, Collaborative Synergy: A Legal and Strategic Analysis of Business Consortiums in The Dominican Republic

Collaborative Synergy: A Legal and Strategic Analysis of Business Consortiums in The Dominican Republic

In the evolving global commerce landscape, business consortiums have become essential for collaborative, temporary ventures in the Dominican Republic. Consortiums preserve the autonomy of participating entities while uniting them towards shared objectives and resource pooling. They are legally defined as “contracts used by two or more entrepreneurs, whether natural persons or legal entities, engaged in similar or complementary economic activities”. The goal is to create a shared framework that strengthens the business capabilities of its members, enabling them to undertake projects that would be challenging to accomplish on an individual basis.

The country regulates consortiums through common law norms and supplementary regulations. Article 1832 of the Dominican Republic Civil Code defines a consortium as a partnership embedded in a contract “by which two or more people agree to put anything in common, with the sole purpose of sharing the benefit that may result from it”. Parties must represent these arrangements in writing, and could be project-oriented, focusing on singular initiatives. Consortiums should serve a lawful purpose, being an association contracted in the common interest of the parties, and their associates would contribute money, goods, or their industry.

The General Law of Commercial Companies and Limited Liability Individual Enterprises (Law No. 479-08) further acknowledges the figure of “accidental or partnership entities”, and its description aligns with what is commonly recognized as a consortium. “Accidental or partnership entities constitute a contract by which two or more persons who are merchants take an interest in one or several specific and temporary commercial operations, which must be executed by one of them in their own name and under their personal credit, with the obligation to account and divide among their partners the profits or losses in the agreed proportion. These entities do not have legal personality and a name, assets, and social domicile. They will not be subject to formal requirements or registration and may be proven by all means.”

The lack of legal personality in consortiums raises questions about their ability to contract, assert rights, and execute dispositional acts. This is compounded by the absence of exclusive legislation governing them. Article 150 of Law 479-08 clarifies that third parties acquire rights and assume obligations about the consortium’s manager, the business’s sole owner in external relations.

Law 322 of 1981 stipulates that a foreign person must be associated with a national company or a mixed capital company to participate in contests, lotteries, or any other form of award. This piece of legislation is the leading promoter of consortiums.

The tax regime for consortiums is outlined by Article 2 of the General Direction of Internal Taxes (“DGII”), General Norm No. 05-2009, issued on March 31st, 2009, stating that all companies and commercial entities recognized in Article 3 of Law 479-08 are considered legal persons, while Paragraph I of the aforementioned Article 3 acknowledges the accidental entity as a commercial entity, which means that this type of entity is assimilated to those considered as legal entities. Article 16 of the norm in question says: “Obligation of an RNC. The accidental or participation entities will have an RNC independent of that of each of the Legal or Natural Persons that comprise it. They must separately comply with all the fiscal obligations established in the Tax Code, Regulations, and General Norms applicable to a legal person, including the payment of the tax on assets.”

To register in the “State Registry of Suppliers”, the General Directorate of Public Procurement (“DGCP”), in its resolution 72/2013, Article 1, stipulates that any submission will require, among others, “the original notarial act by which the consortium is formalized, including its purpose, the obligations of the parties, its duration and the capacity of exercise of each member of the consortium, as well as their general information.”

The formation of a consortium is strategically motivated by the desire for resource optimization and enhanced market reach. It enables smaller Dominican firms to collectively access markets and opportunities beyond their capacity. However, the success of consortiums hinges on their governance. Melissa Silié, in her article “Consortium and their regulation in the Dominican Republic”, emphasizes that effective decision-making processes, transparent operational policies, and equitable resource distribution are essential to prevent conflicts, which derived from the dispersed legal framework of the consortiums.

Business consortiums in the Dominican Republic represent a sophisticated and increasingly essential approach to collaborative enterprise. Their efficacy hinges on a delicate equilibrium of strategic alignment, legal compliance, and robust governance. As the Dominican market continues to integrate into the global economy, these consortiums are poised to play a central role in its commercial and economic progression.

 

Article written originally for American Bar Association Newsletter, by:
Alfonso Lomba Jiménez
Partner
República Dominicana

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