Several types of company structure are available in Chile. The majority of commercial companies are established as:
- limited liability companies (Limitadas or Ltda);
- public or privately owned corporations (sociedad anónima or SA);
- joint stock companies (sociedad por acciones or SpA); and
- individual limited liability companies (empresa individual de responsabilidad limitada or EIRL).
These companies provide for a limitation of liability of members or shareholders.
In general, at least two members or shareholders are required to form a company. However, joint stock companies and individual limited liability companies can be formed by one individual. Joint stock companies can be formed by another legal entity.
The traditional way of establishing a company requires granting a public deed before a notary public. An abstract containing the basic details of the new entity as they appear in the public deed must be registered with the Registry of Commerce of the jurisdiction in which the company is domiciled and published online in the Official Gazette.(1) The registration and publication must take place within 60 days of the date on which the public deed is notarised (or within 30 days for joint stock companies). Similar requirements apply for establishing a branch of a foreign company.
In practice, copies of the registration published in the Official Gazette, the abstract signed by the notary and the copy of the public deed registered with the Registry of Commerce are filed with a notary. However, this is not a legal requirement for the new entity to exist.
The law requires that a company's name must include the type of entity (ie, Ltda, SA, SpA or EIRL). The names of limited liability companies must include a reference to the business that the company carries out or the name of one of its founders. The names of individual limited liability companies must contain both references. There are no requirements regarding the names of corporations or joint stock companies.
No centralised database of legal entities exists, so in practice two companies could have the same name. Under the Commercial Code, if two joint stock companies have the same name, the older company has the right to request the second company to change its name. However, there is no general legal provision for the protection of the names of entities.
All legal entities must have starting capital, but there is no minimum capital requirement or obligation to pay in a part of this capital when an entity is established. Corporations must pay back capital investment within at least three years. For joint stock companies the timeframe should be defined by the incorporator; if no specific period is mentioned, this term is understood to be five years.
The law requires that all shares must be nominative; fractional shares are not permitted. Limited liability companies have no shares, but membership interest is represented in a percentage of capital. There is no minimum holding or interest requirement for companies that must have at least two members or shareholders (eg, there can be 99.99% participation of one member and 0.01% participation of the minority member or shareholder).
For limited liability companies, individual limited liability companies and joint stock companies, the incorporator will define the company's administration and the powers of management. Limited liability companies must be managed by at least one member or a board of directors. A person with no membership interest in the company cannot be appointed as manager or administrator. This limitation can be circumvented by appointing a manager with a membership interest, who in turn may appoint delegates to manage the company's business.
Corporations must be managed by a board of directors comprising at least three company members for privately owned companies and five members for public companies. Board members have no authority to represent a company per se. The board must grant powers to specific persons to manage the entity's business.
Corporations and joint stock companies are governed by majorities defined in the company's bylaws and under company law. A two-thirds majority of issued shares is required to amend a company's bylaws. The bylaws of limited liability companies can only be amended by unanimous consent of all members, no matter how minimal the participation of minority members may be.
All types of legal entity must define one or more specific business activities that they will undertake. Certain regulated businesses can only be undertaken by corporations (eg, insurance, banking and pension funds).
All companies must have a domicile (ie, the county of registration). If the bylaws or articles of incorporation do not state a domicile, the company will be considered to be domiciled in the county in which the public deed of establishment was granted. A company's domicile defines the jurisdiction in which it will be registered with the Registry of Commerce. There are registrars of commerce in most major cities. Generally, the Registry of Commerce is held by real estate registrars; there is no centralised public database.
In order to carry out business activities, a company must declare the start of its business activities and obtain a tax registration number from the tax authorities. To obtain a tax number a company must appoint a representative before the tax authorities who must be a Chilean resident (either a Chilean national or foreign resident with an appropriate working visa) with a physical address in Chile (post office boxes are not accepted).
For further information on this topic please contact Santiago Montt Vicuña at Montt y Cia SA by telephone (+56 22 233 8266) or email (firstname.lastname@example.org). The Montt y Cia SA website can be accessed at www.monttcia.cl.
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