Modernization is key for corporate companies. Corporate compliance has become a part of this modernization that companies have been implementing over the last 20 years. The World Compliance Association defines Corporate Compliance as a set of best practices and procedures adopted by corporate companies. Through Compliance it is possible to identify and classify the operational and legal risks that a company may face, in order to establish control, management and prevention mechanisms.
Why do companies need Compliance?
The modernization of companies, in relation to the application of Corporate Compliance, has ceased to be a voluntary option for many organizations and has become a mandatory requirement to be integrated into their strategy and internal structures, in order to comply with legal precepts or to protect themselves against risk situations that would seriously jeopardize the stability and daily continuity of the organization.
The Compliance function is based on a management system of indicators that enables organizations to manage the risks of not complying with regulations. In the first place, it is designed mainly from the perspective of legal compliance, mainly criminal law; but increasingly, the different models are incorporating an ethical dimension, which goes beyond compliance, towards the identification of the values that should govern the organization’s conduct.
The concept of Compliance is not new. However, the rapid evolution of several national and international legislations, related to applicable sanctions, has created a process of preventive compliance decision making by companies. This has ensured the role of Compliance as one of the latest issues to be enlisted within the management strategies of any entity.
The aim is to identify forms of behavior and rules of conduct that not only reduce the risk of not complying with regulations, but also favor the effective implementation of the ethical values with which the organization identifies. As I mentioned before, when including Compliance practices in companies, we are not only talking about a map of criminal risks, internal rules of transparency and good corporate governance, but also taking into account the tools to be used so that companies can comply with the clear objectives established by the law. From the renewal of operating permits to the payment of annual taxes.
Non-Profit Non-Governmental Organizations (NGOs) are not far behind. The role of a compliance officer of a company or organization should not only be focused on preventing crimes from being committed within the entity, on exempting the organization from criminal liability, or on building a common integrity system, but also on complying with the essential administrative processes, to which they are obliged by law.
In recent years, the responsibilities and legal requirements applicable to Non-Governmental Organizations (NGOs) have increased in Honduras. These requirements, and the consequences of non-compliance, must be diligently managed, from a legal and ethical point of view; not to be left in the dark about the rules that affect them.
To mention specific requirements, the Directorate of Regulation, Registration and Monitoring of Civil Associations (DIRRSAC, for its initials in Spanish) establishes that Civil Associations must register each Board of Directors of Civil Society Organizations. Taking into account the following requirements:
- Written request for registration of the Board of Directors (or related body) and issuance of a certificate, by the legal representative, addressed to the Secretary of State in the Offices of the Interior, Justice and Decentralization, which must include the corresponding power of attorney, duly authenticated (authenticated signature).
- Original summons issued for members to attend the election assembly, signed and sealed by whoever corresponds according to the bylaws and with authenticated signature;
- Original certification of the minutes of the Assembly in which the election of the current Board of Directors of the Civil Society Organization is recorded, with an authenticated signature, even if it is original.
- Photocopy of the identification documents of the members of the elected Board of Directors.
Likewise, every Civil Association shall submit an annual report of its Financial Statements, including the following information:
- Letter of presentation of the Annual Report by the Legal Representative of the Organization or Legal Proxy indicating the presentation of the Financial Statements and details of its activities, duly stamped and signed.
- Balance sheet, income statement and declaration of activities, which should reflect in a clear and detailed manner the source of income and expenses incurred by the Organization.
In addition to these requirements before DIRRSAC, each organization should make an analysis of its own operation to determine if it will also need to apply for exemptions before the Secretary of Finance or the procedures that may be appropriate before the Revenue Administration Service (SAR, for its initials in Spanish).
From this perspective, it is important to appreciate that Compliance is also concerned with regulating internal operations to bring them in line with regulations, designing manuals and processes to ensure compliance. It is a function that is constantly changing to adapt the organization to an increasingly broad and complex regulatory framework.
If an NGO has a compliance officer, it is of utmost importance that he can highlight three important aspects: prevention, risks, and protocols to be implemented. With regard to prevention, processes can be established that allow compliance with the law and, aiming for these procedures to be materialized in the daily behavior of employees. Distinguishing risks detects preventable offenses. It also requires determining the risks of non-compliance and analyzing their scope in order to prioritize the actions of the compliance program. This leads us to design protocols to prevent the commission of crimes or non-compliance with mandatory requirements established by law.
The proper application of Compliance for Organizations brings as consequences a better working environment, greater competitiveness, greater legal certainty, reduction of legal problems, and higher productivity. Every company needs to enter into this modernization, for the daily and mandatory application of Compliance.