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On 28 February 2020, the Organic Law of Entrepreneurship and Innovation was published In Ecuador, which establishes for the first time the definitions and mechanisms for the creation, control, and procedures of SAS in Ecuador. On 25 September 2020, Simplified Stock Companies’ regulation was issued to establish the determining points of this type of companies.
DEFINITION OF A SAS
It is a type of authorized company in which the creation procedures and the costs associated with said procedures are simplified. Its objective is to formalize and regularize the enterprises, for which it was formalized in the Organic Law of Entrepreneurship in Innovation.
One of the advantages is that they favor simplifying the process, such as the preparation of deeds, additional notarial acts, face-to-face and limited acts that previously prevented the creation of new companies due to the lack of resources to be able to carry them out.
The SAS are companies born in response to a purely commercial need, and this situation limits the company’s ability to have financing resources such as entering the stock market. The solution to be able to quote would be to change the company’s name according to the requirements to be able to do so if the company so wishes.
REQUIREMENTS TO CONSTITUTE A SAS
The essential requirements to constitute a SAS are the following:
- Electronic certification of shareholders: It should be noted that, for this type of electronic documentation, it is necessary to previously obtain an electronic signature among the types of entities that provide this service of authorized electronic signatures are Central Bank of Ecuador, Security Data, AnfacAuthorities of Certification Ecuador CA and the Council of the Judiciary.
- Domain reservation: For this, it is necessary to previously create a user on the page of the Superintendency of Securities and Insurance Companies, or if you have one, enter the corporate sector, with the username and password, then choose the option to reserve a domain, enter the constitution option and follow the steps indicated by the system to generate a document, which must be printed at the end of the reservation process.
- Additional documentation: To finalize the process by the user, it is necessary to download and fill out the registration forms,such as the contract, appointments, and registration forms. Said documentation can be found on the Superintendency of Securities and Insurance Companies’ website when entering the “User Guide” It should be noted that all these documents must be signed electronically by the natural or legal persons that will make up the SAS. Later they will be sent to the email address of the corresponding office.
Once the previously indicated procedures have been complied with, a validation review will be carried out by the company registration area, which will be in charge of completing the registration process once all the documentation has been completed.
CAUSES OF DISSOLUTION
Unlike those of the other types of company or company names, an SAS’ recurring losses for at least the first five financial years are not considered as grounds for dissolution. However, the following points are considered as grounds dissolution:
1. Failure to comply for three financial yearswith the provisions of article 20 of the Companies Law, which indicates the following:
- Balance sheet, statement of profit and loss accounts, reports and reports of the administrators of inspection bodies duly approved by the General Meeting of Partners and Shareholders, as the case may be;
- Payroll of administrators, legal representatives and or partner and shareholders in accordance with international standards of transparency in tax matters and the fight against illegal activities;
- Other types of information requested by the control body.
2. Expiration of the term of duration of the SAS, indicated in the company’s bylaws unless an extension is established by means of registered documents before its expiration, and;
3. Bankruptcy order of the company, legally enforceable.
To these grounds for dissolution, all those provided by the Company Superintendent will also be added, as long as any of the following situations exist:
- Manifest impossibility of fulfilling the corporate purpose for which it was established, or when it is definitively impeded, due to factual or legal circumstances, from carrying out any operational activity;
- The activities for which it was established would have concluded when its statute would have limited its operational capacity to one or more business activities;
- Non-compliance with the Law, the regulations, resolutions,and other regulations issued by the Monetary and Financial Policy and Regulation Board or the Superintendency, as appropriate, or the bylaws of the company;
- Intervened companies that refuse to pay the auditor’s fees or do not provide the facilities for him to act;
- Impediment or difficulty for corporate control inspections, in accordance with the provisions of article 440 of the Companies Law;
- Has not overcome the causes that motivated the intervention of the company, after a report from the Superintendency’s control area recommending the dissolution; and
- According to its financial statements, the company records operating losses that amount to 50% or more of its equity.
If you need further information, please contact Mr. John Hidalgo, Director of AUDIT TAX CORPORATE (www.auditcorporate.com) via jhidalgo@auditcorporate.com
Written by Mr. John Hidalgo, Director of AUDIT TAX CORPORATE, a member firm of Allinial Global in Ecuador
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