ECUADOR Law and Practice Contributed by: Sebastian Corral Guevara, Miguel Pizarro Páez, María Fernanda Mencías Pérez, José Cisneros Pazmiño, Roque Bustamante Espinosa and Jorge Pizarro Páez, Flor Bustamante Pizarro & Hurtado
tractual flexibility, the SAS is generally the preferred vehicle for start-ups, wholly owned subsidiaries, hold - ing companies, joint ventures and most private invest - ment projects. Unless the founders elect otherwise under the appli - cable legal regime, the incorporation of an SAS is effected through registration with the SCVS. Where contributions include real estate, a public deed and registration with the relevant Land Registry are required. SA The SA remains the preferred vehicle for large busi - nesses, regulated industries, projects involving multi - ple investors and companies requiring more sophis - ticated corporate governance structures. Capital is divided into freely transferable shares, and sharehold- ers’ liability is limited to the amount of their contribu - tions. Since the 2023 reforms, it may also be incorpo - rated as a single-shareholder company. The minimum share capital is USD800. The com - pany’s governance generally consists of the share - holders’ meeting, one or more legal representatives and, where established by the by-laws, a board of directors. This corporate form continues to be widely used for regulated businesses, financial institutions, compa - nies seeking external financing and projects involving institutional or strategic investors. A limited liability company may have up to 15 part - ners. Equity interests are not freely transferable and generally require the approval of the remaining part - ners, reinforcing the intuitu personae nature of this corporate form. The minimum capital is USD400, and the liability of the partners is limited to the amount of their contributions. This vehicle is typically used for closely held, family- owned or professional businesses where maintain - ing the composition of the ownership structure is an important consideration. Limited Liability Company (Compañía de Responsabilidad Limitada – Cía Ltda)
Compared to the SA, its governance is generally more rigid. In particular, managers appointed in the articles of association enjoy greater stability, as their removal may be subject to the grounds and procedures estab - lished in the Companies Act and the company’s by- laws, rather than being freely revocable at any time. Branch of a Foreign Company A foreign company may conduct business directly in Ecuador through a branch. To do so, it must obtain authorisation from the SCVS, appoint a permanent legal representative domiciled in Ecuador and allocate capital of at least USD2,000. Although a branch does not have separate legal per - sonality from its parent company, it is treated as a local taxpayer and is generally subject to the same tax and regulatory regime applicable to Ecuadorian companies carrying out the same activities. Mixed-Economy Company (Compañía de Economía Mixta) A mixed-economy company combines public and pri - vate capital and is primarily used for projects involv - ing the state or the provision of public services. It is governed by the Companies Act and the special rules applicable to mixed-capital entities. Public and private shareholders must be represented on the board of directors in proportion to their capi - tal contributions. Where the public sector holds more than 50% of the share capital, the chair of the board must be appointed from among the directors repre - senting the public sector. In practice, the SAS has become the preferred cor - porate vehicle for most domestic and foreign private investments due to its simplified incorporation pro - cess and governance flexibility, whereas the tradi - tional SA remains the preferred structure for regulated businesses, companies with more sophisticated gov - ernance requirements and projects involving institu - tional investors. 3.2 Incorporation Process The incorporation process depends on the type of cor - porate vehicle selected. In practice, the incorporation of a SAS is significantly faster than that of traditional
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