Amendments To The Law On Companies

• Law Firm: CorralRosales
• Subject Matter: Corporate/Commercial Law, M&A/Private Equity, Corporate and Company Law, Corporate Governance, Shareholders
• Author: Mr Milton Carrera
• Published date: 03 April 2023

In the supplement to the Official Gazette No. 269 of March 15, 2023, the amendments to the Law on Companies for the Optimization and Promotion of Business and for the Promotion of Corporate Governance were published, the most relevant aspects are as follows:

a) Sole shareholder/member: Corporations and the limited liability companies may be incorporated by unilateral act by a single shareholder/member.

b) Transfer of units: Units issued by limited liability companies are freely transferable, provided the transfer is between members of the company, and may be carried out by means of a private document.

c) Pledge over units: Units issued by limited liability companies may be pledged with the unanimous consent of the members.

d) Suspension of dividend distribution: Foreign members/shareholders who do not disclose their chain of ownership until the corresponding beneficial owner is identified, in addition to the prohibition to attend, intervene and vote in the ordinary shareholders' meetings, may not receive the corresponding dividends declared by the company until such information is provided.

e) Right of accretion: The bylaws of a corporation may recognize the right of accretion, i.e., a shareholder will have the possibility of subscribing the shares resulting from a capital increase that are not assumed by another shareholder, with priority to third parties. If there are several shareholders interested in assuming the shares offered, these will be allotted in proportion to the participation of each one of them in the capital of the company. In the event of silence in the bylaws, the general shareholders' meeting, at the time of establishing the basis for the capital increase, may grant the shareholders the aforementioned right of accretion.

f) Enforceability of shareholders' agreements vis-à-vis third parties: As a general rule, shareholders' agreements concerning any lawful matter shall be binding among the shareholders, but not enforceable against third parties. However, the agreement will become enforceable against a third party when it is proven that such third party knew of its existence and provisions. The breach of a shareholders' agreement will give rise to the aggrieved counterparty's right to request, at its discretion, the performance or termination of the agreement, and in both cases, compensation for damages.

g) Financial solvency report for capital reduction processes: When the general shareholders' meeting resolves to reduce capital, it must...