Corporations are managed by a board of directors and their designated officers, except for the authority reserved to the shareholders meeting. Board members are appointed at the shareholders meeting in a single election, during which shareholders may accumulate their votes in favour of a single person or distribute them among different persons. Those who obtain the highest number of votes are elected as directors. The minimum percentage of shares required to elect a director generally depends on the number of members of the board of directors. In the case of an open corporation, at least five board members are required.
According to the Corporation Act, the meeting of the board of directors of a corporation shall take place with at least the majority of the directors in office. Resolutions shall be adopted with the majority of directors attending the meeting. In the event of a deadlock, the director chairing the meeting shall have the casting vote.
Each shareholder is entitled to request sufficient, reliable and timely information from the directors in respect of the legal and financial affairs of the company. The directors shall be jointly and severally liable to the company, the shareholders and to third parties for damages caused by non-compliance with the Corporation Act.
The board of directors annually submits the following for the approval of shareholders:
- the balance sheet;
- the profit and loss statement;
- the auditors' report; and
- a report containing a substantiated analysis in respect of the company for the last fiscal year.
In the case of open corporations, the latter report includes a summary of comments and proposals related to the progress of the company's business by holders of 10% or more of the issued and outstanding voting shares. These shareholders are also entitled to request that the board of directors summons the shareholders to a regular or special meeting, provided that they indicate the matters to be submitted for shareholder approval. The meeting should take place within 30 days of the request.
The quorum for a shareholders meeting shall be the absolute majority of the issued voting shares. However, if a second meeting must be convened due to lack of quorum, it shall take place with any of the holders of voting shares in issue who attend. Resolutions at a regular shareholders meeting (to be held annually within four months following the end of each fiscal year) shall be adopted by the absolute majority of the attending shareholders.
Resolutions for the following may be adopted only at special shareholder meetings.
- issuing securities that are exchangeable for the company's shares;
- selling the company's assets and liabilities;
- creating a surety or lien to secure obligations of third parties other than the company's subsidiaries;
- dissolving the company;
- converting, dividing, merging or consolidating the company;
- approving equity capital contributions other than cash contributions; and
- amending any of the company bylaws.
Resolutions shall be adopted by the absolute majority of the attending shareholders, except where the law requires a higher quorum. The act requires a quorum of at least two-thirds of the voting shares in issue of a corporation for matters listed in Article 67, namely:
- the conversion, division, merger or consolidation of the company;
- any amendment to the life term of the company;
- the dissolution of the company;
- any changes to the company domicile;
- the reduction of the equity capital;
- the approval of equity capital contributions other than cash contributions;
- any change of the authority vested on the shareholders meeting or limitations imposed on the authority of the board of directors;
- the reduction of the number of board members;
- the sale of the assets and liabilities of the company;
- a change in the manner in which profits or other benefits are distributed; and
- any other matters contained in the company bylaws.
In closed companies, shareholders who dissent from certain major transactions have the right to be bought out at book value. In open companies, the right to be bought out shall be exercised at market value. The transactions that give rise to this appraisal right are:
- the conversion, merger or consolidation of the company;
- the sale of the assets and liabilities of the company;
- the creation of preferences, or the increase or reduction of preferences already given, provided that only the holders of the preferred stock affected by the adopted resolution may be bought out by the company; and
- any other transaction contained in the company bylaws.
Finally, a corporation may distribute at least 30% of the net profits of the company as dividends for the fiscal year without the consent of all shareholders, provided that there are no accumulated losses.
For further information on this topic please contact Eduardo Puigrredon at Claro y Cia by telephone (+56 2367 3000) or by fax (+56 2206 3000) or by e-mail ([email protected]).
The materials contained on this web site are for general information purposes only and are subject to the disclaimer.