Generalities

A consortium contract or agreement refers to a convention signed between two or more companies with the aim of grouping together and jointly participating in the execution of a specific business or project, determining the applicable rules and regulating the direction of this joint operation, while each party maintains its own legal personality and independence.. 

A consortium is a useful collaborative tool among companies to temporarily cooperate for the execution of a project or contract, sharing risks, assets, knowledge, experience, goods, and also the personnel from the participating entities. 

Our Commercial Code provides extensive regulation of companies, including the different types of companies, companies incorporated abroad, mergers, dissolution and liquidation of companies, obligations, and commercial contracts, among other topics. However, the Honduran Commercial Code does not regulate or mention consortiums or consortium contracts at all. 

Interestingly, despite the silence maintained by both the Commercial Code and its amendments regarding consortiums, some brief mentions regarding these agreements can be found in the Antitrust Law, Law of Public Private Partnerships, the Law for Modernization and Development of the Agricultural Sector, or the Transfer Pricing Law’s Bylaw, using terms such as“coinvestment”,”, “joint action agreements”, o ““joint ventures”.Nevertheless, the law which regulates consortium contracts on a deeper level is the Public Procurement Law and its Bylaw. 

A Consortium Contract bears great similarities to the Joint Venture Agreement (JV)which has its origins in common law, and is widely used in the United Kingdom and the United States of America. Through a Joint Venture Agreement, also known in Spanish as“contrato de empresa conjunta,” two or more companies agree to collaborate and make common efforts to develop a project, while both maintain their own legal personality and independence. Conceptually, in general terms, there is no noticeable difference between the two legal figures, particularly in our country where both are treated as atypical or unnamed contracts. However, in certain jurisdictions, legislation has determined that a “joint ventures”. is a figure used to develop projects of a commercial or merely private nature, while the consortium is essentially used for the execution of public contracts. consortium is essentially used for the execution of public contracts.  

In this regard, the Public Procurement Law limits itself to indicating that interested parties in participating in a public procurement process may submit their bids in a consortium, without this implying the creation of a differentThe regulations of this law indicate that a consortium is is understood as the temporary union of companies that, without constituting a new legal entity, organize to participate in a public contracting procedure, and if awarded, to sign and execute the contract, with the rights and obligations that this entails, including potential liabilities towards third parties.. 

In the absence of commercial regulation, the administrative regulation has established that, within the Honduran legal framework, consortium contracts are a legal figure to be used so that multiple companies can jointly participate in a public procurement process without the need to form a new commercial company.  

Requirements

The participation of companies in public contracting processes in Honduras requires the following conditions:

• Signing of a consortium contract or agreement between the parties, which can be signed on plain paper, as it does not require a public deed. This agreement must include:
  • The object of the consortium. 
  • The obligations of the parties integrating the consortium. 
  • The participation of the parties within the consortium. 
  • Regulation of the consortium's relationship with the procuring state authority. 
  • The determination of a representative, who will exercise the representation of the consortium.
  • The duration of the consortium, which will be at least the time necessary for the execution of the public contract until its completion. 

Additionally, the companies that make up a consortium must demonstrate their own economic and financial solvency, as well as technical and professional suitability. We emphasize that, by express mandate of the Public Procurement Law, the companies that form a consortium will be jointly responsible before the Public Administration. 

In cases of public procurement, it is essential that, in addition to the content of the Law and the Regulations, special requirements or requests that may be contained in the procurement documents for the contracting process in question are taken into account. 

Registration and Record

The Public Procurement Law and its Bylaw do not require that consortium contracts or agreements be formalized in a public deed, as they can be signed on plain paper, nor do they require that they be registered with a Public Registry (with the Mercantile Registry being the most relevant in this case). 

However, both for publicity effects and greater solemnity and enforceability, it has been common (and permitted) for these agreements or contracts to be made in a public deed authorized by a Notary Public and for the same to be registered within the registral records of the companies making up the consortium. 

Despite the fact that the public registration of these contracts could result in utility, benefit, publicity, and reinforced legal certainty for both the signing parties, as well as for the Public Administration and even third parties, currently, the registration of Consortiums has faced opposition from certain Mercantile Registries for not considering them a registrable document according to the Property Law and its Bylaw. The previous argument is based on the fact that a Consortium Contract is not listed among the contracts and legal relationships registrable under Article 170, numeral 2 of the Property Law Bylaw, despite the fact that the Property Law establishes that registration to be done by request (of a party) for acts and contracts that according to the interest of the parties, request their registration to secure and publicize their rights against third parties. 

Concerning taxation, our Tax Code does not specifically regulate Consortium Agreements. However, our Tax Code does include the figure of“de facto companies”, categorizing them as passive subjects or taxpayers. In application of this rules, Consortium Agreements have been permitted to obtain their inscription within the National Tax Registry and to obtain their tax ID, for purposes of filing tax returns and paying such taxes and allowing them to obtain fiscal solvencies, which are necessary in public procurement processes. . 

Conclusions

Consortium contracts and joint venture agreements “joint ventures”. are very useful figures for cooperation between companies to achieve common goals or objectives, with each contributing necessary elements to satisfactorily develop the same. In the case of Honduras, both figures lack regulation in our commercial legislation, with a brief regulation of consortium contracts in the Public Procurement Law.  

However, this scant regulation allows parties to regulate their commercial relationship primarily based on the principle of autonomy of contractual will, thereby providing a great deal of latitude for the parties to regulate their legal relationship with the conditions they deem appropriate, with the Public Procurement Law determining some rules applicable only if bidders in public procurement processes decide to participate through a consortium. 

(1)  Artículo 17, Ley de Contratación del Estado.

(2)  Artículo 31, Reglamento de la Ley de Contratación del Estado. 

 (3) Artículo 25, Ley de Propiedad.