Foreign Investment Regime
The legal entities most commonly used in Peru to carry out commercial activities are the corporation and the limited liability company. However, the branch office is another useful legal form used by foreign businesses.
There are two types of corporation: the closely-held corporation and the openly-held corporation.
A closely-held corporation has the following characteristics:
- It has no more than 20 shareholders;
- Its shares are not registered in the Stock Market Public Registry;
- It may or may not have a board of directors (ie, this is optional); and
- The shareholders have a preemptive right with regard to share transfers (unless the articles of incorporation provide otherwise).
A corporation is considered to be openly held if any of the following events occur:
- The corporation publicly offers its shares or its liabilities which are convertible into shares;
- The corporation has more than 750 shareholders;
- More than 35% of its capital belongs to at least 175 shareholders;
- The corporation is incorporated as openly held; or
- All the shareholders with voting rights unanimously approve to become an openly-held corporation.
Generally, the articles of incorporation and bylaws may not limit the free transferability of shares or restrict stock negotiations, nor may they give shareholders the preferential right to buy shares when shares are transferred. There are certain exceptions to this rule.
All of a closely-held corporation's shares (with certain limited exceptions) should be registered in a public registry and are therefore subject to the control of the National Commission of Companies.
Limited liability company
A limited liability company is very similar to a closely-held corporation, but has the following additional traits:
- Its capital is divided into participations of equal value (ie, not shares of stock);
- The transferability of a partner's participation to his heirs upon his death may be restricted by the company's bylaws (ie, the other partners may be given the right to buy them); and
- Partners' participations are not freely transferable to third parties, that is, the other partners have a preemptive right to purchase them. If none of the partners exercises this right the company may purchase and amortize them, and thereby reduce the capital.
A foreign branch of a company can be established in Peru by public deed which must be registered at the commercial registry. The public deed must contain at least the following:
- a document certifying that the main office in its country of origin is currently active and neither the bylaws nor the articles of incorporation contain any restriction on establishing a foreign branch;
- a copy of the by laws or partnership agreement; and
- the agreement by the competent corporate body to establish a foreign branch, which must state, among other things, the capital assigned to the foreign branch and the dimicile of the foreign branch.
Peru's foreign investment regime is mainly governed by two laws, both of which are regulated by Supreme Decree 162-92-EFC of October 12 1992.
The Foreign Investment Promotion Law (Legislative Decree 662 published on September 9 1991) creates mechanisms to guarantee foreign investors tax and legal stability, availability of foreign currency and non-discriminatory treatment. It was enacted to stimulate the flow of foreign investment.
The Framework Law for Private Investment (Legislative Decree 757 published on November 13 1991) contains provisions to stimulate private investment, including the elimination of all legal and administrative barriers that restrict free private initiative. This law also includes provisions that protect investors from arbitrary changes to taxation policy.
All economic activities are open to foreign investment with no restriction on the amount of participation of foreign investors. Foreign investors' rights are the following:
- Foreign investors have the same rights as nationals and enjoy equal legal status with these and with the state;
- Foreign investors may acquire shares, participation or property rights from Peruvian nationals;
- Foreign investors may remit in foreign currency the entire amount of their profits after deducting the relevant taxes and dividends;
- Foreign investors may remit the entire capital in foreign currency;
- Although remittances of foreign currency must be carried out through the banking system, no government permission is required; and
- Foreign investors have access to unlimited short, medium and long-term internal credit.
For further information on this topic please contact Jose Antonio Olaechea at Estudio Olaechea by telephone (+51 1 264 4040) or by fax (+51 1 264 4050) 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.