Distribution, Agency and Representation Agreements in Honduras

The Civil and Commercial codes, Supreme Decree 549, Official Register (LA GACETA) No.: 22366 of 07 December 1977 govern the principal-distributor or agent relationship in Honduras. The Law is entitled "Law of Agents, Distributors and Representatives of National and Foreign Enterprises," which as often happens in other Central and South American countries, is very protectionist to the interests of the local (Honduran) distributor or agent. Please note that to take advantage of the provisions of the above Law, the distributor or agent must be registered as such before the Ministry of Industry and Commerce.

The main provisions established in the said Statute which benefit the local firms are:

1. The Distributor must be a Honduran Company (51% of the stock must rest in the hands of Honduran Citizens). If the distributor is not a Honduran company then it cannot register itself as a distributor of foreign firms and it would not be entitled to the protection of this Law.

2. The grantor cannot refuse to renew or unilaterally terminate the contract without a "JUST CAUSE." If it does, then it is subject to paying pecuniary compensations, which may be very high.

3. The...