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Sources of corporate governance rules and practices

Primary sources of law, regulation and practice

What are the primary sources of law, regulation and practice relating to corporate governance? Is it mandatory for listed companies to comply with listing rules or do they apply on a ‘comply or explain’ basis?

The main statutes applicable to corporate governance are:

  • Law 18,045 (Securities Act);
  • Law 18,046 (Corporations Act);
  • Decree 702 of Ministry of Hacienda, 2011, Rules of Corporations Act (Rules);
  • Decree Law 3,538, Securities and Insurances Superintendence (SVS) organic law; and
  • Law 21,000, Financial Market Commission (CMF) organic law.

Additionally, the SVS issued the General Rule Number 385, dated 8 June 2015 (GRN 385), which obliges listed corporations to annually inform the SVS and the general public about the corporate governance, social responsibility and sustainable development practices adopted by them under a ‘comply or explain’ scheme.

Likewise, other regulations regarding corporate governance have been issued by several institutions for the specific entities they oversee:

  • in 2008, the Superintendence of Pensions issued special norms on the matter, applicable to Private Pension Fund Administrators;
  • in 2011, the SVS issued the General Rule Number 309, stating the corporate governance principles for insurance and reinsurance companies;
  • in 2013, the Superintendence of Banks and Financial Institutions introduced certain matters of corporate governance in its Updated Rules Digest;
  • in that same year, the Health Superintendence issued a circular letter applicable to private health insurances (isapres); and
  • the Social Security Superintendence has also issued circular letters, in relation to Family Welfare Funds (2015) and Mutual Benefits Societies of Employees (2017).

As a general rule, listed companies shall comply with all listing rules. However, GRN 385 follows the ‘comply or explain’ principle, meaning that listed companies are not obliged to comply with all practices included in the GRN 385, but to inform which practices have been adopted and how they have been implemented or to explain why a practice is not suited for or desirable to the company interest given its reality.

Finally, this chapter refers to corporate governance general rules in listed corporations and closed corporations, but partnerships limited by shares or special norms for other type of legal entities are not included.

Responsible entities

What are the primary government agencies or other entities responsible for making such rules and enforcing them? Are there any well-known shareholder groups or proxy advisory firms whose views are often considered?

The SVS was the authority in charge of overseeing the Chilean capital market, until February 2017 when the CMF replaced it. However, their functions are very similar despite the change of name and structure. The CMF has the authority to issue instructions and orders to apply and allow compliance of relevant laws and rules, to solve inquiries and petitions, and to investigate claims made by shareholders, investors or other legitimate interested parties. Additionally, for specific types of corporations, the relevant authority may issue rules related to corporate governance.

Despite the fact that it is a common practice that certain authorities, such as the older SVS and the new CMF, develop a consultation process with the general public for new regulations to be passed, there is no well-known shareholders’ group or proxy advisory firm whose views are often considered. Some advisory firms have rendered their opinion and made some recommendations about certain Chilean corporate governance issues, but the authorities are not bound to consider their opinion. In recent years, activist shareholders have appeared in the Chilean market, but as stated above, authorities are not obliged to consider their requests.

Rights and equitable treatment of shareholders

Shareholder powers

What powers do shareholders have to appoint or remove directors or require the board to pursue a particular course of action? What shareholder vote is required to elect or remove directors?

Directors are appointed and removed by shareholders acting in shareholders’ meetings. In order to revoke the board, all members must be removed at once. Shareholders may not remove one or more directors. Consequently, the number of votes required to elect a director will depend on their number and, as a general rule, to remove the whole board, 50 per cent plus one vote of the shares with voting rights are needed.

The board of directors is obliged to purse actions agreed by shareholders’ meetings, whose matters are listed in the Corporations Act and in certain cases in company by-laws.

Directors appointed by a shareholders’ group have the same duties towards the company and other shareholders as the remaining directors, not being able to infringe their duty with them to defend the interest of the shareholders’ group that elected them.

Shareholder decisions

What decisions must be reserved to the shareholders? What matters are required to be subject to a non-binding shareholder vote?

The following decisions are reserved for shareholders:

  • Ordinary shareholders’ meeting (occurs once a year at a predetermined time):
  • reviews the company’s situation and auditor’s report, the approval or rejection of the annual report, the balance sheet and financial statements;
  • profit distributions;
  • appointment or revocations of directors and auditors; and
  • any other matter of social interest that is not covered in the matters of the extraordinary shareholders’ meeting.
  • Extraordinary shareholders’ meeting (occurs at any time when the social needs require it):
  • company’s dissolution;
  • company’s transformation, merger or division and amendments to by-laws;
  • bonds convertible in shares or debentures issuance;
  • sale of relevant assets;
  • granting of guarantees to secure third-party obligations (excepted for affiliates where the board approval is enough); and
  • any other matter that shall be decided by a shareholders’ meeting.

In Chile, the concept of the non-binding shareholder vote does not exist.

Disproportionate voting rights

To what extent are disproportionate voting rights or limits on the exercise of voting rights allowed?

Chile follows the rule ‘one share, one vote’, being that the shares with multiple votes are prohibited by the Corporations Act, but shares with limited or no voting rights are allowed. As a general rule, even unpaid shares have voting rights, except if the articles of incorporation express the contrary. Shares owned by the same company do not have voting rights.

Most of the time, shares without voting rights or with limited votes are associated with certain preferences, for example, to elect a higher number of directors or to have the right for a higher proportion of company profits. If the company does not comply with preferences, shares will keep their voting rights while preferences are not fully respected.

Shareholders’ meetings and voting

Are there any special requirements for shareholders to participate in general meetings of shareholders or to vote? Can shareholders act by written consent without a meeting? Are virtual meetings of shareholders permitted?

Shareholders have to be registered in the company’s shareholders’ registry to participate in a meeting. In listed companies, shareholders have to be registered at least five business days prior to the shareholders’ meeting, and in closed corporations, at the beginning of the meeting.

Even shareholders with non-voting shares and directors are authorised to participate in shareholders’ meetings with the right to speak.

Shareholders may attend meetings personally or be represented by a third party, who may or may not be a shareholder. The proxy form has to comply with certain requirements in order to be valid, and the company has the right to qualify such proxies.

Shareholders cannot act by written consent without a meeting.

All matters shall be subject to independent voting unless they are approved by unanimous decision. Voting shall be developed through a system that secures the simultaneous issuance of votes or its issuance in secret. Scrutiny must be carried out in a single public act, and in both cases, it shall be publicly known how each shareholder voted.

According to article 64, section 3 of the Corporations Act, the SVS (now the CMF) may authorise distance voting systems for listed corporations. Those systems have to protect shareholders’ rights and the voting process. The SVS’s General Rule Number 273 has authorised the following systems: ballot, voting by electronic device and distance voting. The latter has to comply with authentication, access control, confidentiality, integrity and no-rejection principles.

The GRN 385 asks if the corporation has a system that allows:

  • shareholders to remotely participate in shareholders’ meetings and voting, at the same time as those physically present;
  • shareholders to remotely observe in real time what is happening in the meeting; and
  • the general public to be informed in real time of the agreements reached by the meeting or with a time difference of less than five minutes.

Despite the fact that distance voting systems are permitted, to the best of our knowledge Chilean listed companies have not implemented them for the following reasons: the Chilean stock market is highly concentrated; most of the investors are located in Santiago; the majority of the meetings take place in this city; and proxies are commonly used.

Shareholders and the board

Are shareholders able to require meetings of shareholders to be convened, resolutions and director nominations to be put to a shareholder vote against the wishes of the board, or the board to circulate statements by dissident shareholders?

Resolutions and directors’ nominations have to be put forward for voting even when against the wishes of the board. The board does not have the authority to limit the decisions to be made at the shareholders’ meeting.

Shareholders that own more than 10 per cent of outstanding shares with voting rights may request the board of directors to convene an ordinary or extraordinary shareholders’ meeting, expressing in their request the matters to be discussed at the meeting.

Shareholders who own more than 10 per cent of voting shares may formulate comments and propositions: related to the company’s business and to require their inclusion in the annual report; and related to the matters put up for vote by the board in shareholders’ meetings and to include them in the information to be sent to shareholders.

All shareholders have the right to speak in the meeting, thus their opinion (dissenting or not) shall be heard. Meeting deliberation and agreements shall be included in the relevant book’s minutes, and in listed corporations the most recent minutes of the meetings have to be available on the company’s website for shareholders. Additionally, books may be inspected by shareholders prior to the ordinary shareholders’ meeting.

Controlling shareholders’ duties

Do controlling shareholders owe duties to the company or to non-controlling shareholders? If so, can an enforcement action be brought against controlling shareholders for breach of these duties?

Article 30 of the Corporations Act establishes, as a general rule, that shareholders have to exercise their rights respecting the company and other shareholders’ rights. The Corporations Act does not establish special duties for controlling shareholders, but they shall exercise their rights with due respect for the limits imposed by other shareholders and company rights. Hence, controlling shareholders may not abuse their control position to obtain benefit at other shareholders’ or the company’s expense.

Enforcement actions that may be brought against controlling shareholders will depend on the abuse committed or the law infringed. Other shareholders and the company may claim damages under civil law or using the derivative action described in question 18 below.

Shareholder responsibility

Can shareholders ever be held responsible for the acts or omissions of the company?

No, as a general rule, corporations limit the shareholders’ liabilities, being responsible up to the amount they have agreed to pay in for subscribed shares only. Consequently, the only obligation that shareholders have with the company is to pay the capital corresponding to their shares, not being obliged to return the benefits received.

Corporate control

Anti-takeover devices

Are anti-takeover devices permitted?

In Chile, the majority of companies have a controlling shareholder, thus there is no need for specific defences. The shareholder is the only person in charge of deciding about the sale of his or her shares. Therefore, if a person wants to take control of the company, he or she will have to negotiate with the controller and then follow the special procedure established by law for the public offerings for the acquisition of shares, known as ‘OPA’.

Eventually, by-laws may include certain anti-takeover devices as long as they are not contrary to the applicable law.

Issuance of new shares

May the board be permitted to issue new shares without shareholder approval? Do shareholders have pre-emptive rights to acquire newly issued shares?

All matters related to company capital (increase, decrease, issuance of new shares, shares privilege, vote restrictions, etc) have to be approved by the relevant shareholders’ meeting. Consequently, the board is not allowed to issue new shares without shareholders’ approval.

Article 25 of the Corporations Act states the general rule regarding pre-emptive rights to acquire newly issued shares. Any shares or any other securities that will in the future give rights over company shares shall be offered, at least once, preferably to each shareholder on a pro rata basis of the shares owned. However, there are certain limited exceptions to pre-emptive rights, such as capital increase percentage destined to stock options for employees of the company or its affiliates and capital increase owing to merger by absorption to the absorbent company’s shareholders, among others.

The pre-emptive right can be renounced or transferred - to other shareholders or third parties - by the relevant shareholder during a term of 30 days and with the formalities established by the Corporations Act and its Rules. If the shareholder does not express his or her opinion during that term it will be understood that he or she renounces his or her right.

Shares not subscribed by shareholders cannot be offered to third parties at inferior value or in better conditions. In listed corporations, this restriction applies for a period of 30 days after the expiry of the option term. After that, the stocks may be offered to third parties at different prices and conditions if the offer is made through a stock exchange.

Restrictions on the transfer of fully paid shares

Are restrictions on the transfer of fully paid shares permitted and, if so, what restrictions are commonly adopted?

In listed corporations, company by-laws cannot contain restrictions to free disposing of shares. Nevertheless, shareholders’ agreements that establish restrictions or certain rights over company shares are allowed. In order to be able to exercise the rights contained in the shareholders’ agreements before third parties, the agreement shall be deposited in the company, made available to other shareholders and third parties and noted in the shareholders’ registry of the company. The shareholders’ agreements will not affect the company’s duty to register the share transfer.

Common restrictions included in shareholders’ agreement are tag-along, drag-along and right of first refusal, among others.

Compulsory repurchase rules

Are compulsory share repurchases allowed? Can they be made mandatory in certain circumstances?

Yes, under certain and limited circumstances the company may repurchase its own shares. Those cases are:

(i) owing to a withdrawal right exercised by shareholders;

(ii) as result of a merger with another company that is a shareholder of the absorbent company;

(iii) if it allows for compliance with a capital decrease agreement, when the market price of the stocks is lower than the rescue value to be paid to shareholders; or

(iv) when a shareholders’ meeting agreed on that following certain conditions and requirements.

These situations can only be temporal, for example, in cases (i) and (ii) the stocks have to be sold by the company in a stock exchange within one year of their acquisition, and in (iv) within 24 months or five years if the stocks are destined to be employees’ compensation plans. If stocks are not sold during the term, the capital will be automatically decreased.

The cases described in (i) and (ii) are mandatory.

Dissenters’ rights

Do shareholders have appraisal rights?

Yes, article 69 and the following articles in the Corporations Act give dissenting shareholders the right to withdraw from the company and be paid for their shares.

The withdrawal right is granted to a dissenting shareholder, meaning a shareholder who opposes in the same meeting the agreement reached by the shareholders or, who being absent at that meeting informs the company about his or her disagreement within 30 days counted from the meeting’s date. The right is granted to all shareholders, even to those that own non-voting shares. Shareholders who attended the meeting - personally or represented - but refrain from voting, will not have the withdrawal right.

Matters that grant withdrawal rights are: company transformation, merger, sales of certain corporate and affiliates assets, the granting of certain guarantees for third-party obligations, in listed companies, for minority shareholders, when a shareholder acquires more than 95 per cent of shares, the cancellation of the company’s registration in the Securities Registry kept by the CMF, among others.

The value that the company shall pay to the dissenter shareholder for his or her shares is: for listed companies - the market price, and for closed corporations - the book value.

The dissenting shareholder may renounce his or her withdrawal right before the company pays the stock value. Once the price is paid, the stocks have to be registered in the shareholders’ registry under the company’s name.

The board of directors may convene a shareholders’ meeting, during a certain period of time specified by law, to reconsider or ratify the agreement that originates the withdrawal right. If the meeting revokes the original agreement, the withdrawal right will expire.

Responsibilities of the board (supervisory)

Board structure

Is the predominant board structure for listed companies best categorised as one-tier or two-tier?

Corporations are managed by a board of directors appointed by the shareholders’ meeting. In Chile, the only allowed board structure is one-tier. Even when the law does not expressly state that it is a unitary board, there is no discussion about this.

Board’s legal responsibilities

What are the board’s primary legal responsibilities?

The board of directors is in charge of managing the company and represents it judicially and extrajudicially, for the compliance of its purpose, being invested with all the managing and disposal authorities that law or the by-laws not established as authorities of the shareholders’ meeting.

Directors have to exercise their function in complying with their fiduciary duties. Their main duties are:

  • the duty to be informed (and the right to request certain information);
  • the duty of care, having to comply with the standard of conduct set by law; and
  • the duty of loyalty, which includes:
  • the duty of confidentiality; and
  • the duty to respect the business opportunity of the company.

The director has to be loyal to the company in the exercise of his or her functions and cannot compete or damage it with his or her actions.

Board obligees

Whom does the board represent and to whom does it owe legal duties?

The board of directors represents the company, owing its legal duties to the company and its shareholders.

Directors appointed by a group or class of shareholders have the same duties towards the company and the rest of the shareholders as the remaining directors, not being able to infringe their duties under the pretext of defending the interest of those who have appointed them.

Enforcement action against directors

Can an enforcement action against directors be brought by, or on behalf of, those to whom duties are owed?

Yes, shareholders who represent at least 5 per cent of the outstanding shares or any director may sue, on behalf of the company, those responsible, including directors, for any damage caused to the company owing to infringement of the Corporations Act, its rules, by-laws, or norms issued by the board or by the previous SVS or the new CMF. This action is known as derivative action.

Care and prudence

Do the board’s duties include a care or prudence element?

Directors have to exercise their functions in compliance with the fiduciary duties imposed by law, one of them being the duty of care. Directors shall use, in the exercise of their functions, the care and diligence that people ordinarily employ in their own businesses. This corresponds to the ordinary standard of care (culpa leve) defined by Chilean civil law.

The duty of care obliges every director to regularly follow and decide about managing issues, requesting all the information needed for this purpose, with the convenient collaboration or assistance from management, to actively participate in the board and committees, attend the meetings, request board meetings and that certain matters be reviewed by the board, opposed to illegal acts, among others.

Directors will be jointly and severally liable for damages caused to the corporation and its shareholders owing to any guilty and fraudulent actions.

Board member duties

To what extent do the duties of individual members of the board differ?

Directors’ functions are collectively exercised in meetings duly constituted. Therefore, individual acts of directors do not constitute an act of the board, nor of the company and are not binding for the company unless the board, acting as such, delegates some specific functions.

Directors are jointly and severally liable for damages caused to the shareholders and the company owing to their negligent and fraudulent actions. To protect his or her responsibility, the director has to oppose the act or agreement and the opposition shall be recorded in the minutes of the relevant directors’ meeting and shall be informed to shareholders in the next ordinary shareholders’ meeting.

Delegation of board responsibilities

To what extent can the board delegate responsibilities to management, a board committee or board members, or other persons?

Individually considered directors are not allowed to delegate their personal functions as directors. However, the board may delegate part of its functions to senior executives, managers, lawyers, one director or directors’ commissions and, for specifically determined purposes, to other persons.

Non-executive and independent directors

Is there a minimum number of ‘non-executive’ or ‘independent’ directors required by law, regulation or listing requirement? If so, what is the definition of ‘non-executive’ and ‘independent’ directors and how do their responsibilities differ from executive directors?

Given the characteristics of the Chilean stock market, which is highly concentrated, independence does not refer to management but to the relation to controlling shareholders.

Listed corporations that have a market capitalisation equal to or higher than the equivalent of 1.5 million units of account (US$59 million approximately, as at 31 May 2017) and at least 12.5 per cent of the issued shares with voting rights, are owned by shareholders that individually control or own less that 10 per cent of such shares, have to appoint at least one independent director and constitute a directors’ committee.

The independence concept was amended by Law 20,382 passed in 2009. Before the reform, a director was independent if he or she had been elected without controlling shareholders’ votes.

Currently, a person shall not be considered as independent if at any moment during the last 18 months:

(i) they maintained any economic, professional, credit or commercial connection, interest or dependency of relevant volume and nature, with the company, the other companies from the same group, its controller, the senior management of any of them, or has been director, CEO, manager, senior executive or consultant of them;

(ii) they maintained certain family relationships with the persons above-mentioned;

(iii) they have been director, CEO, manager or senior executive of a non-profit organisation that has received contributions or donations from the persons indicated in (i);

(iv) they have been a partner or shareholder who owned or controlled, directly or indirectly, 10 per cent or more of the capital;

(v) they have been a director, CEO, manager or senior executive of an entity that has rendered legal or consultant services, for relevant amounts, or an external auditor of the persons indicated in (i); or

(vi) they have been a partner or shareholder who owned or controlled, directly or indirectly, 10 per cent or more of the capital, directors, CEO, managers or senior executives of the main company’s competitors, suppliers or clients.

The main difference in responsibility of independent directors is that they shall be members of the directors’ committee that is further described in question 25. As explained in question 24, executive directors are not allowed.

Board size and composition

How is the size of the board determined? Are there minimum and maximum numbers of seats on the board? Who is authorised to make appointments to fill vacancies on the board or newly created directorships? Are there criteria that individual directors or the board as a whole must fulfil? Are there any disclosure requirements relating to board composition?

The size of the board is determined in the company’s by-laws establishing an invariable number of directors. If shareholders want to modify the number of directors or to create a new directorship, a by-laws amendment has to be agreed on at the relevant shareholders’ meeting and must comply with all the formalities. There is one exception for companies that have to appoint independent directors and the directors’ committee, in which case if its by-laws consider fewer than seven members, the ordinary shareholders’ meeting has to appoint seven directors.

The minimum number of seats depends on the type of corporation. Closed corporations shall have at least three directors, listed companies at least five, and corporations that shall designate an independent director and establish a directors’ committee shall have at least seven directors. If the respective by-laws do not set the number of board members, the legal minimum shall apply.

The Corporations Act does not set a maximum number of directors. However, special laws may establish special minimum and maximum and other requirements for special corporations (eg, banks).

By-laws may establish substitute directors in the same number of principals. If they do, each principal director shall have his or her substitute. Substitutes will replace principals permanently in case of vacancy or temporarily in case of absence. If the vacancy of a director and his or her substitute occurs, the whole board has to be renewed in the next ordinary shareholders’ meeting. In the meantime, the board may appoint a substitute. There are special rules for vacancies of independent directors.

The following persons cannot be appointed as board members:

  • minors (aged under 18 years old);
  • directors who have been revoked owing to the rejection of the balance sheet by a shareholders’ meeting;
  • persons with certain criminal records (including bankruptcy crime); and
  • authorities regarding entities that they, directly and in accordance with the law, supervise or control.

There are other restrictions to being a director of listed corporations or their affiliates, such as being a senator, congressman, state ministry, CMF officer, stockbroker, etc.

Except for independence in certain cases, there are no required criteria that individual directors or the board as a whole must fulfil, such as age, gender, nationality, diversity or expertise.

General Rule Number 30 (GRN 30), issued by the SVS, which contains the ongoing information that listed corporations have to disclose, states a disclosure requirement relating to board composition. The annual report shall contain information about diversity in the board of directors, informing about the number of directors by gender, nationality, age range, and years as director. Also, it shall include information about the profession or occupation of directors appointed during the last two years.

Additionally, another General Rule (GRN 385) asks if the company has established a system to inform shareholders about:

  • the diversity of capacity, conditions, experience and vision that is needed in the board;
  • the maximum number of other boards in which it is appropriate that company directors participate;
  • the candidate’s experience and profession; and
  • if the candidate, during the last 18 months, has or has had any contractual, commercial or any other kind of relationship with the company’s controller, main competitors or suppliers.

Board leadership

Is there any law, regulation, listing requirement or practice that requires the separation of the functions of board chairman and CEO? If flexibility on board leadership is allowed, what is generally recognised as best practice and what is the common practice?

The CEO position is incompatible with the board chairman position and with being auditor or accountant of the company, and in listed corporations is also incompatible with being a board member.

There is flexibility on the board leadership being the chairman elected by directors. In case of a tie, it will be decided by a ballot.

Board committees

What board committees are mandatory? What board committees are allowed? Are there mandatory requirements for committee composition?

There is only one mandatory board committee for listed corporations that complies with the requirements described in question 22. This directors’ committee is a mix of accounting and compensation committees.

The directors’ committee has the following main faculties and duties:

  • to review the external auditors’ reports, the balance sheet and the financial statements;
  • to propose to the board the name of external auditors and the risk rating agency;
  • to review and issue a report about related-party transactions;
  • to review the remuneration and compensation plans for the CEO, senior executives and other employees;
  • to inform the board about the convenience of hiring auditors for services other than external auditing; and
  • to prepare the annual report about its work, including recommendations for shareholders.

The directors’ committee shall be composed of at least three members and the majority of them shall be independent. If there are more than three independent directors, the board shall decide, by unanimous decision, who will be on the committee. In case of disagreement, preference shall be given to those directors who have been appointed with more votes from shareholders that own or control less than 10 per cent of shares. If there is only one independent director, he or she will appoint the other members of the committee. The president of the board may not integrate the committee or subcommittees unless they are independent.

Finally, by-laws may establish other different committees, their functions and composition requirements and corporations may voluntarily establish the directors’ committee.

Board meetings

Is a minimum or set number of board meetings per year required by law, regulation or listing requirement?

Yes, in listed corporations the board of directors shall meet in ordinary meetings at least once a month. The company’s by-laws may establish a higher frequency or other specific requirements.

The GRN 385 asks if the board has established a minimum number of ordinary meetings.

Board practices

Is disclosure of board practices required by law, regulation or listing requirement?

No, there is no disclosure required. However, the minutes and the books, among other company documents, shall be available at the company’s offices for shareholders’ review during the 15 days prior to the ordinary shareholders’ meeting.

Additionally, the GRN 385 asks if the board of directors meet, at least quarterly, with the external auditing company, risk management unit, internal auditing unit, compliance officer, corporate responsibility and sustainable development units, or their equivalents, to analyse relevant aspects of the functions developed by them.

Remuneration of directors

How is remuneration of directors determined? Is there any law, regulation, listing requirement or practice that affects the remuneration of directors, the length of directors’ service contracts, loans to directors or other transactions or compensatory arrangements between the company and any director?

A company’s by-laws must determine if directors shall be remunerated or not. If they are, every year the ordinary shareholders’ meeting shall fix in advance the compensation amount to be paid to directors. Any other relevant payment made to the directors for functions different to the director’s position has to be authorised or approved with the relevant formalities.

Additionally, the annual report shall contain all remunerations received by directors during the prior year, including those for other functions than the director position, representation allowances, bonus and any other payment.

The members of the directors’ committee shall be remunerated. The remuneration shall be fixed, every year, by the ordinary shareholders’ meeting, in accordance with their functions. The remuneration shall not be less than the remuneration that any regular board member receives plus one-third of its amount.

As a common practice, directors’ remunerations are composed of a fixed fee and a variable part, which depends on the company’s results.

Remuneration of senior management

How is the remuneration of the most senior management determined? Is there any law, regulation, listing requirement or practice that affects the remuneration of senior managers, loans to senior managers or other transactions or compensatory arrangements between the company and senior managers?

As a common practice, the board of directors determines the remuneration of most senior management. In Chile, there is no say-on-pay by shareholders on this matter. GRN 30 states that the annual report has to state the remunerations paid to senior management as well as the compensation plans and special benefits for them.

GRN 385 asks if salary structures and polices of the CEO and senior management have to be approved by the shareholders’ meeting. Furthermore, GRN 385, trying to prevent bad practices, asks if the company has implemented a formal procedure to annually review salary structures, total compensations granted to the CEO and other senior executives, with the assessment of a third-party, and if they are published on the company’s website.

D&O liability insurance

Is directors’ and officers’ liability insurance permitted or common practice? Can the company pay the premiums?

D&O liability insurance is a common practice for directors. Corporations can pay the director’s premiums. However, as the director is not an employee of the company, it is highly likely that the Chilean Internal Revenue Service will consider the premium a rejected expense. This means that the company shall pay a penalty tax of 40 per cent of the expenses amount. It will be necessary to prove before a tax court that the premium expense was needed to generate the company’s income.

Indemnification of directors and officers

Are there any constraints on the company indemnifying directors and officers in respect of liabilities incurred in their professional capacity? If not, are such indemnities common?

There is no constraint on the company indemnifying directors and officers in relation to liabilities incurred in their professional capacity, but this is an uncommon practice. Liabilities that arise from gross negligence or fraud cannot be indemnified, in accordance with civil law.

Exculpation of directors and officers

To what extent may companies or shareholders preclude or limit the liability of directors and officers?

Any by-laws disposition or shareholders’ agreement that precludes or limits directors’ or officers’ liability will be null and void. Moreover, the approval of the annual report, financial statements and other documents by the shareholders’ meeting does not preclude or limit the director’s liability for determined acts or business, nor does the specific approval of them preclude liabilities when they have been executed fraudulently or negligently.


What role do employees play in corporate governance?

According to the law and regulations, employees do not play any specific role in corporate governance. They are stakeholders without attributions or rights. If a person is an employee but also a shareholder, he or she will play his or her role as any other shareholder.

Board and director evaluations

Is there any law, regulation, listing requirement or practice that requires evaluation of the board, its committees or individual directors? How regularly are such evaluations conducted and by whom? What do companies disclose in relation to such evaluations?

No, there is no legal requirement in this regard. However, GRN 385 asks if the company has established a formal procedure to annually review the board’s organisation and functioning to detect areas of improvement, with the help of an expert third party. Additionally, GRN 385 asks about board evaluation process regarding the inclusion of practices mentioned in such rule.

Disclosure and transparency

Corporate charter and by-laws

Are the corporate charter and by-laws of companies publicly available? If so, where?

Corporations shall have, available for shareholders, at their main office, branches and on their website (for listed corporations) updated versions of their by-laws duly signed by the CEO, indicating the date and notary public, in which their articles of incorporations, by-laws and any amendments have been granted along with the information about their legalisations.

Additionally, GRN 385 asks that corporations have an updated website, where shareholders may easily access the company’s public information.

Company information

What information must companies publicly disclose? How often must disclosure be made?

The board shall disclose to shareholders and the general public certain of the company’s legal, economic and financial information required by law or by the CMF. The specific obligations will depend on whether it is a listed or closed corporation. In listed corporations, the board has to take measures needed to avoid the information being disclosed to certain persons before the general release.

The board of directors has the authority to qualify certain information as confidential, when it refers to pending negotiations that, if they are known, may affect the social interest. This shall be agreed by at least three-quarters of the directors in the exercise.

Examples of disclosure obligations are:

  • information to be disclosed for the ordinary shareholders’ meeting: annual reports, balance sheet, minutes, external auditors’ reports, etc, which shall be available for shareholders’ review during the 15 days prior to the date of the ordinary shareholders’ meeting in the company’s offices. During that term, information from the company’s affiliates shall also be available. In listed corporations, the annual report, financial statements and auditors’ report have to be made available for shareholders and some of those documents have to be published in the company’s website; and
  • ongoing information to be disclosed by listed corporations to the CMF, brokers and all stock exchanges (when the company is listed in one of them) contained in the GRN 30 includes:
  • quarterly and annually financial statements and reports;
  • capital variations;
  • annual report;
  • essential facts, about the company, its business and securities, as soon as the company knows about it or it happens. The information is essential when it would be considered relevant for investment decisions by a prudent person. The GRN includes a list of essential facts examples and the instruction to inform them. Confidential information has to be provided to the CMF in accordance with special instructions; and
  • information of interest means information that cannot be qualified as essential, but is useful for a proper financial understanding of a company, its securities or their offer.

There are several other norms that contain obligations to disclose information about several matters.

Finally, GRN 385 asks if the company has implemented a formal and ongoing improvement procedure to detect and implement eventual improvements in the production and diffusion of information to the public and if such procedure is audited by a third party, on an annual basis.

Hot topics


Do shareholders have an advisory or other vote regarding executive remuneration? How frequently may they vote?

Shareholders do not have an advisory or any other vote regarding executive remuneration; it is determined by the board of directors or by the senior management.

Shareholder-nominated directors

Do shareholders have the ability to nominate directors and have them included in shareholder meeting materials that are prepared and distributed at the company’s expense?

Yes, they do. The CEO shall inform shareholders, at least two days prior to the meeting, about the list of nominated directors that have accepted the nomination and have declared whether they have any unsuitability for the position. If this is not possible, the list shall be available at the beginning of the meeting. Candidates may be added to the list even during the meeting, provided they comply with certain requirements.

Shareholder engagement

Do companies engage with shareholders? If so, who typically participates in the company’s engagement efforts and when does engagement typically occur?

Yes, usually Chilean companies engage with shareholders through the investor relation units.

GRN 385 asks whether companies have a unit in charge of the relationship with shareholders, investors and the media.

Sustainability disclosure

Are companies required to provide disclosure with respect to corporate social responsibility matters?

Yes, GRN 30 states a disclosure requirement relating to corporate social responsibility and sustainable development. The annual report shall contain information about diversity in the board of directors, management teams and the organisation in general, informing about the number of people by gender, nationality, age range and years as part of the company. There is no special regulation regarding environment, human rights or other corporate social responsibility matters in the sources of corporate governance rules and practices mentioned in question 1. However, other norms could contain obligations to disclose information about environment or other matters, depending on the company´s business (eg, mining, energy, others).

Additionally, GRN 385 asks that the company establish some of the following practices regarding corporate social responsibility:

  • the board of directors meets at least quarterly with the unit of social responsibility, sustainable development or those responsible for an equivalent function to analyse: the effectiveness of the policies approved by the board to transmit the benefits of diversity and inclusion for society, inside the organisation, its shareholders and the general public; organisational, social or cultural barriers detected that could be inhibiting the natural diversity; usefulness and acceptance that sustainability reports have had with spread to relevant interest groups;
  • the board of directors has approved a policy and established formal procedures that aim to provide the public with information regarding: the policies adopted by the corporation in matters of social responsibility and sustainable development, the interest groups identified by the company, the relevant risks in sustainability and sources of them, indicators measured by society in this matter, the existence of goals and the evolution that sustainability indicators have had; and
  • the board of directors has established formal procedures that detect and reduce organisational, social or cultural barriers that could be inhibiting the natural diversity.

CEO pay ratio disclosure

Are companies required to disclose the ‘pay ratio’ between the CEO’s annual total compensation and the annual total compensation of other workers?

No, companies are not required to disclose the pay ratio between the CEO’s compensation and other workers. However, GRN 30 states that the annual report has to express the overall remuneration of its team of senior executives.

Gender pay gap disclosure

Are companies required to disclose ‘gender pay gap’ information? If so, how is the gender pay gap measured?

Yes, GRN 30 states a disclosure requirement relating to the gender pay gap. The annual report shall contain the proportion that represents the base gross salary average, by type of position, responsibility and function performed, of female executives and workers with respect to male executives and workers. There is no special regulation regarding gender pay gap disclosure of directors’ remuneration.

Update and trends

Update and trends

Please identify any new developments in corporate governance over the past year (including any significant proposals for new legislation or regulation, even if not yet adopted). Please identify any significant trends in the issues that have been the focus of shareholder interest or activism over the past year (without reference to specific initiatives aimed at specific companies).

In February 2017 the Law No. 21,000 came into force, which regulates the CMF (which replaces the previous authority, the SVS). Although their functions remain almost unchanged, the new CMF structure varies significantly from the SVS one. Instead of only one superintendent, the CMF has five commissioners, elected by the President and the Senate. This grants more independence from political changes. Regarding auditing faculties, the CMF has new investigative tools such us access to secret banking information and telephone interception, but in return the Law offers more guarantees to audited entities. For example, fine values are set in advance by a catalogue and a leniency system is implemented.