Types of Bussines Organizations

TYPES OF BUSINESS ORGANIZATION Main forms of business There are several different legal vehicles for companies or individuals in Chile. In the vast majority of cases, the form of organization can be freely chosen, with the exception of specifically regulated business areas such as banking, financial services, insurance companies, some public service providers, pension fund management and other activities for which the law determines the legal structure to be implemented. The following is a brief description of the most frequent corporate structures used by foreign investors for the development of their activities in Chile Local representatives Foreign investors and companies can operate in Chile through one or more representatives domiciled in Chile. The appointment of a representative must be contained in a deed in which the parties, indicating the authority or power of representation granted to the representative, may freely agree under the terms and conditions. The representative must include a resident in Chile in order to be notified by the Internal Revenue Service (Servicio de Impuestos Internos) of any tax obligation applicable to the foreign investor or business. Branch or agency of a foreign company Foreign companies can establish a branch or agency in Chile, which has to be considered as the foreigner itself and not as a different entity, so any and all rights and obligations of the branch in Chile are considered as rights and obligations of the foreign entity. This option is available for companies incorporated abroad as corporations, partnerships, limited liability companies, or any other permitted corporate entity, and requires the foreign company to fulfill some basic requirements of incorporation in the country and to appoint a resident in Chile as an agent in Chile, with sufficient powers of representation to conduct the company’s business. The incorporation of a subsidiary in Chile Different corporate structures in our regulation are available to any foreign investor willing to incorporate a subsidiary in the country. They differ in aspects such as limitation of liability, freedom to transfer your rights or shares, management, minimum and maximum number of partners / shareholders, distribution of profits, separation of business lines within the company, etc. The most common types of companies used by foreign investors and their main characteristics are as follows: Limited Liability Companies A minimum of 2 members is required, with a maximum of 50 members. The partners have no responsibility for the obligations of the company. To transfer the rights in the capital of the company a modification of the statutes executed by all the partners is required. The management of the company can be freely agreed upon by the partners; it can be entrusted to one or more partners, a board of directors or another person. Depending on the type of management chosen, changes in it may require a modification of the statutes. The profits can be distributed among the partners, as they freely agree. Unless the partners agree otherwise, the profits must be distributed among the partners in accordance with their proportionate share. Corporations – A minimum of 2 shareholders is required. In the case of a corporation having more than 500 shareholders or if not less than 10% of its shares are owned by 100 shareholders or more (except those owning 10% or more), it has to be registered before the first Securities and Insurance Superintendence (Superintendencia de Valores y Seguros) now National Financial Market Commission (Comisión de Mercado Financiero -CMF) and listed in a local stock exchange, becoming an open corporation. – The shareholders have no responsibility for the obligations of the company. – The shares can be freely transferred, unless the shareholders agree otherwise. – Management corresponds to a board of directors with at least 3 members (for listed companies a minimum of 5 or 7 directors is required, depending on the annual income of the company). – Board members are appointed by the shareholders at the annual meeting of shareholders. – Shareholders’ meetings are held at least once a year. – Profits must be distributed according to the participation of each shareholder. At least 30% of the annual income must be distributed among the shareholders, unless otherwise unanimously agreed upon. Companies by Shares (SpA) Only one shareholder is required. In case