BUSINESS

Business Structuring

In our country, to structure a business it will always be convenient to formalize it through the constitution of one of the mercantile or civil company figures that our legislation foresees. We speak promptly of limited companies, limited companies, de facto or joint venture associations, as well as the establishment of branches of foreign companies, domiciliation of same and foreign companies. Here is a brief summary of its main characteristics:

ANONYMOUS COMPANY: The anonymous companies in Ecuador are capital companies, where what is the most important is how much capital each member contributes, the greater contribution in capital has in the company will have greater power of decision in the company and will receive greater benefits or profits. It is a company whose shares are freely negotiated, that is, for the entry and exit of a new partner, among other decisions, it is not necessary to have the approval of the other partners. Must have a minimum capital to be constituted, the concurrence of at least two (2) capitalist partners, must have at least one legal representative and one person to replace him (call general manager, president, etc.) so that the company always has an official that represents it in any legal act or contract and will have a social statute that regulates it.

LIMITED COMPANY: Limited companies are partnerships, where it is more important who is the partner with how much capital contributes; Naturally, whoever contributes the most capital in the company will have greater power of decision in the company and will receive greater benefits or profits. It is a society that requires the existence of an entire trust between the partners, because their shares are not freely negotiated, but both for the entry and exit of a new partner, among other decisions, must have unanimous approval of the other partners. Must have a minimum capital to be constituted, the concurrence of at least two (2) partners, must have at least one legal representative and one person to replace him (call general manager, president, etc.) so that the Company always has an official that represents it in any legal act or contract and will have a social Statute that regulates it.

FACT ASSOCIATION or ASSOCIATION OF ACCOUNTS IN PARTICIPATION: The association or Accounts in Participation arises from the agreement in which a person gives to one or other, partitions in the profits or losses of one or more operations. This accidental association or de facto partnership is governed by the conventions of the parties and is exempt from the formalities established for the companies. They lack legal status, and can be established by public deed or private contract. Although the association does not constitute a legal entity, in any case the Law recognizes it as an accidental company and grants it valid legal effects. It is necessary for the association to have a Unique Taxpayer Registry so that it can carry out commercial activities and issue invoices on its own account, independently of its associates. The associations are governed by what the parties have agreed. However, participants have the right to obtain accounts of the funds they have contributed and of the profits or losses produced. The liquidation must be done every year. It is important to mention that the participants do not have any right of ownership over the assets that are the object of association even though they have been contributed by them. Your rights are limited to obtaining accounts of the funds you have contributed and of the losses or gains.

The most important positive aspect of the Association or joint accounts, which differentiates it from commercial companies (anonymous and limited liability company), is its easy and agile constitution process, since once the agreement between the parties has been drawn up, which is advisable but not mandatory that is raised to public deed in a notary (the SRI usually requires that the public deed be presented to issue the RUC to this company), the association is ready for its activity.

Therefore, it is not obliged to present balance sheets or other documentation before the Control Entity of the commercial companies.  However, it has some negative aspects:

  • While in anonymous and limited companies, their partners are responsible only up to the amount of their contributions to the company, in the association or joint accounts this responsibility is unlimited.
  • Although the association has legal recognition as an accidental or temporary company, it does not enjoy legal status.
  • If you intend to establish a business or permanent business activity, it is not advisable for image and presence to do so through this figure, due to its accidental, temporary nature.

For the constitution of an association or accounts in participation, it is necessary to set the terms by which the members agree to be governed, as well as submit the necessary documentation and information.

BRANCHES OF FOREIGN COMPANIES: In order for a company incorporated abroad to be able to exercise its activities in Ecuador, it must be domiciled in our country, subjecting itself to Ecuadorian laws regarding all acts and legal business that it celebrates or that takes effect in Ecuador. , and meet the following requirements:

  1. Verify that the company is legally constituted in accordance with the law of the country in which it was organized by means of a certificate of legal existence granted by the corresponding authority of the country of origin duly legalized by Apostille.
  2. Check that according to this law and the bylaws the company can agree to the creation of branches, has the power to negotiate abroad and that the relevant decision has been adopted by means of a certified copy certified by Apostille of the act of incorporation, of the bylaws and of the minutes of the general meeting in which the decision to open a branch was adopted, with an assigned capital (minimum USD $ 2000) and naming who will be its attorney in Ecuador.
  3. To have permanently in Ecuador a representative with broad powers to carry out all the legal acts and businesses that are to be held and have effect in the national territory, and especially so that he can answer the demands and fulfill the obligations contracted. For this, a power granted by the foreign company in favor of its representative in Ecuador is required, a power that allows it to answer lawsuits and fulfill obligations, a power that must be legalized by Apostille.
  4. Open a capital integration account with a minimum capital of USD $ 2,000.00.
  5. Certificate issued by the Ecuadorian Consul in the country of origin of the company, certifying that it is incorporated and authorized in the country of its domicile and that it has the power to negotiate in Ecuador.
  6. The representative of the company must have his residence in Ecuador, so if he is a foreigner, he must obtain a visa, as agent of the company.

For the granting of this type of visa an immigration application form is required, and the following documents must be accompanied:

  1. Appointment or power
  2. Documents that prove the legal existence of the natural or legal person and that justify the minimum capital, and
  3. Updated certificate of compliance with obligations granted by the Superintendence of Companies.

DOMICILIATION: In the event that the practice of these activities is habitual or permanent, the law requires what is known as "domiciliation" in the country, carried out through the establishment of a Branch, where the documents indicated above must be presented. in the Superintendence of Companies, for the approval of the opening of the branch and the qualification of the power through a Resolution of the Superintendent of Companies. The Ecuadorian legislation establishes the obligation to domicile in Ecuador to foreign companies, even when they will not carry out usual activities, when their activities in Ecuador deal with the execution of public works, rendering of public services or exploitation of natural resources.

FOREIGN COMPANIES: Ecuador recognizes three situations for foreign companies.

  1. Foreign companies that enter the country to exercise certain legal acts that have the quality of sporadic or isolated.
  2. Foreign companies that enter the country in order to exercise in Ecuador activities such as public works execution, provision of public services or exploitation of natural resources of the country.
  3. Foreign companies that enter the country to directly and habitually exercise their economic activities in Ecuador.

In the last two cases, foreign companies to operate or acquire obligations, previously require domiciliary in Ecuador, ie establish a branch in the country.

In the first case, however, as established in art. 6 of the law, do not require direct debit but must have a Representative or Representative in Ecuador, who can answer lawsuits and comply with the obligations acquired.

They must have a Representative or Representative when they represent a foreign company that negotiates or acquires obligations in Ecuador, even if they are not required to be domiciled in the country, who must have resident status in Ecuador.

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