10-07-2022
In Chile, there are 4 types of legal entities for a foreign company or a foreign individual to consider when forming a company (i) sociedades de responsabilidad limitada (SRL), or limited liability companies/partnerships; (ii) sociedades anónimas (SA), or stock corporations or corporations; (iii) sociedades por acciones (SPA), or simplified corporations; and (iv) branches of foreign entities.
1. Limited Liability Company (Sociedad de Responsabilidad Limitada or SRL
This type of company is mainly regulated by Law No. 3.918 but also by rules applicable to general partnerships and by certain rules contained in the Commerce and Civil Codes. The liability of the members of an SRL is limited to the amount of their contributions or to the higher amount established in the bylaws. Equity rights can only be transferred with the unanimous approval of the partners. There is great flexibility as to the rules that may be included in the bylaws.
The SRL is managed as established in the bylaws. If the bylaws do not state who manages the company, management corresponds to partners, by themselves or by representatives. If a manager is not appointed, all partners may administrate the company. Bylaws may establish different management options, such as appointing certain partner or partners, third parties or even a board of directors.
2.Corporation (Sociedad Anónima or S.A.)
This type of company is mainly regulated by Law No. 18,046 (the Corporations Act) as well as by the Corporations Regulations (Reglamento de Sociedades Anónimas).
A corporation may be open (public), closed (private) or special. Open corporations are those that register, voluntarily or by legal obligation, their shares in the Securities Registry and are under control of the Financial Market Commission (Comisión para el Mercado Financiero or CMF). Special corporations are expressly established by law (eg, banks and insurance companies). Closed corporations are those that do not qualify as open or special.
Its share capital is divided into shares, which may be transferred without limitation, except for certain exceptions such as those contained in shareholders’ agreements. In private corporations, bylaws may establish certain restrictions, but in public corporations, this is not allowed. The liability of shareholders is limited to the amount of their capital contributions.
Managed by a board of directors appointed by the shareholders. The board is responsible for administration and representation of the company and is entitled to delegate part of its powers to the CEO and other officers.
3.Simplified Corporation (Sociedades por Acciones or SpA)
Simplified corporations are regulated by special rules contained in the Commerce Code. They are also ruled by their bylaws and by the private corporations’ rules in a suppletory manner. Unlike corporations, SpAs may be incorporated and operate with only 1 shareholder. The capital is divided into shares.
Legal regulation for simplified corporations is more flexible than that of corporations as it allows special agreements regarding, for example, management, profit distributions, share ownership, multiple votes and restrictions to voting rights. Management is flexible. Bylaws may establish different management options, such as appointing certain shareholder or shareholders, third parties or a board of directors.
4.Branch of a Foreign Legal Entity (Agencia)
A branch acts as an alternative form of entity as it corresponds to the presence of a foreign company (ie, parent) in Chile that does not seek to incorporate a new company, but instead only establishes a branch of the existing company. It is not a separate legal entity, except for in the case of certain tax purposes. The parent company is ruled by its local laws. The Commerce Code and the Corporations Act have certain special rules about the establishment and amendments of the branch for foreign companies and for-profit entities and corporations, respectively.
It is managed by an agent appointed by the parent. The parent grants the agent extensive power to act on its behalf in Chile. This power shall expressly mention that the agent acts in Chile under direct responsibility of the parent.
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