Registration and Supervision
Supervision of Shareholders Meetings
This update addresses the procedure for the registration and supervision of corporations and limited liability companies pursuant to Decree 14,122 of July 31 2001.
Corporations and limited liability companies are the most common legal entities for doing business in Paraguay.
Corporations are a unique form of business organization offering public share subscriptions. They must have a minimum of two shareholders, who are liable for the company's debts in proportion to the limits of their investments.
Limited liability companies are more simple entities that are most commonly used for small businesses. As with corporations, the liability of members is limited and the entity is legally distinct from the quota holders. The company's losses may not be offset against quota holders' personal assets.
The legal status of both types of entity is acquired through registration of the company bylaws in the Public Registry of Legal Persons and the Public Registry of Commerce. Registration must be ordered by a first-instance civil or commercial judge, and the permission of the Treasury Office of the Ministry of Finance is required in advance.
The Treasury Office's Department of Registration and Supervision of Companies (DRSC) studies the charter documents of companies and supervises compliance with all legal provisions concerning shareholders meetings.
The DRSC assesses whether a company's bylaws accord with the provisions of the Civil Code, specifically in terms of:
- the name, nationality, status, profession and domicile of the shareholders, and the number of shares paid in by each of them;
- the company's name and address, and those of intended branches in Paraguay and abroad;
- the company's purpose;
- the amount of issued and paid-up capital;
- the face value and number of shares, and whether they are registered or bearer;
- the value of assets contributed;
- the rules by which the company's profits will be distributed;
- the founding shareholders' or incorporators' share of the company's profits;
- the number of managers and their powers, with an indication of those who will represent the company; and
- the length of time that the company is likely to be business.
If the dissolution or cancellation of a company's legal status is petitioned, a notarized copy of the minutes of the relevant shareholders meeting must be submitted to the Treasury Office.
When the issue of dissolution arises, the Treasury Office must consider whether a company's files comply with the applicable legal provisions and whether the necessary fiscal and municipality contributions have been paid.
Once the analysis of a company's files is concluded, the DRSC submits its legal opinion to the Treasury Office for further remittance to the corresponding judicial court and registry.
Within 10 days of registration a company must submit the following to the DRSC:
- its bylaws, duly legalized and registered;
- its opening balance sheet, as certified by the tax authority; and
- a petition of registration.
Companies must give the DRSC 10 days' advance notice of any shareholders meeting, with an indication of the nature of meeting and its date, time, location and agenda.
Supervision of Shareholders Meetings
The DRSC supervises regular and special shareholders meetings. Supervision is carried out with particular emphasis on:
- whether a company's books comply with the applicable commercial laws;
- whether the required deposit of the shares for attendance is made;
- whether the amount of the issued, subscribed and paid-up capital is correct;
- the existence of the right quorum and voting rules; and
- compliance of all legal formalities in general.
The minutes of the shareholders meeting must detail:
- the names of the shareholders present (or their representatives);
- the amount of shares deposited;
- the votes conferred by the quorum;
- an analysis of each item on the agenda and the resolutions adopted; and
- the number of votes for each resolution.
The commissioning officer of the DRSC shall submit a report to the Treasury Office regarding these issues.
Within 30 days of a shareholders meeting companies must submit the following to the DRSC:
- the minutes of the meeting and a report of the board of directors;
- a balance sheet certified by the tax authorities;
- a note of the fiscal deposit regarding publication of the board's report; and
- the minutes of the special shareholders meeting, if one has taken place.
If a company's annual shareholders meeting is not held the DRSC may order it to take place and may submit a report to the Treasury Office indicating measures to protect the company's fiscal interests, as well as those of shareholders.
Within 10 days of registration of their bylaws the branches and agencies of foreign companies must submit the following to the DRSC:
- the duly legalized and registered bylaws;
- a power of attorney, granted to the local agent and duly registered;
- the opening balance sheet, certified by the competent authorities; and
- a letter detailing the above documents.
For further information on this topic please contact Luis Breuer at Berkemeyer Attorneys and Counselors by telephone (+595 21 446706) or by fax (+595 21 449694) or by email ([email protected]). The Berkemeyer Attorneys and Counselors website can be accessed at www.berke.com.py.