importance of Current Law

• Commercial law plays a vital role in the Dominican Republic's economy.
• Legal Framework for Business Activities: Commercial law provides rules and regulations for commercial transactions, company formation, commercial contracts, intellectual property, fostering legal certainty, and confidence in business environments.
• Investment Promotion: A clear commercial legal framework is vital for attracting domestic and foreign investment, ensuring investor rights are protected and rules are predictable.
• Regulation of Competition: Commercial law has regulations that ensure free competition and deter unfair practices to creating an efficient and fair market for businesses and consumers.
• Consumer Protection: Commercial laws include mechanisms that protect consumer rights by establishing standards for quality, information, and corporate responsibility.
• Conflict Resolution: Commercial law establishes procedures for resolving commercial disputes through courts or alternative methods like arbitration and mediation, which ensures smooth commercial relations and prevents the stoppage of economic activity.
• Adapting to Change: Dominican commercial law evolves to meet the challenges and opportunities of globalization and the digital economy.

Commercial Instruments and Means of payment

• Dominican commercial law regulates commercial instruments and payment methods that aid transactions and credit in the business world.

Main Commercial Instruments

• These instruments are securities incorporating a literal and autonomous right, with circulation that facilitates credit and transactions.

The Check

• The check consists of an unconditional order of payment against a bank, to pay the beneficiary a set amount of money.
• Payment Order: Instructs the bank, is not a payment promise.
• Payable on Sight: Payable when presented to the bank.
• Involved Parties: Maker (issues the check), Drawee (bank), Beneficiary (receives payment).
• Function: Primary payment method.
• Legal Framework: Law No. 2859 on Checks.
• Example: A company issues a check to a supplier for goods; the supplier presents the check to the Drawee bank for payment.

Promissory Note

• An unconditional payment promise made by someone(debtor) to another(beneficiary) agreeing to pay at later date.
• Payment Promise: The maker commits to paying.
• Due Date: Contains a specific date the payment must happen.
• Involved Parties: Maker (promises to pay), Beneficiary (receives payment).
• Function: Mainly a credit tool.
• Legal Framework: Law No. 658 on Bills of Exchange and Promissory Notes (applied by analogy).
• Example: Someone borrows from a bank and signs a promissory note guaranteeing the loan amount plus interest will be paid in the future.

Bill of Exchange

• It is a security containing an unconditional order of payment by one person (drawer) to another (drawee) to pay a third party (beneficiary) a determined sum of money on a specific future date.
• Payment Order (Directed to the Drawee): The drawer orders the drawee to pay.
• Acceptance: The drawee needs to accept to be obligated to pay.
• Involved Parties: Drawer (gives the order), Drawee (pays if they accept), Beneficiary (receives the payment).
• Endorsement: Can be easily endorsed, enabling its circulation.
• Function: A credit and payment tool, especially for complex business transactions.
• Legal Framework: Law No. 658 on Bills of Exchange and Promissory Notes.
• Example: A company sells merchandise to another company on credit and the drawer issues a draft to the drawee, is payable on a future date, the drawee accepts the draft, being bound to pay the drawer (or the person the drawer endorsed the letter to).

New Payment Methods

• Tech has transformed payments by offering faster, safer, and more convenient alternatives.

Credit and Debit Cards

• Operation: Payments can be made by using a credit line granted by a bank (credit card) or directly debiting funds from the holder's bank account (debit card).
• Advantages: Convenience, reassurance and general acceptance.
• Regulation: Law No. 155-17 against Money Laundering and Terrorist Financing, and regulations of the Superintendency of Banks.
• Example: A customer uses debit card to pay for a meal or credit to pay for groceries.

Electronic Payment Methods

• Electronic Bank Transfers: Transferring funds between bank accounts electronically.
• Advantages: Speed, security, traceability.
• Example: A company pays a bill to a supplier using electronic bank transfers.
• Mobile Payments: Using smartphone apps to make payments.
• Advantages: Convenience, accessibility.
• Example: Someone pays for a service using a smartphone app.
• Virtual Wallets: Platforms storing payment data to enable online transitions.
• Advantages: Ease of use, security (in some instances).
• Example: Costumer uses digital wallet payment like PayPal to pay for groceries online.
• Cryptocurrencies: Not widely used as a payment method in the Dominican Republic, these assets represents a new form of digital value.
• Advantages (Potential): Decentralization, potentially lower transaction costs.
• Disadvantages: Volatility, lack of clear regulation.
• Example: A small business takes Bitcoin, this is rare even today.

Commercial Credit Transaction with Bill of Exchange

• Scenario: Importadora Caribeña S.A sells car parts to Taller Mecánico Estrella SRL on credit for RD$500,000, with 90 days to pay.
• Instrument: Importadora Caribeña S.A issues a bill to Taller Mecánico Estrella SRL due in 90 days with Importadora Caribeña S.A being the beneficiary for guarantee the debt.
• Process: Importadora Caribeña S.A produces the bill, The bill is presented to Taller Mecánico Estrella SRL, who signs agreeing to pay on the due date, Importadora Caribeña S.A. can hold the bill til maturity or endorse it to a third party, the bill is presented to Taller Mecánico Estrella SRL’s bank for payment.

Payment for Credit Card Services and Electronic Transfer

• "Diseño Creativo RD" charges an individual customer RD$10,000 for graphic designs.
• A customer can pay through a point of sale at the office or through online service credit card.
• Transfers: the client transfers funds from their account to the company's account, by online or mobile banking.

In conclusion

• Traditional commercial tools like checks, promissory notes, and bills of exchange are still important in Dominican business law, and are especially used to formalize duties, credit and payment methods have been increasing thanks to effectiveness and convenience. The variety of means available for commercial interactions are effective, secure and safe.

Commercial Companies

• Dominican corporate law offers various legal structures for organizing companies, each with advantages and disadvantages, the General Law of Commercial Companies and Individual Limited Liability Companies No. 479-08, as amended by Law No. 31-11, is the primary regulation on this matter.

Types of Commercial Companies in the Dominican Republic

• The Dominican law acknowledges these types of businesses:
• Sociedad Anónima (S.A.): is a capital company, partners responsibility is limited to their contributions and divided into shares.
• Sociedad de Responsabilidad Limitada (S.R.L.): Is a company with partners limited to their contributions which is divided into social quotas.
• Sociedad en Nombre Colectivo (S.N.C.): Is a society where partners share an unlimited responsibility for social debts.
• Sociedad en Comandita Simple (S. en C.S.): Is a mixed society, that forms two kinds of partners: those who share social or unlimited responsibilities and those who share limited responsibilities.
• Sociedad en Comandita por Acciones (S. en C.A.): Is a mixed company with the capital divided into shares and partner take unlimited liability While other partners’ limited liability.
• Empresa Individual de Responsabilidad Limitada (E.I.R.L.): Is an entity with its own legal personality that limits responsibilities to the company.

Main Features of Each

• Sociedad Anonima: Requires 2 socio members and has limited liabilities and has a capital law fixed at RD$30,000.
• Sociedad de Responsabilidad Limitada: has a members limit of 2-50 and its liabilities are limited with No minimum legal capital.
• Sociedad en Nombre Colectivo S.N.C: requires 2 partners with Unlimited and Joint Liabilty and no minimum legal capital.
• Sociedad en Comandita Simple S en C.S: Has limited and unlimited stakeholders and No minimum capital.
• Sociedad en Comandita por Acciones: Requires a minimum capital of RD$30,000.
• Empresa Individual de Responsibilidad Limitada: only needs one Limited Responsibility Stakeholder No capital requirements.

Advantages and Disadvantages

• Sociedad Anónima (S.A.): the business is more capable to attract capital, limited accountability, and more defined structure organization which causes cost to rise for management and lower control.
• Sociedad de Responsabilidad Limitada (S.R.L.): has limitations on members, more limited structure to transfer and attract investment for its organization.
• Sociedad en Nombre Colectivo (S.N.C.): Simple constitution and running in a shared liability which has high risk and needs low capital.
• Sociedad en Comandita Simple (S en C.S.): Complex structure for joint responsibilities.
• Sociedad en Comandita por Acciones (S en C.A.): Complexities in administrating has a conflict of interest to combine financial liabilities.
• Empresa Individual de Responsabilidad Limitada (E.I.R.L.): may difficulty obtaining loans.

General Constitution Requirements

• Reserve a Corporate Name: For Registration in the National Industrial Property
• Develop Corporate Bylaws: Must contain information of the company.

Important Considerations

• Consulting with Legal Experts: Consult expert advice to determine business requirements.
• The Required Capital: is the minimal to support the law for any company.
• Areas of Responsibility: Direct Impact for the company.
• Administration Roles: varies to structure company.
• Fiscal Roles: can vary in the company.

Corporate Operations

• Corporate procedures has any legal processes and management to a company. the laws have been put together from General Law to modifications from Law 31-11

Transformation of Companies

• Definition: Any company that can adapt the same personality that is juridical; also can be transformed in the anonima.

General requisites

• Transformation Agreement: Meeting Quorum for each member
• Develop new statues: that adopt new statue in new company type
• Inventory and value of social worth: to be inventoried in the company
• Publishing: in the national papers of transforming document
• Commercial Records: should be registered and re transformed
• Notify Creditors: of what rights they’ll be affected once that process happens.
• Effects: of the old company will continue to operate according to what is still active.

Fusion of companies

• Definition: Is the operation in which either society is absorbed or creates a new society in what is the absorbed or combined will be terminated.

General requisites

• Design a Project: By the participating societies.
• Administration and Auditing Report: That justifies that future fusion
• Meeting approval: Approved by reunion or board member that are in legal quorum
• Publish: In an national circulation paper that are approved of fusion
• Notify any: creditors that can affect a determinate company.
• Effects: to create a new company where is fusion.

Disolution of Societies

• Definition: Has to stop any activity that will lead to a stop or definitive end of period. without any liquidation action.
• Cause of Dissolution (Art 343 de Ley 479-08): of a timeline to what by laws
• Inconvenience to practice social objections.
• Reduce patrimony’s that reduce social capital for those that still have a redemption of equity.
• Declaration of default in society.
• Approved by the partnership.
• Total fusion from the company.
• Other common causes in by laws.
• Because of a legal demand.
• Process: that needs to inscribed to the legal authorities and publication.

Liquidation of Societies

• Definition: set of operations for liquidation.
• Processes: appointment for that designation that represents the society to liquid operations.
• Inventory and final record: that inventories the society.
• Realize Assets: liquidation for what values is on
• Remanent Distribution: which distributes the socios.

Responsibilities of Stakeholders

• Shareholding that can be liable to the company capital, unless fraud that the can do and are liable.
• Peoples that are connected by legal authorities.

Responsibilities for Administrators (Council members)

• Civil Responsibilities: of what are caused to society
• Sanctions: from crime of what their administrating.

Notable Factors

• Official Forms: That are to complete.
• Legal Advice: Legal help that advice in the company
• Stakeholders' Debts: to protect interest to each company.

Conclusions and Trends

• In the Dominican Republic, commercial law has significantly evolved, adapting to economic, social, and technological changes, while also dealing with challenges, also needing to grow to respond to international commerce trends.

Current Challenges in Commercial Law in the Dominican Republic

• Regulation and Adaptation: Commercial laws do not evolve as fast as innovation, generating legal vacuums.
• Data and Privacy Protection: Data security is a constant issue with the growth of trade.
• Unfair Competition and Fraud: Fraudulent trades have surged with the rise in digital enterprises.
• Conflict Resolution: There’s a deficiency of mechanisms for resolving issues regarding international trades.

New Trends and their Impact on Commercial Law

• E-Commerce: The growth has been challenging.
• Challenges on regulating online law agreements.
• Consumer protection for online transactions.
• Fiscal trade in cross trade situations.
• The valueless is always the same in signatures and private protection in online trade.

Automation and Digital Companies

• Digital business models that are based from different platforms.
• Trends on how to regulate those models.
• Regulations can create ways to challenge the market.

Responsible Artificial Intelligence (AI) and Automated Work

• It is important to transform AI but will affect a normal process.
• Important to be more accurate with information while also following the trend
• Must protect data and jobs.

Blockchains and Cryptocurrencies

• Blockchains has tendencies and can change how finance works for financial
• Also it creates concern for how assets should be regulated.

Sustainability to businesses

• Social pressures has become more involved in what sustainable and responsible businesses are more sustainable.

Practice Recommendations

• Constantly Review Legislation: is important to review actualization of technologies
• Increase Legal Court: that strengthen laws
• Help resolve disputes to promote arbitration for different types of ways to connect economic ways.
• Explain How to work in new bureaucrat Processes.
• Empower different ways for registering companies.
• Fortify trade in register and make things more protected
• Educate those for any legal business.
• Connect those with a third party for new solutions.
• Be more on tech for every way.
• Develop new roles for legal authorities.
• Understand what we are going to look ahead to follow a great practice.

In Conclusion

• Commercial laws have gone above and beyond, in a great aspect for trends and that help build the country's economy for everyone to build and come one is important to a certain objective.