Important Amendments To The Law On Companies No.2

• Published date: 13 April 2023
• Subject Matter: Corporate/Commercial Law, Compliance, Corporate and Company Law, Shareholders
• Law Firm: CorralRosales
• Author: Mr Milton Carrera

In our corporate bulletin of the 22nd of this month we summarized the amendment of the Law on Companies for the Optimization and Promotion of Business and Corporate Governance. Below, we include other important amendments:

a) Acquisition of treasury stock: The acquisition of treasury stock by a corporation has long been authorized by the Law on Companies. This amendment adds the following: (i) funds from net profits, statutory reserves or contribution of money or assets of the company may be used for the acquisition (previously only net profits could be used); (ii) the economic and political rights of the shares acquired by the company are suspended until the shares return to circulation, in which case the transferee is entitled to exercise them; and (iii) the shares must be disposed of within a maximum period of five years from their acquisition, otherwise they will be redeemed through the corresponding share capital reduction.

b) Action for oppression of minority shareholders: A new action is created that may be brought by minority shareholders (understood as those who do not have control over the company) against majority shareholders for conducts that violate their rights under the law.

c) Agreements between directors/shareholders and the company: The transfer or encumbrance of assets in favor of the director or a shareholder, the acquisition of personal property of the director or a shareholder, and any other act or contract entered into between the company and the director, require the prior approval of at least 75% of the capital attending the respective shareholders' meeting. The directors or shareholders involved may not vote.

d) Transformation into a S.A.S.: Any legal entity of any nature (including non-commercial organizations), and contractual partnerships, may transform into a simplified stock corporation (S.A.S.).

e) Corporate acts that require prior approval: In corporate acts that require prior approval by the Superintendence of Companies (capital decrease, merger, spin-off, among others), the review will be formal, only referring to the legality of the acts, without the need for a prior inspection for their approval or registration, unless there is a request from a shareholder. The minutes of the shareholders' meeting must include a statement from the shareholders and the legal representative of the veracity and authenticity of the information provided. The Superintendence of Companies may carry out an inspection process within seven...