On March 15, 2023, the reform to the Companies’ Act for Optimization and Entrepreneurial Development and for the Promotion of Corporate Governance was published in Official Supplement No. 269, whose main reforms we detail below:
• Company in formation: This concept is introduced, granting it to companies whose bylaw has already been issued or executed, but is not yet registered in the Commercial Registry or Registry of Companies. Those who have contracted on behalf of such companies will be personally, jointly, and severally and unlimitedly liable for the fulfillment of the obligations undertaken.
• Unipersonal Foundation: All companies regulated by the Companies Act can be incorporated by a sole founder, whether is an individual or company, through a unilateral contract.
• Corporate acts by private contract: All companies regulated by the Companies’ Act can be incorporated and executed all corporate acts by private contract unless the contribution of real estate is involved in the incorporation or when the law requires this formality.
• Contribution for incorporation: The contribution of pledged or mortgaged property (including real estate with an open mortgage), credit rights, companies, and establishments is permitted and regulated.
• Additional obligations: Supplementary contributions, consisting of obligations to provide money, and accessory performances, which may be obligations to provide goods, provide services, or not to perform certain actions, may be established in the bylaws.
• Liability limits of partners and shareholders: Partners and shareholders shall not be liable for the labor, tax, or any other obligations executed by the company.
• Directors’ liability: Company directors shall not be liable for labor, or any other obligations executed by the company. As for tax obligations, the provisions of the tax law shall apply.
• Minority shareholders: Shareholders who own the 5% of the share capital may request the addition of one item to the agenda for each shareholder meeting. Shareholders representing at least 10% of the share capital may request the installation of the general shareholders’ meeting to address matters they consider relevant.
• Motion of appeal: Any shareholder may object the resolutions adopted by the shareholder meeting or by the management bodies that harm the interests of the company for the benefit of one or more shareholders.
• Information request prior a meeting: Tree days prior to the scheduled meeting, shareholders may request from the directors any information or clarifications they deem necessary regarding the items on the agenda. The directors shall be obliged to deliver the information up to the day before the meeting.
• Access to information: Shareholders or partners shall have unlimited access to all information on the company, including financial statements, reports from management and supervisory bodies, recordings of meetings, lists of shareholders or partners, and reports on matters discussed or to be discussed.
• Oppression action: Minority shareholders may request a legal action against the majority shareholders who have engaged in a detrimental conduct to their rights.
• Non-compete of directors and shareholders: Directors shall not appropriate business opportunities or engage in operations that compete with the company they manage without authorization from the shareholder meeting. Likewise, shareholders may stipulate by agreement or by a statutory provision that they shall not participate in acts or operations that involve competition with the company. The reforms regulate actions for shareholder liability.
• Conflicts of interest: Directors shall not execute any acts or transactions that represent a conflict of interest without authorization from the shareholder meeting.
• Exception of meetings in unilateral companies: Unilateral companies do not require the holding of meetings or assemblies. The decisions of the sole shareholder shall be recorded in documents signed by the shareholder and filed in the company’s books.
• Share pledge: Pledging of shares is allowed if there is unanimous consent of the share capital.
• Shares in trusts: Corporate shares may be held in a business trust, provided that the trustee is registered in the Book of Shares and Shareholders.
• Legal reserve: The legal reserve is not mandatory in the bylaws for simplified stock companies; however, the shareholders may constitute optional or statutory reserves.
• Anticipated dividends: Simplified stock companies may deliver quarterly or semi-annual dividend advances to their shareholders, prior to the authorization of the shareholders’ meeting.
• Corporate veil lift: The definition and procedure of the corporate veil is established.
• Companies of Collective Benefit and Interest (BIC. for its acronym in Spanish): If for 5 consecutive years the company has generated a positive social or environmental impact, the company will have: i) Priority in public procurement processes when there is a price parity with the offer of other participants; and, ii) A 50% reduction in the payment of corporate contributions to the Superintendence of Companies, Securities and Insurance.
• Mergers: 3 types of mergers are recognized; i) Abbreviated merger; ii) Fully-owned merger; and iii) Reverse merger.
• In the case of an abbreviated merger, it is recognized that the absorbing company will automatically subrogate any enabling title, license, property titles, operating permits that have been issued to the absorbed company.
• Company spin-off: 3 types of spin-offs are recognized: i) Total spin-off: Total liquidation of a company whose assets are divided into two or more parts; ii) Partial spin-off: Transfer of one or several parts of the assets to one or several newly incorporated or existing companies; iii) Spin-off by segregation: Transfer in block of one or several parts of the assets of a company in exchange for shares, participations or quotas of the beneficiary companies.
• Expedited cancellation: When a company has no pending obligations before the Superintendence of Companies, Securities and Insurance, it may request that the company be dissolved, liquidated, the share capital be adjudicated, and it be cancellated.
• Simplified liquidation: To access this process, a liquidation plan may be presented, in which the time and the sale of assets must be determined.
• Business group: It is determined that business groups are: i) Vertical or subordinate: Those whose parent company directly or indirectly holds control over other subsidiaries; ii) Horizontal or coordination: They are formed by companies subject to the same unit of decision.
This publication contains general interest information and does not constitute legal opinion on specific matters. Any particular analysis will require legal advice from the Firm.