Chile is likely the most business–friendly economy in South America. The country is moving forward to a way on making business simple and more affordable to foreign investors. Currently, the process of setting up a business is probably the quickest and most efficient in the region. On March 2011, the act 20.494 reduced costs and softened the requirements for publication and registration of an incorporation. Although start up a business in Chile used to be slow and complicated, since new law has come into effect, the paperwork and process has gotten a lot easier than a decade ago.
In Chile, there are several types of companies as follows:
BRANCH OFFICE (AGENCY)
It is not a legally autonomous entity, but an agency of parent company which establishes its main address in Chile. Basically, It’s a business extension of parent company abroad. Thus, in order to establish a branch in Chile, it is mandatory to register the relevant certiﬁed and legalized documents with a local Notary.
STOCK CORPORATION (SOCIEDAD ANÓNIMA)
The stock corporation is a corporate body that results from the formation of a single equity provided by shareholders. This kind of companies can be publicly traded or private equity and are managed by Board of Directors (Choose by the Shareholders) whose members can be replaced at any time.
A corporation is created by means of notarized deed, that must contain:
- The shareholder's names, professions and addresses that are starting the corporation.
- The name and domicile of corporation.
- The speciﬁc objects for which corporation is created.
Validity of corporation, which can be undefined; if nothing is said, the validity is presumed to be undefined.
- The capital of the corporation and number of shares, indicating any special arrangements over shares and privileges, and whether shares have a par value or not; the way shareholders must pay their contributions, the dates they must do, and valuation assigned to any contributions in kind.
- How corporation will be administrated and how the administration will be supervised by shareholders.
- The corporation's ﬁnancial year-end (at which date the ﬁnancial statements must be prepared) and when the Shareholders Meeting must be held.
- How corporation will distribute its proﬁt.
- How corporation will be liquidated.
- How differences among the shareholders or between the shareholders and corporation to be resolve; if nothing is said, its understood that differences will be submitted to arbitration process.
- The names of first Directors.
A summary of these statues, duly notarized, must be submitted at Register of Commerce office. Additionally, this summary must also be published once in the Oﬃcial Newspaper. Both, the summary submission and the publication must be made within sixty days after the deed is signed. Moreover, the most important aspect on this type of company is the capital contribution directed to the corporate business. The identity of partners is not relevant, as participation is expressed in quotas - called shares, which are not subject to any restriction. The capital promised, must be subscribed and paid in a period of three years. The corporate administration falls on a board of directors who are selected by the shareholders. Additionally, a general manager must be designated that will hold the status of legal representative of the company.
Public Companies are basically those that fulfill any of the following conditions:
- The shares are public traded (Stock Exchange)
- Have more than 500 shareholders
- At least 10% of shares belong to 100 share-holders, excluding for calculation purposes thereof those shareholders who individually exceed such percentage.
- Make a public offering of their shares (IPO)
Private equity corporations are basically those not falling within the above deﬁnition and they do not make public oﬀering of their shares.
JOINT-STOCK COMPANY (SOCIEDAD POR ACCIONES)
Named as “Sociedad por Acciones”, or “SpA”, which has a corporate structure similar to a private equity corporation. The significant differences are to reduce formalities and administrative costs generally associated to corporations. Moreover, Its administration is more ﬂexible and can be constituted by a single shareholder, whether is a natural or legal person.
SpAs are governed by the Commerce Code, butin absence of provisions therein (and in the relevant by-laws), they are governed by those provisions applicable to private equity corporations.
Like stock corporations, its a corporate body that results from formation of a single equity contributed by one or more shareholders. The administration can be carried out by an administrator or by a Board of Directors whose members can be replaced at any time.
The creation of joint-stock company is the same as a stock corporation, a summary of the previously mentioned statues, duly notarized, must be submitted at the Register of Commerce office that corresponds to the company's domicile. The summary must also be published once in the Oﬃcial Newspaper. Both the summary submission and the publication must be made within one month. It can also be constituted by public deed or private instrument. The business name must add at the end “Sociedad por Acciones” or “SpA”.
LIMITED LIABILITY COMPANY(SOCIEDAD DE RESPONSABILIDAD LIMITADA)
A Limited Liability Partnership is a general association and its most important diﬀerence with another form establishment is that each partner’s liability is limited either to the capital amount contributed or to a greater amount, if its speciﬁed in the partnership deed.
There are no requirements regarding capital contributions. A limited liability partnership is created by notarized deed that should contain the items required by the Commercial Law. The name of a limited liability company should contain the name of one or more partners, or a reference to partnership’s object. However, the legal name should end with the word “limitada” (limited); otherwise, each partner is unlimitedly liable for all the partnership’s liabilities.
The summary submission and publication must be made within sixty days after the deed is signed. Participants can alienate their social rights in the company, with consent of the other partners, through amendment of by-laws. The management is responsibility of any or all partners, or to whomever is designated. This could also be a third party. This type of company is not subject to the control of supervising agencies. They are governed by Law Nr. 3.918 and the Commercial Code.
INDIVIDUAL LIMITED LIABILITY COMPANY (EMPRESA INDIVIDUAL DE RESPONSABILIDAD LIMITADA)
It is constituted only by a natural person, it’s a commercial company with its own patrimony different from the owner and is subject to the Commercial Code. It is governed by the Law N°19.857.