Commercial Companies of Benefit and Collective Interest

commercial-companies-corporative-milton-carrera

The Superintendence of Companies, Securities and Insurance through resolution number SCVS-INC-DNCDN-2019-0021 published in the Official Registry number 107 of December 24, 2019 issued the instructions for the operation of the Commercial Companies of Benefit and Collective Interest. Below, we summarize its most relevant aspects:

  1. Any national company under control and supervision of the Superintendence of Companies, Securities and Insurance may voluntarily adopt the status of a Benefit and Collective Interest Company, without this implying a change in the type of partnership or the creation of a new partnership.
  2. To adopt the characterof a Benefit and Collective Interest Company , and thus develop its operational activities for the benefit of the interests of its partners or shareholders and is required to create a positive material impact, in the interest of the partnership and the environment at the same time. Companies must thus approve it through the general meeting of partners or shareholders with a majority representing at least two thirds of the subscribed or paid share capital, as applicable. The corporate bylaws must be amended, incorporating specific activities into the corporate purpose, through which these companies will fulfill the obligation to generate a positive social or environmental impact. Once the amendment of the bylaws is registered in the Mercantile Registry, the Benefit and Collective Interest Company will have the obligation to send said documentation to the Superintendence of Companies, Securities and Insurance for the corresponding update in the institutional database. Additionally, if the company considers it convenient, it may formalize the corporate action to change the company name and fulfill the other requirements established in the law, adding the expression “Company of Benefit and Collective Interest”, or the acronym B.I.C. to its denomination.
  3. In the companies in which the status of Benefit and Collective Interest Company is adopted, the dissenting or non-concurrent partners or shareholders of the general meeting that made said decision will have the right to separate from it, in the terms of article 333 of the Law of Companies (reimbursement of the value of its shares in accordance with the respective prepared balance sheet)
  4. The obligation to create a positive material impact on society and the environment may cover one or more of the following areas: a) governance, b) working capital, c) community, d) customers, and e) environment. Consequently, the administrators of a Benefit and Collective Interest Company must ensure compliance with the activities set forth in the statute, in one or more of these areas, in order to achieve the specific objectives incorporated in its social purpose.
  5. The area of ​​impact on governance is related to the corporate governance of companies. For such purposes, the administrators of a Benefit and Collective Interest Company may consider, among others, the following aspects:
    • The interests of the company and its partners or shareholders;The short, medium and long term consequences of decisions related to the operational activity of the company they represent;
    • The preservation and protection of the reputation and good name of the company;
    • The need to treat, in a fair and equitable manner, all partners or shareholders; and,
    • The expansion in the diversity of the administrative and supervisory composition of the company.
  6. The area of ​​impact on working capital will allow the administrators of the Benefit and Collective Interest Companies to consider the interests of their workers, considering among others the following aspects:
    • The establishment of reasonable compensation and analysis of wage gaps to establish fair standards in the collection of compensation;
    • The establishment of grants to train and professionally develop their working capital;
    • Promote the participation of workers in society, either through the acquisition of shares or shares, or by intervening in the company’s administrative bodies;
    • Determine flexibility alternatives for workers’ working hours, teleworking, or others, without affecting their remuneration;
    • Disseminate the company’s financial statements among its workers.
  7. The community impact area will allow administrators to consider, among others, the following aspects:
    • The need to foster social relations with the company’s creditors, suppliers and customers;
    • The impact of social operations on the community;
    • The effect of the operations of the company and its subsidiaries, if any, on the local, regional, national and even international economy;
    • The incentive of volunteer activities and the creation of alliances with foundations that support social work in the interest of the community as part of its social responsibility policy;
    • The main focus on contracting  services or acquiring goods of local origin or belonging to enterprises developed by women or ethnic minorities.
  8. The area of ​​impact on customers will allow administrators to address a social or environmental problem through, among other things, the following:
    • Provision of electricity or products that provide electricity, drinking water, affordable housing and other infrastructure;
    • Products or services that allow people to focus on income-generating activities such as computer, finance, mobile technology or services that optimize / increase business activities;
    • Products or services that improve the delivery of health services, health outcomes and healthy living, such as medicines and preventive health services;
    • Products and services that have an educational focus, such as schools, textbooks, media and independent arts, or preserve local culture, in the case of artisanal trade;
  9. The area of ​​impact on the environment will allow the administrators of a Benefit and Collective Interest Company, among other aspects, to consider the following:
    • Respect for the rights of nature enshrined in the Constitution of the Republic;
    • The impact of its operations on the environment;
    • The monitoring of gas emissions that cause a greenhouse effect;
    • The promotion of recycling or waste reuse programs;
    • The increase in the use of renewable energy sources and the implementation of energy efficiency measures.
  10. Annually, the legal representative of the Benefit and Collective Interest Company must prepare a management impact report choosing the most appropriate standards. It should give an account of the activities carried out to fulfill the obligation to create a positive material impact on society and the environment, the report must have a certification issued by an independent entity specialized in the fields that apply, and it will be presented to the general meeting for the purpose of acknowledgement and approval.
  11. The status of a Benefit and Collective Interest Company can be terminated by a modification of its bylaws, undoing the changes made to acquire said status. The corresponding resolution will be adopted by the general meeting of partners or shareholders with a majority representing at least two thirds of the subscribed or paid share capital, as applicable.
  12. If in the exercise of its control and surveillance authority, the Superintendence of Companies, Securities and Insurance verifies that the Company of Benefit and Collective Interest has not fulfilled its obligation to create a positive material impact on society and the environment in accordance with the provisions of its corporate purpose, or that its administrators have failed to comply with their obligation to prepare the management impact report, or who have breached the rules of this instruction, the Superintendence of Companies will proceed to notify the company of the violations in which it has incurred, so that within six months the company can rectify these breaches or modify its bylaws undoing the changes made to acquire the quality of a Benefit and Collective Interest Company.

If after this period, the company has not taken care of the notified breaches or modified its bylaws, it may be declared dissolved.

Milton Carrera
Senior Associate at CorralRosales
mcarrera@corralrosales.com

The Role of INEN in the Administrative Process for Regulatory Infringement

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The Ecuadorian Standardization Service (INEN) is part of the Ecuadorian Quality System and plays an important role in regulation, standardization and metrology. It also participates in administrative proceedings carried out by the Sub-Secretary of Quality for infringements.

INEN is responsible for conducting inspections to verify compliance with technical standards before and during an administrative proceeding. The first inspection, which can be ex officio or by complaint, is intended to determine the conformity or not of a product with the corresponding technical standards. If the result is “non-compliant”, the Sub-Secretary of Quality will bring a sanctioning administrative proceeding.

As an example, in the controls carried out in compliance with the Ecuadorian Technical Regulation RTE INEN 284 “Quantity of product in prepackaged / pre-encased”, a term of 30 days is granted for the company to amend or justify the nonconformities detected in the first inspection. At the end of the 30-day term, INEN carries out the second technical inspection and if the non-conformity still exists, the Sub-Secretary of Quality can apply the sanctions provided in the Law of the Ecuadorian Quality System.

The 30-day term granted to execute corrective actions is sufficient in the case of national products, but it is not sufficient for foreign products. This situation has caused several companies to be sanctioned without considering the time, costs, and other eventualities that importing products entails.

When applying sanctions, the Sub-Secretary of Quality takes into account the reoccurrence of such nonconformities, so it is very important that companies make the necessary changes and file the required technical justifications, as well as their legal arguments before the second verification.

As derived from the preceding paragraphs, the function of INEN is to ensure compliance with mandatory technical standards whose main objective is to protect consumers.

INEN is part of several international organizations and applies international standards or parameters in the controls it performs; an aspect that has contributed to the acquisition of new skills, the application of new guidelines, and the accumulation of experience in the execution of its work. This office has put emphasis on the above-mentioned quality controls, especially regarding the net content of a product. To do so, it has adopted a monthly schedule to perform random inspections and verifications for each type of product.

Miguel Maigualema
Asociado en CorralRosales
miguel@corralrosales.com

Ecuadorian IP Office Overturns Problematic Lower Instance Decision on Recognition of English Language Terms

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The territory of the Republic of Ecuador is predominantly Spanish speaking. Amerindian languages are also widely spoken, particularly provincially, but their use is gradually diminishing. Despite the dominance of Spanish in Ecuador, the English language is everywhere, and its influence could be said to be growing. This poses certain interesting questions from a trademark law perspective, since the general approach of the Ecuadorian IP Office is to consider terms in foreign languages as “fantasy terms”. That is, foreign language terms will not be considered as being understood by the general public, except in the case of the most commonly known words.

The stated position is more complex in practice when one considers that due to the continued encroachment of the English language throughout the American Hispanic region, generally accepted as even more marked than in the case of the Iberian-Hispanic world, the list of well-known English words is growing and therefore not a fixed concept. In addition, what is or is not a “well-known English word” is largely subjective, with such an assessment often being reduced simply to the personal experiences of the examiner in question. It should also be pointed out that levels of English competence vary greatly among Ecuadoreans, producing somewhat of a lottery in the application of this doctrine.

An interesting case arose a several years back in relation to DISCOVERY COMMUNICATIONS, LLC’s enforcement of its ANIMAL PLANET mark for its well-known television series and documentaries about wild animals and domestic pets. Specifically, CENTRO DE RADIO Y TELEVISION CRATEL C.A., the company behind a national television channel in Ecuador, applied to register MUNDO ANIMAL in Classes 35, 38 and 41 (‘mundo’ means ‘world or ‘earth’). DISCOVERY opposed the applications on the basis of their Ecuadorian registrations for ANIMAL PLANET in Classes 38 and 41.

The oppositions were initially refused, following which all cases were appealed. Upon appeal before the IP Committee in Class 35, the authorities referred to studies as to the penetration of the English language in various countries around the world, saying that it would be incorrect to state that English had penetrated Ecuadorian culture. From there the reasoning was somewhat confused, but it was understood that the authorities considered the terms ‘animal’ and ‘planet’ as not easily understood by the general Ecuadorian public. This was quite an astonishing finding given that the the word ‘animal’ is the same in Spanish as in English, and that the Spanish for ‘planet’ is ‘planeta’. Clearly, this was the wrong starting point for deciding the cases.

It should be pointed out though that above Committee level decision contained a dissenting judgement from one of the Committee members, setting out in no uncertain terms that ANIMAL PLANET would be easily understood by Spanish speakers. The Committee is made up of three members, therefore the opposition was still rejected by 2 to 1. Nevertheless, dissenting judgements are rarely seen within such decisions, and needless to say the dissenting voice was encouraging for DISCOVERY, who decided to further appeal.

A reconsideration motion was filed against the mentioned decision, which is a request for the relevant authority to review its prior finding. Within such action, in contrast to the previous instance the authorities acknowledged that the meaning behind the mark ANIMAL PLANET would be easily understood by general Ecuadorian public, given the Spanish translation of the same is essentially identical except for the addition of the extra letter ‘a’ within the Spanish word ‘planeta’. The Office then went to conclude that the terms MUNDO and PLANET relate to an identical concept, and therefore that there was a risk that consumers would be confused. This reasoning was then followed within the related matters in Classes 38 and 41.

While the Ecuadorian trademark authorities’ acceptance that the meaning of ANIMAL PLANET can be deciphered by the average Ecuadorian consumer represents a welcome return to common sense, the Office’s position as a whole is interesting since the respective marks are being used on television programmes for content relating to animals. That is, in terms of inherent distinctiveness, the marks are towards the lower end of the spectrum. In addition, ‘mundo’ is not in fact a translation of ‘planet’, but rather means ‘world’ or ‘earth’. Therefore, the decision highlights that even in the case of non-literal translations, a conceptual link can still be inferred and be sufficient for a finding of confusing similarity. CorralRosales agrees with the decision, since it reflects the reality in that translations themselves are not always literal or direct.

A similar article was published in WTR on January 16th. Click to read it.

Ian Wall
Associate at CorralRosales
ian@corralrosales.com

Temporary Tax

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Regulation NAC-DGERCGC 20-00000004 issued by the Internal Revenue Service and published on January 29, 2020 in the Supplement of the Official Registry 131 establishes the procedure for filing the tax return and paying the temporary tax.

The Regulation establishes that the temporary tax that must be paid on an annual basis on the fiscal years 2020, 2021 and 2022.

The taxable base is equal to the income obtained on the fiscal year 2018 -as registered in the income tax return or as established by the Tax Administration within an assessment procedure- less the exempt income and income not subject to income tax. To this amount the taxpayer should add or deduct, as appropriate, the adjustments for deferred taxes registered in the same fiscal year.

The following rates must be applied to the taxable base:

Taxable income from 

Taxable income until

Tax rate
US$1.000.000,00 US$5.000.000,00 0,10%
US$5.000.001,00 US$10.000.000,00 0,15%
US$10.000.001,00 Forward 0,20%

The value of annual each contribution cannot exceed 25% of the income tax generated in the fiscal year 2018.

Those taxpayers who did not generate income tax in the fiscal year 2018 are not required to file and pay the temporary tax return. The advanced income tax shall not be considered if the amount was higher than the income tax generated.

If the amount of the taxable income or the amount of the income tax declared in the income tax return filed for the fiscal year 2018 changes, a substitute tax return must be submitted.

If the entity is liquidated before the date on which the temporary tax return must be filed, the tax must be paid in advance with respect to the fiscal year in which the liquidation takes place. Entities liquidated until December 31, 2019 are not required to pay the temporary tax.

CORRALROSALES

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Law for Simplification and Progressivity of the Tax Regime

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Below we will analyse the Law for Simplification and Progressivity of the Tax Regime published on December 31, 2019 in the Supplement of the Official Registry 111, amended the Internal Tax Regime Law.

Dividends:

Dividends distributed to individuals with tax residence in Ecuador and entities and individuals located abroad are subject to income tax. Only dividends distributed to entities with tax residence in Ecuador or permanent establishments located in Ecuador are exempted from income tax.

The taxable income is equal to 40% of the dividend effectively distributed. The concept of global dividend is eliminated (dividend distributed plus taxes paid by the company) and consequently the tax credit for taxes paid by the company.

Dividends distributed to individuals with tax residence in Ecuador are subject to up to 25% withholding. The Tax Authority will issue a regulation establishing the withholding percentage applicable, according to the amount of the dividend.

Dividends distributed to entities and individuals residing abroad will be subject to 25% withholding tax. However, if the Ecuadorian entity that distributes the dividends fails to report its corporate structure, the withholding percentage applicable to the dividend paid abroad will be 35%.

It is ratified that the capital increase with retained earnings (stock dividend) will not be taxed.

Interest Expense:

In the case of interest paid by banks, insurance companies and entities of the financial sector of the Popular and Solidarity Economy:

Interest that exceeds the interest rate established by the Monetary and Financial Policy and Regulation Board will not be deductible.

The total amount of the loans granted abroad -directly or indirectly- by related parties, may not be greater than 300% of the entity equity. Interest paid or accrued with respect to credits that exceed this percentage will not be deductible.

In the case of interest paid by entities or individuals, the total amount of the net interest paid on loans granted by related parties must not exceed 20% of the entity´s profit before labor participation, plus interest, depreciation and amortization corresponding to the respective fiscal year. Interest paid or accrued that exceed this percentage will not be deductible.

Creation a temporary tax to be paid:

  • How much should be paid? 

Entities that perform economic activities and whose taxable income in fiscal year 2018 are equal to or exceeded one million dollars.

  • How much should be paid?

The amount to be paid must be calculated according to the following chart:

Gross taxable income
from (US$) 

Gross taxable income up
to
 (US$)

Rate
1.000.000 5.000.000 0,10%
5.000.001 10.000.000 0,15%
10.000.001 Onwards 0,20%

The amount of the tax shall not exceed 25% of the income tax generated in the fiscal year 2018.

  • When should the tax be paid?
When should the tax be paid? The tax shall be paid annually during the fiscal years 2020, 2021 and 2022, until March 31st of each year. Failure to submit the tax form within the deadline will be sanctioned with a fine equal to US$1,500.00 for each month or fraction of a month. The fine will not exceed 100% of the contribution.

Important reforms

  • VAT on digital services:

Digital services are subject to 12% VAT. The taxable event occurs when: In the case of import of digital services, the taxable event occurs when the importer of the service -an entity or permanent establishment located in Ecuador- pays the service provider. In the case of delivery of goods, the taxable event occurs when the importer pays for the delivery services of such goods. The VAT will be applicable over the amount of such delivery services.

The VAT on digital services will be applicable starting July 2020.

Web domain services, hosting and cloud computing services are subject to 0% VAT.

  • Foreign Exchange Control Tax:

The exemptions of foreign exchange control tax were amended as follows:

  1. Investments from abroad made in the Ecuador stock market. These investments may be made in equity securities or in fixed income securities.
  2. Dividends: Dividends paid to entities or individuals residing in tax havens is exempted. This exemption is not applicable if the dividends are distributed to foreign entities which shareholder –directly or indirectly- are individuals or entities with tax residence in Ecuador which are shareholders of the entity that distributed the dividend.
  3. Payments made abroad for financial returns, and capital gains derived form:
    • Investments from abroad made in the Ecuador stock market. These investments may be made in equity securities or in fixed income securities.
    • Securities issued by entities domiciled in Ecuador, that were acquired abroad, destined to finance housing, microcredit or productive investments.
    • Fixed-term deposits or investments made with resources from abroad in local financial institutions.

This exemption does not apply if the payment is made between related parties.

CORRALROSALES

Teleamazonas – Annual and/or monthly taxes apply from January 1st

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DETAILS

FECHA: 2-01-2020

CORRALROSALES IN THE NEWS:: 

-Andrea Moya

DATE: Teleamazonas

Our Partner, Andrea Moya, has been interviewed by the Teleamazonas news to explain the tax amendments introduced by the “Tax Simplification and Progressivity Law” and the date on which the amendments come into force.

“When taxes must be paid on an annual or monthly basis, the amendments entry into force from the first day of the following month. All amendments, in general, are effective as of January 1, with certain exceptions. The first exception is the distribution of dividends. This amendments entry into force on December 31,” Andrea Moya said in the interview.

Another of the points analyzed by our Partner was the amendment to the sub capitalization limit. “Previously, in credits between related parties you had a sub capitalization rule. Now this limit for interest expense changed to 20% of the profit. This should only affect contracts signed as of this date,” she explained. However, this has not been clarified in the law.

Another of the reforms that will come into force in 180 days, is the VAT for digital services, such as Uber or Netflix. “All the concepts that the law does not regulate specifically, the Tax Authority will have to issue a regulation” Andrea Moya points out during her interview.

All these changes could mean an amount of 600 million US dollars in revenue for the Government.

If you want to watch the video, press here

A Christmas Smile

Last Saturday, December 21, some members of the CorralRosales team volunteered at a Christmas party at San Vicente de Paúl Children’s Home. This state institution, managed by the Daughters of Charity of St. Vincent de Paúl Company, is responsible for the care and protection of up to 300 children between zero and twelve years of age.

CorralRosales firmly believes in corporate social responsibility; that is why we are always willing to be part of any humanitarian event or activity.

On this occasion, we decided to share our time, which is the most valuable thing we have. The volunteers of the CorralRosales team spent a day sharing activities, playing games and listening to these little children who need so much attention and love.

65 boys and girls from newborns to adolescents attended the event. They were able to enjoy an afternoon full of fun with a clown, magic tricks and live music. Together the CorralRosales team and the children sang the traditional Christmas carols, played with friends, and ate hamburgers and cotton candy; small pleasures the children thanked with smiles that lit up their faces as well as ours. And as it is to be expected at a Christmas celebration, Santa, Mrs. Clause and their helpers handed out gifts that included toys and clothes.

Without a doubt, it was an unforgettable and very emotional experience, not only for the little ones but also for the entire CorralRosales volunteer team. Having the opportunity to share time with these children reminded us of how fortunate we are and that we can find happiness in small things such as a smile, a hug or a laugh in the company of our friends.

Happy Holidays from the CorralRosales Team!

Public-Private Partnerships in Ecuador

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DETAILS

DATE: 11-12-19

CORRALROSALES IN THE NEWS: 

-Jimmy Rodríguez

Ecuador is committed to accelerate the construction of infrastructure and the provision of public services through Public-Private Partnerships (“PPP”). For this purpose, it is essential to plan and prioritize strategic projects by sector; a transparent and predictable legal framework; and, above all, an inter-institutional structure with defined competencies and with the capacity to coordinate, monitor, and control.

The State and the private sector can be complementary agents in the provision of goods, jobs, and services to citizens. One of the fundamental responsibilities of the central and regional governments is to provide high-quality infrastructure and public services in a timely manner. By associating with the State, the private sector contributes with capital, as well as experience and specific knowledge. This figure is known as Public-Private Partnerships.

Chile, Colombia and Peru have had PPP regulations and experiences for at least a decade. In Ecuador, the Law of Incentives for Public Private Partnerships and Foreign Investments was enacted on December 18, 2015. So far, several APP contracts have been signed between the Central Government and private[1] partners. As part of the National Development Plan, The Ministry of Transport has 5 road projects in public tender and 9 other projects on the agenda[2]. On the other hand, although there are some initiatives promoted by the private sector, it is still a pending task of the regional governments to crystallize projects through this instrument.

The PPP scheme ensures the legal stability of the contract and grants access to tax benefits for the private partner, such as income tax 10 year´s exemption, tax outflow (ISD) exemption on imports, financing and payment of dividends, and the reduction of tariffs and VAT applicable to imports related to the project. The applicable law provides the possibility to submit any dispute that may arise between public entities and private partners to a national or international arbitration process.

The timely execution of the projects and the absence of conflicts derives from the capacity of the State to coordinate and monitor the execution of the projects, and cooperation between institutions. For this purpose, the State should have adequate material and human resources to ensure the success of the projects.

Given that the State has limited and scarce economic resources, it is decisive that Ecuador maintains the incentives contained in the Law of Incentives for Public-Private Associations and Foreign Investments, and that it applies a modern and transparent system of PPP which will contribute positively to the development of the country.

If you want to read this article in Spanish, click here


[1] The relevant infrastructure projects are: Posorja Port, Bolívar Port ; Río 7 – Huaquillas Highway; Guayaquil viaduct; and, Chongón – Santa Elena road system.

[2] Ver: https://www.obraspublicas.gob.ec/asociacion-publico-privada-2013-2017_esp/ (2019-11-22)

Solidarity Bike Race

solidarity-bike-race

Last Sunday, the CorralRosales team participated in the Niños de María foundation solidarity bicycle race.

As it has already become a tradition, on November 24 the Niños de María foundation organized its eleventh cycling race. Under the name “Record Niños de María, pedaleando por la educación de 300 niños”, hundreds of participants gathered to raise funds to pay for food and education of 300 children.

The Niños de María foundation, created in 1994 as a non-profit Catholic foundation, welcomes the most vulnerable children in our society into their schools and programs such as: the sewing project “Hilando Futuro”, choir, symphonic orchestra or folkloric dance.

CorralRosales is very committed to social causes. Therefore, we wanted to support this great solidarity initiative taking part in it, since all the money raised from the race registration will be used to support the Niños de María foundation school and projects.

“We decided to participate in this event not only because it allows us to put in our grain of sand and contribute to a better society, but also because it helps us strengthen ties between coworkers in a healthy environment,” says Verónica Fernández, Director of Human Resources of the firm.

The CorralRosales team, who wore a specially designed shirt for the occasion and competed under the business category of the race, was made up of both partners and administrative staff of the firm, and their families. The race route was 21-kilometer long and took place in the Chaquiñán de Cumbayá.

After the race, the team met again and was able to share some of the experiences and anecdotes of the day. Despite the fatigue from the race, everyone agreed with the words of one of the Partners of the firm, Francisco Gallegos: “It has been a pleasure to be able to enjoy an activity with family along with coworkers. Without a doubt an incredible experience that we recommend and that, of course, we are looking forward to repeating”.

solidarity-bike-race

solidarity-bike-race

solidarity-bike-race

solidarity-bike-race

solidarity-bike-race

Idealex – Technological Tools in the Workplace

technological-tools-edmundo-ramos-rafael-serrano-idealex

DETAILS

FECHA: 24-11-19

PROFESIONALES EN LA NOTICIA: 

-Edmundo Ramos
-Rafael Serrano

MEDIA: Idealex

Most companies provide their employees with technological tools (“ICTs”) such as corporate email, mobile phone, and computers in order for them to fulfill their tasks. It is common for the worker to use them for personal purposes, resulting in situations of unauthorized use of work ICTs, or the incorrect handling of information owned by the employer.

Since the employer is the owner of the ICTs, he may establish limits for the proper use of them. Article 46 of the Ecuadorian Labor Code does not establish any laws regarding the treatment of information and the consequent right of the employer to access and control it. Nevertheless, the employer must respect constitutional rights granted for the protection of data, correspondence and privacy. 

The right to inviolability and secrecy protects the communications made by the worker. For this reason, the employer will not be able to access email or information contained in the company’s computer or cell phone without the worker’s consent.

Communications can also be protected by the constitutional right to personal data protection: “The right to personal data protection, which includes access to and decision on information and data of this nature, as well as their corresponding protection. The collection, archiving, processing, distribution, or transferring of this data or information will require the authorization of the holder or the mandate of the law.”

Personal data is all the data or information that makes a person identifiable. In general, corporate emails refer to names, surnames, or positions of the person to whom the email is assigned, just as the cell phone number is linked to a specific person. The definition of personal data would include both the email and the cell phone number. Therefore, since this information can be considered as personal data, the authorization of the holder is required to access and review this information. 

Finally, the right to privacy also protects the use and access to ICTs. The American Convention on Human Rights recognizes this right, which provides the following: “No one can be subjected to arbitrary or abusive interference in his private life, his family, his home or his correspondence, nor of illegal attacks on his honor or reputation.”

The Inter-American Court of Human Rights has indicated, “… The scope of privacy is characterized by being exempted and immune from abusive or arbitrary invasions or attacks by third parties or the public authority.” The right to privacy would apply to personal communications made by the worker using work ICTs.

The rules that define the use and control of technological tools must be in writing in the different legal documents of each company, in order to have the necessary support to sanction their misuse:

Employment Contract: the employer must establish in the employment contract the delivery of technological tools and the use of them. The contract shall also recognize the rights of the employer to recover the ICTs and obtain a backup of the information contained therein.

Internal Work Regulations: It is essential to incorporate in this document, rules that regulate the use of technological tools. Employers may establish sanctions in their Internal Labor Regulations for their misuse or the inclusion of employee’s data and personal information. The internal regulation must establish the ownership of the information contained in these tools, as well as the periodicity for monitoring or supervision.

Internal Policy of the Company: these documents must explain the rights and obligations that the workers have regarding the ICTs. The policies shall establish the right of the employer to access and obtain copies of all the information within these technological tools. Workers must be notified and informed to the worker.  

Delivery / Receipt certificate: At the time the technological tools are delivered, the employer must establish the limitations and conditions under which the tools are delivered. It is important to detail the physical state and the data content of the tools so that, at the time of their return, the worker is responsible for any deterioration not attributable to their normal use.

Training: The employer shall conduct training for workers regarding the importance and limitations of the use of technological tools.

In conclusion, technological tools facilitate the execution of the functions performed by the workers, but their use must be regulated in detail so that both the employer and the worker know the limits and the sheer work-related purpose that must be given to them. The adequate protection of the company’s ICTs and information that they contain will be possible only if there is clarity in the rights and obligations regarding the use of such tools.

Edmundo Ramos’s Bio:

Edmundo Ramos is a partner at CorralRosales. He has more than twenty-five years of expertise representing local and international clients in labor and social security matters. Edmundo leads the CorralRosales Labor Department and participates actively in the area of ​​Dispute Resolution in the management of labor disputes.

Rafael Serrano’s Bio:

Rafael Serrano is an associate at CorralRosales. He has more than five years of expertise in the TMT industry. He leads the Data Protection Department with an emphasis on personal data protection, electronic commerce, and emerging technologies.

If you want to read this article in Spanish, click here