(ninety) days, the entity will be transformed into a SA ipso facto and will be submitted to the SA regulations over their bylaws. The next shareholders’ meeting held will have to make the corresponding adaptations and chose the members of the board. Management . The SpA’s obligations are basically two: appoint a general manager and to hold ordinary shareholder meetings. Shareholders are free to decide on the management structure, and they can designate a single manager or a board of directors. 2. Matters to be considered when choosing a business entity type There are several advantages and disadvantages related to each type of entity. When choosing, it is vital to consider the following elements: a) Sociedad de Responsabilidad Limitada - It has a minimum of two partners and a maximum of fifty. - All partners may be foreigners. - The responsibility of the partners is limited to its capital contribution. - Its management is simpler compared to an SA. - The partners have the flexibility to agree on the terms of the bylaws. There are no limitations regarding the capital, its payment, and the distribution of profits. - Partners need unanimity to adopt all types of decisions. - Partners that want a relationship of trust, fewer formalities, and simplified management prefer this entity. b) Sociedad Anónima - There is no limitation for the transfer of the shares.

- Foreign entities can hold 100% of an SA’s shares. - Generally, there are no minimum capital requirements. - The creditors have rights over the assets of the corporation, not over the property of the shareholders. - They have a complex management organization (board of directors + shareholders meetings). - They can operate in the stock market. - If they are publicly traded, they have reporting duties towards the CMF. - Businesses requiring large amounts of capital prefer the S.A. corporate structure. c) Sociedad por Acciones - It may be constituted by one or more shareholders, without limitations. - There is almost complete flexibility in agreeing upon the bylaws of the company. - Foreign entities can hold 100% of an SpA’s shares. - It is flexible in its administration. - Shares trading is simpler. - The shareholders can determine the number and types of shares that constitutes the capital. - The shareholder's responsibility is limited. - Enterprises seeking to attract venture capital prefer the SpA corporate structure.

ILN Corporate Group – Establishing a Business Entity Series

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