Financial Crime World

Guatemala’s Business Environment: Understanding Management Restrictions, Environmental Regulations, and Employment Laws

When considering establishing a business in Guatemala, it is essential to understand the country’s regulatory landscape. In this article, we will delve into key areas such as management restrictions, environmental regulations, and employment laws to provide insight for businesses looking to operate in Guatemala.

Management Restrictions

Guatemalan law allows up to two foreign managers to be appointed without authorization from the Ministry of Labor. However, if more foreign managers are needed, the company must demonstrate that the skills or expertise of the foreign manager are not available in Guatemala. Additionally, the number of foreign workers in any company cannot exceed 10%.

  • Shareholders have the power to restrict the powers of company managers through bye-laws or resolutions at shareholders’ meetings.
  • Bona fide third parties can rely on the company’s legal representatives as having the requisite power and authority to act and bind the company in matters within the ordinary course of business.

Directors’ and Officers’ Liability

Guatemalan law holds directors and officers liable for any damages caused intentionally or through negligence. They are also responsible for ensuring that the company’s accounting system is accurate, capital contributions are made on time, and dividends are distributed based on real profits.

  • Directors and officers must disclose any personal interest in a matter before the board or their office and excuse themselves from voting if necessary.
  • They are subject to fiduciary duties and cannot engage the company for their own account or delegate their responsibilities.

Environmental Regulations

Guatemala’s main environmental legislation includes:

  • The Environmental Protection and Improvement Act
  • The Protected Areas Act
  • The Regulation for Environmental Evaluation, Control, and Monitoring

The country requires an Environmental Impact Assessment (EIA) for all projects that could potentially damage natural resources or the environment. Separate environmental permits are required depending on the activity, and businesses must comply with regulations regarding:

  • Waste management
  • Water quality
  • Air pollution

Employment Laws

Guatemalan employment laws require written employment contracts, which must include:

  • The object of the services
  • Manner of providing the services
  • Time for their realization

Employers must also provide a copy of the contract to the competent division of the Ministry of Labor. Implied terms in employment contracts include:

  • Automatic inclusion of employee benefits such as 12 monthly salaries per year, plus mid-year and Christmas bonuses
  • 301 working days per year, not including public holidays

Foreign employees need work permits to work legally in Guatemala, which requires the employer to declare that the employee will be hired on the granting of the permit. However, it is essential for businesses to note that employment contracts must comply with Guatemalan law and cannot relinquish or renounce benefits already established by law, convention, or custom.

Conclusion

Understanding Guatemala’s management restrictions, environmental regulations, and employment laws is crucial for businesses looking to establish themselves in the country. By complying with these regulations, businesses can minimize risks and ensure a successful operation in this Central American nation.