Chile

4 Chapter Corporate Law

    • Kinds of corporate systems.

       

      Corporations (sociedad anónima).

      It can be a publicly held or privately held corporations. Privately held corporations require a minimum of two partners or shareholders and can be formed with one or more foreign partners or shareholders. Liability is limited to the amount of individual contributions.

      A publicly held for example must have more than 500 shareholders, at least 10% of the subscribed capital has to be owned by a 100 shareholders.

      Companies by shares (sociedad por acciones).

      It can have only one shareholder, liability is limited to the amount contributed or agreed to contribute.  Bylaws can be agreed under a public deed or in a private instrument, shares can participate separately in the results of different business ventures. After a month of incorporation a summary must be notarized and filled in the register of Commerce and published in the official gazette.

      Limited liability companies (sociedad de responsabilidad limitada)

      Is formed by a notarized deed and need to be notified by filling a summary at the register of commerce within 60 days and published as well in the official gazette. A limited liability partnership is similar to a general partnership but the partner´s liability is limited to the amount of capital contributed or to a greater amount that is specified in the deed.

      General Partnership (Sociedad Colectiva).

      All the partners administrate the company individually or through an elected representative and each partner is responsible for the legal liabilities of the

      partnership without limit.

      Limited Partnership (Sociedad en Comandita).

      Liability is limited and some partners provide all or a part of the partnership's capital with no right to manage affairs. One or more partners are designated as managing partners and have unlimited liability for the partnership´s debt and losses. Requirements are similar to a general partnership.

      Association ("asociación" or "cuentas en participación")

      Known as a contract between two or more persons or entities to share one or more commercial transactions that will be carried out by one of them, the partner responsible for this will have to present an account and share any profit or loss with the other partners

      Branch (Sucursal)

      A branch is the chilean agency of the parent company, it's not a separate legal entity and is governed by Chilean laws.
       
       
       

    • Corporate System.

       

      The corporation has the same characteristics as other companies for example is a legal entity, its shareholder partners contribute money or goods estimated in money, pursuing profit. The company is management is carried out through the shareholders' meeting and the board of directors, they are responsible for appointing a manager. The rights of the partners are represented in actions of free transferability. There are different types of corporations such as open, special and closed. Open corporations are those that voluntarily or legally register their shares in the Securities Registry. Special corporations are insurers, mutual fund management companies, stock exchanges, etc. Closed corporations are those that do not qualify as open or special. Open and special partnerships are subject to the securities and insurance superintendence

      The initial capital must be fully subscribed and paid within a period not exceeding three years to incorporate the company, otherwise the expiration of the term the social amount will be only capital already paid and subscribed.

      Public deed is required as proof that the company has been formed must be registered in the Registry of Commerce, the deed must carry the following:


      1-Name, profession and address of any of the shareholders and identification.

      2-Name and address of the company.

      3-Specific objects of the corporation.

      4-Duration of the company that may be indefinite.

      5-Indication of the capital with the number of shares with the division indicating their series and preferences, if they exist. It should also indicate the nominal value, form and payment terms by the shareholders and the indication of each contribution.

      6- Organization of the company with the social administration and control by the shareholders.

      7- Year-end date with the balance sheet and the ordinary shareholders' meeting.

      8-How to distribute utilities.

      9-How to carry out the liquidation of the company.

      10-Designate what to do in case of disagreements between shareholders, administrators, should be carried out by an arbitrator.

      11-Designation of the provisional board of directors (in open anonymous companies external auditors are appointed)

      12-Any other agreement by the shareholders.

    • General Shareholders Meeting

      1. Obligation and rights for shareholders.

       

      The rights and obligations of the shareholders are established in the "Shareholders Agreements", contracts between the owners of shares. The shares grant their owners the following rights:

      1- Right to participation in the Shareholders' Meetings with voice and vote.

      2- Right to receive dividends.

      3- Right to receive distribution of capital during liquidation.

      4- Preferential right to subscribe shares of payment in case of capital increases.

      5- Right to receive paid-in shares in cases of capitalization of funds.

      6- Right to assign shares and to encumber them with pledge.

      7-Right to information and make observations.

        8- Right to withdrawal and to demand compensation in case of prejudice.

      9-Right to participate in the administration of the company through the election of directors (they can choose themselves or persons of confidence).


      Shareholders can be represented by a legal representative even if they are not shareholders. In order to represent the shareholder, it must be indicated in writing, indicating the number of shares to be represented. On some occasions, in open corporation, the superintendence may authorize distance voting for shareholders, as long as the system used can guarantee the rights of the shareholders and a correct voting process.

      The shareholders are only responsible for the payment of their shares and are not obliged to return to the social fund the amounts that they have received for the benefit. When a shareholder does not pay their shares in full, the company may sell them to the Stock Exchange.

       


      1. A process for having GSM.

      The appointment to the shareholders meeting will be made by means of a notice published at least three times in different days in newspapers in the town where the company is located, in time and in the manner indicated in the regulations. In open companies, the citation must also be sent by mail to each shareholder with a minimum of fifteen days before. In case of not following these requirements according to the rules there may be sanctions by the superintendence.

      The shareholders' meeting can be ordinary or extraordinary. The ordinary meetings will be on a date indicated by the bylaws each year, the topics for taking decisions are for example the situation of the company, reports of external auditors and the approval or rejection of the balance, financial statements and financial vouchers that are presented by the administrators or liquidators of the company. The distribution of profits and dividends. Election or revocation of the regular and alternate members of the board of directors, liquidators and administrators.

      The extraordinary meetings may be at any time that is necessary, for the dissolution of the company, transformation, merger or division of the company, amendment of the bylaws, issuance of bonds or debentures that may be converted into shares, alienation of the assets, Granting of real or personal guarantees to secure obligations of third parties (except subsidiary companies where the approval of the directors is necessary) Other reasons to carry out the extraordinary meetings may be indicated in the bylaws.

       
       

      1. Decision Requirements.

      Voting rights are given to shareholders per shares they hold or represent. Only holders of shares registered in the Shareholders 'Registry with five days prior to the date on which the shareholders' meeting is to be held may participate in the meetings and exercise a voice and vote. However, in a closed company, all the shareholders who at the time of initiation are in the registry may participate. Holders of non-voting shares (directors and managers) can participate in meetings with the right to speak. The voting must be individual unless the shareholders reach an agreement to proceed by acclamation. In elections held at the shareholders' meetings, votes may be accumulated in favor of a single person or distributed in a conventional manner; those with the most votes or with a single vote shall be elected.

       
       
       

      1. Minutes

      The decisions and agreements made at the shareholders' meetings should be recorded in a minute book that is carried out by the secretary or the manager of the company. The minutes must be signed by those who participated in the meeting, chairman, secretary of the board and by three elected shareholders and if there are fewer than three attendees must also sign the minutes. The minutes will be approved at the time of signing. In the event that someone does not agree with what is written in it or considers that there are omissions or inaccuracies, he has the right to indicate before signing what has been omitted in the minutes. The minutes must be signed by all the persons indicated above within a period not exceeding ten business days after the holding of the shareholders' meeting. In open corporation, the minutes must be available on a website.

       
       
       

      1. Board of Director

        1. Requirement for director.

      The Chilean law indicates that the quality of director is acquired by express or tacit acceptance of the position. A director must be over 18 years old, public employees or individuals sentenced or indicted, stock brokers and securities agents, as well as their directors, managers, senior executives and administrators can't be appointed as directors. In privately held corporations the board must have at least three board members in Public corporations at least five board members.

      The bylaws must indicate if the directors will be paid or not for their position, the amount should be set each year by the shareholders' meeting. The bylaws can indicate, as well, the existence of substitutes, the number of them must be equal to the regular directors, they have the right of voice and they will only have the right to vote when the holders are absent.

       
       

      1. Election and Dismissal.

      Members of the board are elected at the shareholders meeting, and members can be re-elected. The board of directors may only be revoked in its entirety by the ordinary or extraordinary shareholders' meeting. The renewal of the directory can be total and is supposed to be held at the end of the period (cannot exceed three years) If it's not indicated in the bylaws, it shall be understood that the directory will be renewed every year.

      The directors are obliged to keep secret the business of the company and the social information to which they have access and which has not been disclosed to the public. But they are not obliged to do so when the social interest is injured, or when there are omissions to infractions of statutes, laws or regulations issued by the superintendence.


    • Corporate Auditor

                      

      1. Corporate Auditor

      2.  

        1. Number of auditors.

      Open corporations must appoint at least one independent director and a committee when the equity is equal to or greater than 1,500,000 units and at least 12.5% ​​of their issued shares with voting rights are held by shareholders that individually control or own less than 10%. This committee is in charge of examining the reports of the external auditors, the balance sheet and financial statements presented by administrators or liquidators. They must also propose the names for the external auditors that will be suggested to the shareholders' meeting and inform the board of directors regarding the convenience of contracting or not contracting the external audit company for the provision of services that are not part of the external audit.

      The ordinary meetings of shareholders in closed public limited companies must appoint annually two inspectors of regular accounts or external auditors to examine the accounting, inventories, balance sheets and financial statements.


      1. Ob Obligation of auditor.

      2.  

      The report of the external auditors and account inspectors will be incorporated into the report with the financial statements. Auditors can attend general meetings but are entitled only  with the right of voice not to vote. External auditors and account inspectors are responsible for any damages they may cause, in case of errors or false information.

      In the case of open corporation, the report of the external auditors and the audited financial statements must be available on the company's website.


    • Share

       

      1. Kinds of Shares

      2.  

      The share capital must be set in the bylaws and the shares must be registered before the Securities Registry. Bylaws can indicate shares with limited voting rights or without voting rights. The amount of the shares may change each time the shareholders' meeting approves the balance for each year. The changes must be expressed in the balance sheet, the new capital and the value of the shares. The shares may be paid in cash or with other assets. The bylaws of open corporations cannot include limitations on the free disposition of the shares. Particular agreements on the transfer of shares must be available in the company for the other shareholders and third parties that are interested, it must be a reference of this at the Shareholders Registry. In case of transfer of subscribed and unpaid shares, the assignor will be jointly and severally liable with the transferee for the payment of its value, and the terms of payment of the share must appear in the title. The shares are registered and their subscription must be in writing in accordance with the regulations. They can also be ordinary or preferred, this must be indicated in the bylaws, in the case of open corporations the preferences that are granted to a series of shares with control over the company will have to be for a period no longer to five years. Types of shares with multiple voting rights are not allowed in Chile under law.

      Non-voting shares or shares with a limited right to vote will not be included to calculate the quorum to hold a shareholders meeting or for reaching agreements in a general meeting.

       
       
       

      1. Dividend.

      2.  

      From the distribution of profits from the profits a percentage is used for the payment of dividends. It is paid in a fixed amount for each stock of shareholders, generally paid in cash. Dividends are divided into three, mandatory minimums (open anonymous companies have an obligation to distribute 30% of net profits) provisional (agreed by the board of directors) other dividends are the payments agreed by the Shareholders' Meeting on the minimum dividend mandatory legal or statutory or eventual.

       
       
       

      1. Capital increase.

      2.  

      The social capital must be established in the bylaws and can only be increased or decreased by reforming the bylaws. The modification of the share capital and the value of the shares will be by the ordinary shareholders' meeting, at the same time of approving the balance sheet for the year, that should contain the new capital and stock values. The new capital must be proportionally distributed among the accounts of paid capital, retained earnings and other accounts of the company's equity.

       
       

      1.  

      2. Capital decrease.

      3.  

      The capital decrease affects all shareholders equally, if the shares have a nominal value, the value will be reduced proportionally. For the reduction of capital, a vote of two thirds of the issued shares with the right to vote is required and it will not be possible to proceed with the distribution or return of capital or the acquisition of shares with which said reduction is intended to be made, but rather with 30 days elapsed from the date of publication in the Official Gazette of the extract of the respective modification. Within 10 days after publication, a prominent notice must be published in a national newspaper and the website must show the decrease in capital and the amount.


    • Bibliography

      Bibliography
       

      Ley Nº 18.046, LEY SOBRE SOCIEDADES ANONIMAS

      Websites

      Establishing a Business in Chile, 2018.

      https://uk.practicallaw.thomsonreuters.com/w-006-9220?transitionType=Default&contextData=(sc.Default)&firstPage=true&bhcp=1


      Establishing a Business in Chile, 2018

      http://www.svs.cl/educa/600/w3-propertyvalue-726.html


      CONSTITUYENDO UNA SOCIEDAD (No date)

      http://www.sii.cl/portales/investors/formas_invertir/constituyendo_sociedad.htm


      NUEVO REGLAMENTO DE SOCIEDADES ANÓNIMAS, 2011

      https://www.svs.cl/portal/principal/605/articles-1762_doc_pdf.pdf


      De los pactos de accionistas en las sociedades anónimas chilenas, concepto, contenido y límites a la autonomía de la voluntad, (No date)

      http://www.palma.cl/pdf/publicaciones/pactos-accionistas-sociedades-anonimas-chilenas.pdf