<typohead type="4">CHILEAN CORPORATE ORGANIZATIONS</typohead>
The three most important legal forms of business entities in <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />Chile are:
1. Limited liability company ("LLC"), in Spanish "sociedad de responsabilidad limitada".
2. Stock corporation ("SC"), in Spanish "sociedad anónima".
3. Registered branch of a foreign stock corporation ("Branch"), in Spanish "Agencia".
1. Limited Liability Company
An LLC is formed by the execution of the charter agreement between the partners by public deed before a Chilean Notary Public. The formation process takes approximately 15 days from the execution of the public deed. Foreign partners have to appear with the corresponding powers of attorney duly legalized up to a Chilean Consul. The main characteristics of a LLC are the following:
· There must be at least two partners who may be either Chilean or foreign, individuals or companies.
· The liability of the partners is limited to the amount of their capital contributions.
· No minimum capital is required;
· The timing for capital contributions is fixed in the charter agreement; and
· The rights of the partners are personal and as such cannot be incorporated in negotiable titles.
There is a great flexibility in the provisions that can be included in the charter agreement. The establishment of a LLC requires no governmental approval and LLCs are not supervised by any state entity aside from the Internal Revenue Service. Financial statements of LLCs are not published.
The public deed that creates a LLC must express: (1) the name and domicile of the partners; (2) the name and purpose of the LLC; (3) the system of management; (4) the amount of capital contribution and form of payment of each partner; (5) the liability of the partners limited to the amount of capital contributions; (6) the form of distribution of profits and losses; (7) the date when the LLC is to begin and end; (8) liquidation and arbitration procedures; (9) the domicile of the company. An abstract of the public deed is registered in the Registry of Commerce and published in the Official Gazette. LLCs are denoted by the words "Limitada" following the firm name. The name of the LLC has to make reference to the purpose of the company or include the complete name of one or more of its partners.
Management responsibilities are shared by all partners or by managers selected by the partners. The management of the LLC is basically done by a general manager that should be a resident in Chile who is appointed by the partners or the managing partner. The partners make the appointment through a power of attorney that lists all the faculties with which he is entrusted. The general manager may be removed by the partners or by resignation. LLCs do not require board of directors or shareholders meetings.
2. Stock Corporations
SCs are classified as open or closed corporations. Open SCs are those that: (a) have 500 or more shareholders; (b) where at least, 10% of the capital subscribed belongs to a minimum of 100 shareholders, excluding those that individually, or through other natural or juridical persons, exceed such percentage; and (c) are registered in the Registry of Securities voluntarily or in fulfillment of a legal provision. Closed SCs are those corporations which do not fulfill any of the above requirements. However, closed SCs may voluntarily fulfill the obligations of open SCs.
Open SCs are registered at the National Securities Registry and are supervised by the Superintendency of Securities ("SVS"). Closed SCs are not subject to control by the SVS. Financial statements of closed SCs are not published.
SCs are formed without special government authorization, except for SCs dedicated to the management of pension funds, banking, insurance, mutual funds, and stock exchanges. Both open and closed SCs have to be organized by two or more shareholders. Shareholders can be non-resident foreign, individuals or companies. Shareholders' liability is limited to capital contributions made or promised to the SC.
SCs are governed by the corporate charter ("Estatutos") contained in the public deed of incorporation, having been duly executed before a Notary Public in Chile. An abstract is published in the Official Gazette and registered in the Registry of Commerce.
Under Chilean law there is no distinction between articles of incorporation and by-laws. The corporate charter must basically state: (1) the initial shareholders; (2) the name and domicile of the SC; (3) the corporate purpose; (4) the duration, if any, of the SC (SC can have indefinite duration); (5) capital of the SC; (6) manner of payment of capital; (7) assessment of all contributions other than in money; (8) the board of directors or appointed officers; (9) the time and process for calling Regular or Special Shareholders Meetings; (10) the method for the distribution of profits; (11) liquidation procedure and dispute resolution; (12) the time for the receipt of balance sheets. Foreign companies should grant powers of attorney to form the SC. The formation process takes approximately 15 days from the date of the execution of the corporate charter.
The capital of the SC must be determined in the corporate charter and may be increased or reduced by amending the charter. Shares have no fixed par value. Both capital and value of the shares automatically change with the approval of the balance sheet for each fiscal year. The initial capital must be fully paid within three years. Bearer shares are not authorized; preferred shares may be issued upon fulfillment of certain conditions. Except by unanimous consent, open SCs must distribute profits of no less than 30% of the total net profits. However, closed SCs may expressly adopt another rule in the corporate charter. Shareholders have preemptive rights.
The board of directors manages the SC. The board is elected in Regular Shareholders Meetings where the shareholders may be represented by proxies. The board consists of a minimum of three directors in closed SCs and five directors in open SCs. Directors do not need to be shareholders and can be foreigners. The law does not sanction the lack of attendance to board meetings.
Duties of directors cannot be delegated, though alternate directors can be appointed. Directors must be physically present to participate in board meetings. Directors must exercise their duties with the care and diligence that individuals ordinarily use in their own business ...
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