What are the books that must be kept by a company in Honduras?

By: Susan Perdomo

A very frequent question when incorporating a company is: What are the books that a company must keep? In order to develop this question, we will refer to the corporation, since this is the most frequently incorporated company, although it applies to other legal entities, with some exceptions, which will be referred to later on.

According to the mercantile law, the books that must be kept by corporations are as follows: I. Corporate books: a. Shareholders’ Registry Book: b. a. Book of Minutes of Shareholders’ Meetings; c. Book of Minutes of the Board of Directors; d. Book of capital increase and decrease; and II. Accounting books: a) Daily Journal; b) General Ledger; and c) Balance Sheet Book, and any other books that may be necessary for objective requirements or special laws.

In this article we will develop the most relevant aspects that we must know about the corporate books, through which the legal and commercial acts that the corporation as such authorizes are kept, such as sale or transfer of shares, change of shareholders, increase or decrease of capital, transformation of the corporation, in this way the corporate books allow to know in written form the life of the corporation.

The general requirements of all corporate books are

    • Physical existence
    • Correlatively numbered and chronologically ordered.
    • Authorized

Physical Existence: The Code of Commerce required that the books must be bound, so it is very common that to date in the companies we find corporate books with such characteristic, however, at present, our Code of Commerce and the Law of Accounting and Auditing Standards (LNCA) has simplified the formality of such books by indicating that they can be kept even in “loose sheets”, which allows flexibility in favor of the legal entities in the sense of maintaining the existence of bound books, or simple loose sheets. The sense of the legislator has been that instead of handwritten books, technological means of printing can be used, thus obviating the old obligation of the secretary of the corporation to handwrite the meetings, minutes or shareholders’ registry. It is important to consider that whether handwritten or printed, the indispensable requirement is that they must physically exist [i].

Correlative numbering and in chronological order The “loose sheets” or books must be duly numbered and recorded in chronological order, in order to preserve the history of the corporation as it has developed over time, and be credible before its shareholders and third parties.

Authorized: According to Article 12 of the Accounting and Auditing Standards Law, all books to be kept by traders and legal entities, whether accounting or corporate, must be authorized, which authorization is given by the authorized governmental entity, currently the municipal mayor’s office of the company’s domicile.

Aspects of each of the corporate books

Shareholders’ Registry Book: Corporations that issue nominative shares are obliged to keep a record of the same, which is identified as “Shareholders’ Registry Book”, this book constitutes the legal link between the company and the shareholders. This book constitutes the legal link between the company and the shareholder, and when the latter is registered, it allows him to exercise his various rights as a shareholder, such as the right of preference in the purchase of shares or capital increase, the right to vote, the right to receive dividends, among others.

The minimum information that this book must contain is the following: I.- The name, nationality and domicile of the shareholder; the indication of the shares that belong to it, expressing the numbers, series, classes and other particulars; II.- The exhibitions that are made; III.- The transfers that are made; IV.- The conversion of nominative shares into bearer shares; V.- The exchanges of securities; VI.- The encumbrances that affect the shares; and VII.- The cancellations of these and of the securities[ii].

This book is fundamental, since the corporation is obliged to consider as a “partner” the person who is registered in the Shareholders’ registry book, which is why the updating of the shareholders’ registry is imperative, since the unjustified refusal to register a shareholder obliges the corporation and its administrators to pay the damages and losses caused. [iii]

Minutes Book

The purpose of this book is to keep a record of the minutes: a) of the general shareholders’ meetings, whether ordinary or extraordinary; and b) of the minutes of the meetings of the Board of Directors of the corporation.

Some companies decide to authorize a book to transcribe the shareholders’ meetings and another book to transcribe the meetings of the Board of Directors, which is not prohibited by current legislation, however, it is up to each company to decide whether to authorize such acts in a single book or not, since what is relevant for the company is that all the resolutions generated are kept. The minutes will be authorized by the signatures of the persons who have this power in accordance with the bylaws.

The general rule establishes that the shareholders must hold at least one ordinary annual meeting, and/or the meetings provided for in their bylaws. In the event that it is not possible to record a meeting in the minutes book, it must be notarized, and extraordinary meetings must always be notarized and registered in the Public Registry of Commerce, even if they are recorded in the book[iv].

The importance of recording in books the minutes of the shareholders’ meetings and/or meetings of the Board of Directors, among others, is to protect the attendees/participants themselves, since dissenters in a vote are exonerated from liability, and a contrario sensu, those shareholders, administrators and/or commissioners who vote on matters that involve interests contrary to the corporation, or relating to its liability, are liable for the damages caused[v]. Such infractions cannot be sustained if they are not recorded in the assemblies or meetings transcribed in the respective book.

Capital Increase and Decrease Book

Any increase or decrease of the capital stock must be recorded in a registry book that must be kept by all companies[vi], this book will record the movements of the economic capital and is of great importance, since the data recorded in it are considered by the public administration for tax purposes, which may increase or decrease according to the value recorded, it is understood that such annotations must be made until the increase or decrease is recorded by means of an amendment of the articles of incorporation by the corporation.

Pursuant to the Law for the Generation of Employment, Promotion of Entrepreneurship, Formalization of Businesses and Protection of Investors’ Rights, created on January 8, 2014, the incorporation of mercantile companies “under any modality” of those recognized in the Code of Commerce was approved, and with the purpose of facilitating investment, said companies were authorized to be incorporated with a single partner, with a voluntary minimum capital, among others, and with respect to corporate books, were authorized to keep said books in the following manner:

Electronically (without printing or authorization of any kind),
Holding their assemblies and board meetings virtually, and with the obligation to record the meeting, keeping the evidence through a video, and delivering a copy to each attendee.
The secretary prepares a summary of the resolutions adopted in the virtual meetings and must deliver a physical or electronic copy to the attendees[vii].

Finally, it is relevant that the companies comply with their obligation to keep the legal books (corporate and accounting books) in accordance with the current regulations, which according to the NLCA law are of a legal nature.

[i] Art 36 of the Commercial Code and Art 12 LNCA (Decree 189-2004).

[ii] Art 137 Commercial Code

[iii] Art 138 Commercial Code

[iv] Art 191 Commercial Code

[v] Art 151 and 154 of the Code of Commerce

[vi] Art 305 Commercial Code

vii] Art 1, 6, 7, 8, 9 Law for the Generation of Employment, Promotion of Entrepreneurship, Formalization of Businesses and Protection of the Rights of Investors [viii] Art 1, 6, 7, 8, 9 Law for the Generation of Employment, Promotion of Entrepreneurship, Formalization of Businesses and Protection of the Rights of Investors