In the last months of 2020, important reforms and laws were approved, and have come to modify the Nicaraguan legal system and will directly affect the legal life of the companies, associations and individuals regulated in these new legal provisions. These are some of the provisions that you should be aware of as we start 2021:
- Final Beneficiary Registry: On August 25, 2020, the Law No. 1035, Reform Law to Law No. 698, Public Registries General Law and to the Commercial Code of the Republic of Nicaragua was published in The Official Gazette Number 158; these reforms have the purpose of creating the Final Beneficiary Registry of Mercantile Companies, which will be governed by the Final Beneficiary Registry Operating Regulation issued by the Registry Special Commission and comes to créate a set of obligation for mercantile companies.
Due to the reforms, all the commercial companies have to report who is its final beneficiary and must support that information through a set of documents and according to the schedule that will be issued by the competent authorities once the Final Beneficiary Registry begins operations; this is expected to be during the first half of this year.
In this sense, mercantile companies must clearly determine who is the natural person who holds final control of the same, and then prepare the necessary documentation to support their declaration.
If it is not fulfilled, one of the most important sanctions is the immobilization of the registry traffic, that is, the companies will not be able to register the necessary acts or contracts for the normal development of their activities such as appointment of the Board of Directors, granting of powers of attorney, modifications to the articles of incorporation and/or Bylaws and contracts subject to registration.
- Update of the Basic information of the mercantile companies and its representatives before the Mercantile Public Registry: said Law 1035, also includes on its article 36 (amendment to article 155 “Mandatory Registration and Sanctions” of Law No. 698) that mercantile companies incorporated before the entry into force of this law, must update their basic information.
Regarding to this new obligation, the General Directorate of Registries issued an Informative Circular, explaining that Mercantile Companies could use the period prior to the Final Beneficiary Registry start of operations, to develop the internal organization processes they deem appropriate, having to register in the corresponding Mercantile Registry all the changes and modifications that the company has suffered, in accordance with the provisions of Article 156 of Law No. 698, Public Registries General Law.
Therefore, the companies must register, update or ratify any change on their shareholding structure, board of directors, domicile of the company and data of their legal representative.
- Foreign Agents Registry: On October 19, 2020, the Law No. 1040 “Foreign Agents Regulation Law” was published in The Official Gazette and established a set of obligations to the majority of nonprofit organizations/associations operating in the country.
The law intends to regulate natural or legal persons, national or foreign, who receive foreign financing to carry out activities that could result in interference by governments, organizations or natural persons, in the Nicaraguan internal or external affairs, threatening the independence, sovereignty and self-determination of the country, as well as economic and political stability.
The law states that all the obligated subjects must be registered in the Foreign Agents Registry (which was created by this law) and defines as a “Foreign Agent” any natural or legal person (included nonprofit organizations/associations), Nicaraguan or foreign that within the country:
- receive funds (including goods or any valuable item) directly or indirectly from foreign natural persons, Governments, Agencies, Foundations, Societies, Associations of any nature; or
- receives funds, works or responds to Organizations that are owned or controlled by a Foreign Person.
In addition to the obligation to register in this new registry, the associations and / or natural persons regulated by this law must comply with the following:
- Report in advance about any transfer of funds or assets that will be received directly or indirectly from Foreign Persons, stating the use and destination of those funds to the competent authority.
- Provide the identification data (name, address, telephone, email, country of origin, etc.) of the Foreign Person who will finance the funds or assets.
- Present a monthly documented, detailed and verifiable report of expenses, payments, disbursements, contracts and other activities related to their performance as a Foreign Agent.
- The donations received by the Foreign Agent may not be used to finance activities not previously declared. Legal persons may not use donations in activities that do not correspond to the purposes and objectives established in their articles of incorporation and bylaws.
- They will not be able to receive anonymous donations.
- Financial resources must be received and channeled through any supervised and / or regulated financial institution in Nicaragua. Donated assets must comply with customs obligations.
Finally, it is necessary to mention that the Obliged Subjects had until December 19, 2020 to register themselves in the Foreign Agents Registry and if they have not complied with this obligation, any movement of financial resources and material goods (assets) will be frozen and could even lose its legal personality.
Therefore, we recommend that each company, association or natural person that could fit in the assumptions of the aforementioned regulations, analyze their current situation, obtain the necessary legal advice, proceed to comply with these new obligations and thus avoid the contemplated sanctions.
If you have any doubts or questions about it, please do not hesitate to contact us.