Volume 6, Number 4, Page 4

Forming Companies in Latin America

By Noronha Advogados

With the development of Mercosur and with the opening of Latin American markets, foreign investors are more frequently forming new corporations as business associations with local companies to allow for better integration with the local market. The following article briefly reviews basic requirements to form companies in various Latin American nations.

In Argentina, the most common form of commercial legal entity is the S.A., incorporated with a minimum participation of two shareholders of any nationality and residence. Authorized capital must be paid in national currency in an amount equivalent to no less than US$12,000.00. There must be at least three directors, the majority of whom reside in the country. The directors need not be shareholders.

In Uruguay, an S.A. requires at least two shareholders of any nationality and residence. No minimum authorized capital amount is required but 50 percent must be subscribed, with 25 percent effectively paid in national currency at the time of incorporation. The S.A. must have at least two directors who need not be shareholders but must reside in the country.

Likewise, in Paraguay, the S.A. is the most typical form of incorporation. At least two shareholders of any nationality or residence are necessary. The authorized capital has no minimum limit but must be paid in full at the time of incorporation. The board of directors may be composed of any number of individuals but at least one director must reside in the country.

In Chile, essentially the same rules prevail, requiring that at least a third of the authorized capital be subscribed and paid in full at the time of incorporation. Comparatively, incorporation in Bolivia requires a minimum of three shareholders and that 50 percent of the authorized capital be subscribed, 25 percent paid in full at the time of incorporation.

Incorporation in Peru also requires at least three shareholders, that at least 25 percent of the authorized capital be paid at the time of incorporation, and resident directors. Similarly, in Colombia at least 50 percent of the authorized capital must be subscribed, 33.3 percent to be paid at the time of incorporation. There must be at least five shareholders.

In Venezuela, 100 percent of the authorized capital must be subscribed by the shareholders (at least two) with a minimum 20 percent paid-up at the time of incorporation.

In all of these countries, the Articles of Incorporation must be drawn up before a notary public and filed at the proper government offices of the Trade Board. As a general rule, incorporation takes thirty days to be completed and is relatively inexpensive.

Noronha Advogados is a law firm with offices in São Paulo, Rio de Janeiro, Brasília, Miami and London