Bolivia Enacts The Law Of Social Enterprises

Bolivia has issued a new law that affects any private company operating in the country. Significant consequences are possible for non-compliance, so it's important for businesses to take note.

Understanding the ramifications of the new legislation is essential, and TMF Group has the local expertise and knowledge to help you understand the implications for your business.

The 'Creation of Social Enterprises' Law came into effect on May 1st, 2018, sanctioned by the Plurinational Assembly.

This law will allow workers to take control of private companies they work for, when the companies enter bankruptcy, abandonment, or liquidation. The Head of State in enacting the new law said that it is not a measure to harm employers, but to protect workers' rights and to create and maintain the job market.

The move by Bolivian President Evo Morales is in keeping with Bolivia being an interventional state that increasingly approaches socialism. These laws seek to sanction private activity and are similar to existing laws in Venezuela.

The 'Creation of Social Enterprises' Law will particularly affect small and medium enterprises, which face cash flow problems and do not have sufficient liquidity to make required payments. The new law also increases the risks of starting a new business and poses a threat to entrepreneurism in the country.

Scope of the new law in Bolivia

According to the norm, a social enterprise is constituted by the active workers of a private company that is in bankruptcy or liquidation, whose purpose is to reactivate the company in defence of its sources of work and in defence of the social interest.

Workers who take advantage of the scope of the law must assume responsibility and the risk of controlling the administration of assets collectively, through an internal and equitable agreement.

In its edition of May 16, the Bolivian newspaper 'Page Seven' revealed part of the text forwarded by the Executive to the Legislative on May 11th. This included Article 7 of the official proposal which states that that it covers "unjustified abandonment of a company when there is a default in the payment of obligations to workers for a period exceeding three continuous months or when the suspension or reduction occurs gradual of the activities ".

The formation of Social Enterprises was foreseen in the 54th article of the Political Constitution of the State that established three modalities to create them: bankruptcy, liquidation, and abandonment. The...

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