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
tives, their powers, term of office, method of appoint - ment and decision-making procedures. Companies may be managed by a sole legal repre - sentative or by two or more legal representatives. Depending on the provisions of the by-laws, legal rep - resentatives may act severally, jointly or successively. In practice, Ecuadorian companies commonly appoint a general manager as the principal legal representa - tive and a president as the alternate legal representa - tive, although other management structures may be freely adopted. In the case of branches of foreign companies, man - agement is entrusted to an attorney-in-fact ( apodera- do ), who acts as the legal representative of the branch in Ecuador. The power of attorney granted by the foreign parent company must be duly apostilled or legalised and, where executed in a language other than Spanish, officially translated before being sub - mitted to the SCVS for approval as part of the branch authorisation process. Likewise, any subsequent revocation of the attorney- in-fact or the appointment of a new attorney-in-fact must also be approved by the SCVS, whose resolu - tion authorises the corresponding registration with the Commercial Registry. In practice, the attorney-in-fact must expressly accept the mandate. This is usually done in the same letter requesting the approval of the power of attorney that is sent to the SCVS. For local companies, shareholders or partners are also free to establish a board of directors in the by-laws, determine its composition, allocate its powers and regulate its internal operation. Ecuadorian law does not generally require private companies to have a board of directors. However, where a company volun - tarily establishes a board of directors, it must comply with the gender diversity requirements introduced by the Violet Law ( Ley Violeta ). In general terms, com - panies with a board of directors composed of three or more members must ensure that, for every three members, one is a woman. The by-laws generally determine the term of office of the legal representatives and directors, the scope of their authority and any internal limitations on their
powers. As a matter of Ecuadorian corporate law, limi - tations contained in the by-laws generally cannot be invoked against good-faith third parties acting in reli - ance on the authority of the company’s duly appointed legal representatives. 3.5 Directors’, Officers’ and Shareholders’ Liability As a general rule, Ecuadorian corporate law recog - nises the separate legal personality of companies. Accordingly, the company is solely liable for its obli - gations, while shareholders, directors, officers and legal representatives are not personally liable for the company’s debts or obligations merely by virtue of their corporate position. Likewise, in the case of branches of foreign compa - nies, the attorney-in-fact ( apoderado ) appointed in Ecuador is not personally liable for the obligations of the branch solely by reason of acting as its legal rep - resentative. Shareholders are generally liable only up to the amount of their capital contributions. Likewise, direc - tors, managers and other officers are not personally liable for the company’s obligations. However, under the Companies Act, directors and officers may incur personal civil liability where, through wilful miscon - duct, fraud, negligence or breach of their legal or statutory duties, they cause damage to the company, its shareholders or third parties. In addition, they may incur criminal liability where their conduct constitutes a criminal offence under the Comprehensive Organic Criminal Code ( Código Orgánico Integral Penal – COIP), including fraudulent administration and other corporate offences. Ecuadorian law also recognises the doctrine of pierc - ing the corporate veil ( desestimación de la personali- dad jurídica ). Pursuant to Companies Act, Ecuadorian courts may disregard the separate legal personality of a company where it has been used to commit fraud, abuse rights, evade legal obligations or cause damage to third parties, in which case liability may be extend - ed to the persons responsible for such conduct. However, the Companies Act expressly provides that piercing the corporate veil is an exceptional and sub -
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