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Micro, small and medium-sized businesses in Cuba: A smooth start

pequeñas empresasThe creation in Cuba of micro, small and medium-size businesses (MSMEs), as part of the overhauling of the economic actors has risen an intensive debate and a lot of expectations, especially in the non-state sector.

As it has was recently reported by Deputy Prime Minister and Minister of Economy and Planning (MEP) Alejandro Gil Fernández on Cuban television’s Mesa Redonda program, they are currently working at an accelerated pace in the norms that will rule the organization and functioning of these companies dedicated to the production of goods and services, conceived with legal personality, both for the state and private sector.

Regarding private MSMEs, he says “the first MSMEs will be created from the current businesses run by self-employed workers, a sector that hires a lot of workers”. In the case of state-run businesses, he explains, “we are conducting a study to see which organizations could join this experience, always with the priorities of the country as their main focus.”

“The first step is to organize what we already have,” the Economy Minister said referring to the undergoing restructuring, in a gradual manner and under the leadership of the Government, in order to “release the productive forces, lift hurdles and boost social responsibility among these economic actors.”

Meanwhile, Economy and Planning Deputy Minister Johana Odriozola Guitart, provided more details on the process of creation of the norms, in which the academy has been actively involved and they have considered the preparation of several legal provisions raging from the highest to the lowest levels of legislation hierarchy.

“Right now, we are agreeing on the basic principles of the legislation,” she says and stresses how the creation of these new actors will bring benefits in the financial and hiring order to the businesses currently in operation.

MSMEs, which will have the same management model regardless of the type of property, will take the legal form of Private Limited Company, Odriozola Guitart continues.

“It means that, unlike other countries, our norms will have a larger scope because we must regularize the characteristics of economic subjects that does not exist so far,” she underlines.

The Deputy Minister explains that the norms are directed to both state and private property, although it does not rule out the existence of joint SMEs in the future.

The purpose of these norms are to provide a smooth start without bumps or legal vacuums. Subsequently, public policies will be evaluated in order to allow a bigger contribution and integration to put talent at the service of the country’s development, the deputy minister adds.

Given the novelty of this topic in the Cuban economic landscape, the Minister of Economy and Planning noted that the ministry’s website has provided responses to some of the most frequently asked questions raised recently.

The population can submit questions on the new legal framework for these economic actors to the email address:

Presented below are several examples:

-How are businesses in Cuba classified as micro, small and medium-sized?

MSMEs in Cuba are classified according to the number of workers involved:

Micro: from 1 to 10.

Small: from 11 to 35.

Medium: from 36 to 100.

-Is the classification by number of workers used worldwide?

No, it is not. The number of workers is the most widespread criterion, but MSMEs can be classified based on other elements. The most commonly used are the volume of annual sales and the assets value.

Monetary restructuring makes it more complex to adopt billing indicators for the MSMEs in Cuba for two main reasons: the new monetary order establishes only one type of exchange rate for all economy actors and it makes impossible to compare historical records with the current conditions.

-What is understood as ‘occupied’?

In the MSMEs, it includes all natural persons who take part in the activity of the business, both as members and as employees.

-How many members can there be in an MSME?

An MSME can be formed with as many members as the company deems necessary as long as they comply with the number of occupied people established by law.

-What are the advantages of being a legal person?

It grants access to financing and more favorable financing conditions, it increases credibility and trust among the clients and increases the chances of positioning a brand in the market and makes contract relationships easier.

In the case of debts, the company can use the business equity to pay it off without affecting the personal equity of the partners and it allows to expand equity and bring in new members.

Likewise, partners and employees can have access to the same social security benefits as state employees.

-What is a Private Limited Company?

It’s a business with equity divided in social shares and composed of the contributions from the members’ personal equity. The organization of this company means there is a separation between the personal equity of the members and the social equity of the company, since the members do not have to comply with the obligations acquired by the company with their own equity, but with the equity of the Private Limited Company.

-Is social equity a must for the organization of a MSME?

The MSME should be organized with social equity that should be reflected on the organization documents. A minimum social equity is not required. The contributions of all members makes the social equity of the MSME. Social equity has three main functions:

Productivity: this function basically has an economic content, by which equity serves as capital funds to obtain profit, through the execution of the corporate purpose.

It determines the position of the member in the company as it numerically provides the percentage of its engagement.

Guarantee to creditors: as long as it is not possible to distribute profits because the company’s net worth does not exceed that amount and allows creditors to know the company’s net worth situation in order to meet their obligations.

-What is the MSME liable for its obligations and what is the scope of its liability?

The MSME is liable for its obligations to third parties with all the assets that make up its patrimony.

-What will be the bodies of the MSME?

The MSME will have the following bodies:

Board: an assembly body in which agreements related to the operation of the company are adopted.

Administrative body: responsible for the management and representation of the MSME.

Supervisory and control body: oversees compliance with the provisions of the legislation in force. It will have its attributions determined in the legal norm, without prejudice that the partners may incorporate others.

In the case of MSMEs with a single owner, it will obviously not be possible to create an assembly body. This body will include the sole partner.

(Taken from Granma)

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