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Decree Law for strengthening the family economy

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On May 17, 2023, the President issued the draft of the Decree-Law for Strengthening the Family Economy. This Decree-Law will enter into force once the Constitutional Court issues a favorable opinion. A public hearing is scheduled for June 6, to analyze this matter. The following is a summary of the most relevant issues:

1. Individuals Income Tax

Increases the amount that individuals may apply as a rebate for personal expenses with respect to the income tax incurred, according to the following detail:

a. Individuals without family dependents: the amount of the rebate will be equal to 18% of the lower value resulting from the personal expenses declared in the respective fiscal year and the value of the basic family basket (US$764.71 for 2023) multiplied by 7.

b. Individuals with family dependents: the amount of the rebate will be equal to 18% of the lesser value resulting from the personal expenses declared in the respective fiscal year and the value of the basic family basket multiplied by the applicable number, according to the following table:

Family dependents are parents, spouse or common-law partner and children up to 21 years of age or disabled of any age; if they do not receive taxable income and are dependent on the taxpayer.

c. Individuals who have dependents with catastrophic, rare and/or orphan diseases: the amount of the rebate will be equal to 18% of the lower value resulting between the personal expenses declared in the respective fiscal year, and the value of the basic family basket multiplied by 20.

If the value of the rebate exceeds the amount of the tax incurred, there will be no refund of the excess.

The income tax table is replaced by the following, which reduces the tax burden for individuals:

The provisions related to the rebate for personal expenses and the table for calculating income tax for individuals will be applicable as from the current fiscal year 2023.

2. Sole Income Tax on Sports Betting Operators

The “Single Income Tax on Sports Betting Operators” is created. The taxable event is receiving Ecuadorian source income derived from sports betting activities carried out live, through internet or any other means.

The taxpayers are:

a. Individuals or entities with tax residence or permanent establishment in Ecuador that carry out sports betting activities.
b. As substitute taxpayers, users of sports betting platforms when the operator does not have tax residence or permanent establishment in Ecuador.

The tax rate is 15% of the taxable base. The taxable base will be calculated according to the following:

a. Operators with tax residence in Ecuador: The taxable base will be equal to the total income (including commissions) minus the total prizes paid in the same period. Prizes will be deducted from the taxable base if 15% of the value of the prize has been withheld.

b. Non-resident operators: The taxable base will be equal to the total amount paid by the user in each transaction, i.e., the total value of the bets. If the bet is made through an intermediary, the intermediary must collect the tax from the user and pay it to the Internal Revenue Service.

The beneficiaries of the prizes will pay a 15% tax on the value of each prize received, in cash or in kind.

The Single Income Tax for Sports Betting Operators will become effective as of January 1, 2024.

3. Simplified Regime for Entrepreneurs and Popular Businesses (RIMPE)

The following are excluded from the RIMPE Regime:

a. Those taxpayers engaged in the production, importation and/or first stage of commercialization of goods or rendering of services taxed with Special Consumption Tax (ICE).
b. Taxpayers who carry out economic activities excluded from the RIMPE regime, even when they simultaneously carry out non-excluded activities.
c. Taxpayers qualified as artisans.

Taxpayers subject to the RIMPE regime will pay the tax according to the following progressive tables:

If, at the end of the fiscal year, the taxpayer had gross income over USD$300,000.00, it must file and pay income tax under the general regime. Prior to this reform, the taxpayer had to apply the general regime in the following year.

The period for the liquidation and payment of income tax corresponding to the RIMPE regime is extended from March to June of each fiscal year.

With respect to Value Added Tax (VAT), the transfer of ownership of tangible property, rights and the rendering of services carried out by popular businesses will be taxed at a 0% VAT rate.

Payments made to taxpayers categorized as popular businesses will not be subject to income tax withholding. In the case of payments made to entrepreneurs, the Internal Revenue Service will determine the income tax withholding percentages.

 

Andrea Moya - CorralRosales - Lawyer Ecuador

Specialist in Tax Law
Andrea Moya, partner at CorralRosales
amoya@corralrosales.com
+593 2 2544144

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NOTE: The above text has been prepared for informational purposes. CorralRosales is not liable for any loss or damage incurred as a result of acting or failing to act on the basis of the information contained in this document. Any additional determined situation requires the specific opinion and concept of the firm in Quito / Guayaquil, Ecuador.

CORRALROSALES

Beginning of the sanctioning regime of the Organic Law on Personal Data Protection

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On May 26, 2021, the Organic Law for the Protection of Personal Data (the “LOPDP“) entered into force with its publication in Official Gazette Supplement 459. However, the sanctioning regime began to apply as of May 26, 2023, as established in the First Transitory Provision: “(the…) provisions related to the corrective measures and the sanctioning regime will enter into force two years after the publication of this Law in the Official Gazette”.

In the course of this time, whoever oversees the processing of personal data had to adapt its activities to the precepts established in the LOPDP, whose purpose is to protect the fundamental rights and freedoms of data owners and their right to the protection of personal data.

The process of adapting to the new information processing depends on the type of company (public entity, multinational, SME, self-employed, among others) and, above all, on the types of data processed (health data, credit data, data of children or adolescents).

The main obligations of companies are summarized below:

1.    Scope of application of the LOPDP:

•    The law is applicable to any processing of personal data, whether in physical or digital format, including its automation and any additional use.

•    Both legal and natural persons, public or private, must comply with the obligations imposed by the LOPDP.

2.    Individuals involved in data protection:

•    The controller is the person, natural or legal, who decides on the purpose and treatment of the personal data collected.

•    The processor is the person who provides a service to the controller that involves the processing of personal data in the name and on behalf of the Controller.

•    The data subject is the natural person whose data is subject to processing, such as name, surname, ID card number, health data, religion, credit data, gender, ethnicity, fingerprint, among others.

3.    New obligations:

The LOPDP obliges to include new warnings, for example: the legal basis for data processing or data retention periods. In addition to the following:
•    Consent: this must be a free, specific, informed, and unequivocal manifestation. This implies that the data controller must be able to prove that it had the consent of the data subject.

•    Relationship between data controllers and data processors: describes the type of contract between the data controller and the data processor. It specifies the obligations of both parties for the provision of the agreed service.

•    Risk analysis: those who process data must carry out a risk analysis on the processing of data, before implementing its use, to minimize the impact, it may have on data subjects.

•    Rights: provides data subjects with a series of rights to ensure data protection, such as: access, rectification, erasure, opposition, portability, not be subject to a decision based solely or in part on automated assessments, among others.

•    Data Protection Officer (“DPO”): those who process personal data, depending on the volume, category, and treatment of data, must appoint a DPO who will be the one to carry out a permanent and systematized control of personal data.

4.    Data Protection Authority (“DPA”):

The LOPDP provides for the creation of the Superintendence of Personal Data Protection, which will oversee the correct application of the law.

5.    Corrective actions:

The DPA shall take corrective measures to prevent further infringement. These measures could be:

•    Cessation of processing.
•    Erase of the data.
•    Imposition of technical, legal, organizational, or administrative measures.

6.    Sanctioning measures:

Establishes an administrative regime whereby there are minor and major offenses. The fines are based on the volume of business:
•    Minor offenses: are sanctioned with fines that go from 0,1% to 0,7%.
•    Major offenses: are sanctioned with fines that go from 0,7% to 1%.

So far, the regulation to the LOPDP has not been issued, nor has the DPA been appointed. However, as the sanctioning regime is already in force, those who use personal data must implement data processing policies and data protection measures to avoid fines.

CorralRosales has formed a team specialized in data protection to provide legal advice and consulting. LOPDP compliance audits are performed, as well as documents related to personal data protection.

Rafael Serrano, asociado de CorralRosales, con traje y corbata. En el fondo, una parte de Guayaquil (Ecuador)

Specialist in Data Protection Law
Rafael Serrano, associate at CorralRosales
rserrano@corralrosales.com
+593 2 2544144

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NOTE: The above text has been prepared for informational purposes. CorralRosales is not liable for any loss or damage incurred as a result of acting or failing to act on the basis of the information contained in this document. Any additional determined situation requires the specific opinion and concept of the firm in Quito / Guayaquil, Ecuador.

CORRALROSALES

Ecuador’s PDPL: challenges of the entry into force of its sanctioning regime

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DETAILS

DATE: 23-05-2023

PROFESSIONALS INVOLVED IN THE ARTICLE:

–Rafael Serrano

MEDIA:

– IAPP

The entry into force of the EU General Data Protection Regulation in May 2018 prompted the creation and adaptation of different regulations on personal data protection worldwide. Ecuador was no exception, and on May 26 2021 the Organic Personal Data Protection Law (PDPL), the first law in Ecuador focused exclusively on regulating and guaranteeing personal data protection, entered into force.

Two years later, as stipulated by law, the corrective measures and the sanctioning regime have come into force. Our associate Rafael Serrano writes on this matter in IAPP.

Serrano points out that “as of May, and since the publication of the PDPL, and private entities have been obliged to undertake adaptation processes that have meant significant challenges for them, which have deepened due to the lack of regulation for the application of the PDPL, as well as the lack of creation and designation of a data protection authority”.

These difficulties, he says, “added to the technical, legal and procedural actions the regulated entities adopted, have undoubtedly generated great uncertainty regarding compliance with and application of the PDPL”.

As of May 26, according to Serrano, “a new stage in the protection of personal data in Ecuador will begin. The risks can be significant, as fines can reach up to 1% of the fiscal year’s turnover immediately before the fine’s imposition”.

He states that the law generates a new regulatory regime that positions Ecuador at an international level since, even with all the risks mentioned above, it also presents great opportunities.

“Compliance with this regulation will improve processes and information systems, and help Ecuadorian companies strengthen their corporate images in the international market. In this sense, companies must begin to mitigate risk by implementing certain documents and security measures”.

If you want to read the complete article, click here.

Constitutional opinion of the veto to the bill that reforms the Organic Law of Regulation and Control of Market Power

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Recorte de "The Legal Industry Reviews", el artículo escrito por Christian Razza

DETAILS

DATE: 10-05-2023

PROFESSIONALS INVOLVED IN THE ARTICLE:

–Christian Razza

MEDIA:

– The Legal Industry Reviews

On January 21, 2023, President Guillermo Lasso Mendoza filed a partial objection for unconstitutionality to the “Draft Organic Reformatory Law of Various Legal Bodies, for the Strengthening, Protection, Impulse and Promotion of Popular and Solidarity Economy Organizations. Artisans, Small Producers, Micro-enterprises and Enterprises” (“Bill”). Our associate Christian Razza writes about it for The Legal Industry Reviews (LIR).

Razza recalls that on March 1, 2023, the National Assembly informed the Constitutional Court (“Court”) of the presidential objection, so that it may issue the respective opinion on the constitutionality of this norm that reforms the Organic Law of Regulation and Control of Market Power (“LORCPM”).

In this regard, it adds that on March 30, 2023, by means of Opinion No. 2-23-OP/23, the Court resolved the partial presidential objection on grounds of unconstitutionality, declaring the objections filed against:

1. Conferring to the Superintendency for the Control of Market Power (“SCPM”) the competence to regulate the modification or elimination of public aid and pricing policies.

In this regard, Razza emphasizes that “the Court pointed out that these provisions contravene Articles 132 paragraph 1, 147 paragraph 3 and 213 of the Constitution of the Republic of Ecuador (“CRE”) since the creation, definition, elimination and modification of any type of pricing policies and public aid are not within its competence”. 

2.Granting the SCPM the power to issue recommendations on the modalities of competition in the markets of a binding nature only for public entities.

Razza points out that “paragraph 17 of the second reforming provision of the Bill allows the SCPM to review in a binding manner the pricing policy implemented by the Executive Branch”.

Therefore, the Court points out that “the Court states that granting the SCPM’s recommendations the ‘binding’ character implies that it is attributed a competence that exceeds the provisions of Article 213 of the CRE for the cases of the superintendencies. Consequently, it resolves that the recommendations coming from the SCPM must have only an optional character”.

If you want to read the complete article, click here.

Dissolution of Congress

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In application of the powers conferred by Article 148 of the Constitution, the President of the Republic issued Decree No. 741 (the “Decree”) whereby the President dissolves Congress and ordered the National Electoral Council to call for legislative and presidential elections to complete the current respective terms.

The aforementioned powers allow the President to dissolve Congress when, in his opinion, there is a “serious political crisis and internal commotion”. It does not require the prior determination of the Constitutional Court and may be exercised only once during the first three years of office.

The National Electoral Council, within a maximum term of 7 days after the publication of the Decree, will call for legislative and presidential elections for the remainder of the current term, which ends in May 2025.

To sum up,  i) the President has made use of a constitutional power expressly contemplated in Article 148 of the Constitution; and, ii) in approximately 6 months a new President and Vice President of the Republic and members of Congress will take office, for a term to end in May 2025. In the meantime, the President remains in office and may issue economic decree laws, with the approval of the Constitutional Court.

Xavier-Rosales-abogados-ecuador

Leader of the Competition, Corporate and M&A areas
Xavier Rosales, partner at CorralRosales
xrosales@corralrosales.com
+593 2 2544144

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NOTE: The above text has been prepared for informational purposes. CorralRosales is not liable for any loss or damage incurred as a result of acting or failing to act on the basis of the information contained in this document. Any additional determined situation requires the specific opinion and concept of the firm in Quito / Guayaquil, Ecuador.

CORRALROSALES

Ecuador China Free Trade Agreement

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On May 10 and 11, 2023 – due to the time difference – Ecuador and China signed a Free Trade Agreement focused on the commercial exchange of goods and e-commerce.

During 2022 Ecuador exported to China around US$5,823 million in products such as shrimp, lead and copper concentrate, other mining products, bananas, balsa, wood, cocoa, among others. China exported to Ecuador approximately US$6,353 million in products including metal products, vehicles, automobiles, cell phones, computers, among others.

Once the treaty enters into force, Ecuador’s products will have access to a market of 1.4 billion consumers and will be subject – for the most part – to immediate tariff relief. Ecuador’s tariff relief for Chinese products is subject to percentages and deadlines depending on the goods. With this, Ecuador will compete with countries such as Peru and Central America that already have a treaty with the Asian country.

The treaty will become effective once it complies with the respective legal process, which includes the pronouncement of the Constitutional Court, approval by the National Assembly, and publication in the Official Gazette.

In the following link you can review the complete text in Spanish:
https://www.produccion.gob.ec/wp-content/uploads/2023/05/FTA-ECUADOR-CHINA-SPANISH.pdf

New definition of strategic medicines

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Boletín general de CorralRosales - Foto edificio con cristalera

The Regulation STFP-009-725-2023 of March 15, 2023 (the “Regulation”), issued by the Board for Fixing and Reviewing the Prices of Medicines for Human Use and Consumption (the “Board”) approved the new definition of strategic medicines, effective as of March 30, 2023.   

According to the Regulation, strategic medicines will be those subject to any of the following criteria:

a.    Medicines included in the National List of Basic Medicines (“CNMB”), except those included in the “List of OTC Medicines” published by the National Agency of Regulation, Control and Sanitary Surveillance (“ARCSA”)
b.    CNMB medicines, except those in which the number of competitors allows the release of its price.  
c.    Medicines that the Ministry of Public Health considers necessary for managing health strategies, programs, plans, and projects, including treating chronic, rare, catastrophic, and orphan diseases.
d.    Medicines not appearing in the CNMB and whose acquisition has been authorized under Ministerial Agreement No. 18 published in the Official Gazette Supplement 573 of November 9, 2021 (or the norm that replaces it). 
e.    Medicines that the Superintendence of Control of Market Power qualifies as monopolistic or have relevant restrictions to competition.  
f.    Medicines containing active ingredients that have not been marketed in Ecuador. 

Additionally, the Regulation establishes that:

i.    As of March 30, 2023, medicines included in ARCSA’s “List of OTC Medicines” will belong to the price-released regime. 
ii.    Until April 21, 2023, holders of valid sanitary registrations shall report to the Technical Secretariat of the Council (the “Secretariat”) the units sold and the retail price marked on the packaging to determine the medicines that will be under the constant criterion in paragraph b.
iii.    Until June 30, 2023, the Secretariat must generate the methodology to determine the medicines to be covered by the criteria in paragraph b and send it to the Council for approval. After approval, the Secretariat will have one month to submit to the Council the technical reports for issuing the list of medicines that will meet the indicated criterion.
iv.    Until June 30, 2023, the Secretariat must submit to the Council the technical reports for issuing the list of medicines that will be subject to the price-regulated regime based on this new definition.
 

Mario Fernández - Boletín CorralRosales - Derecho Corporativo - Contratación Pública - Sector Eléctrico - Ecuador

Specialist in Corporate and Public Contracting Law
Mario Fernández, associate at CorralRosales
mfernandez@corralrosales.com
+593 2 2544144

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NOTE: The above text has been prepared for informational purposes. CorralRosales is not liable for any loss or damage incurred as a result of acting or failing to act on the basis of the information contained in this document. Any additional determined situation requires the specific opinion and concept of the firm in Quito / Guayaquil, Ecuador.

CORRALROSALES

Important Amendments to The Law on Companies No.2

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Boletín societario de CorralRosales - Foto edificio con cristalera
In our corporate bulletin of the 22nd of this month we summarized the amendment of the Law on Companies for the Optimization and Promotion of Business and Corporate Governance. Below, we include other important amendments: 


a) Acquisition of treasury stock: The acquisition of treasury stock by a corporation has long been authorized by the Law on Companies. This amendment adds the following: (i) funds from net profits, statutory reserves or contribution of money or assets of the company may be used for the acquisition (previously only net profits could be used); (ii) the economic and political rights of the shares acquired by the company are suspended until the shares return to circulation, in which case the transferee is entitled to exercise them; and (iii) the shares must be disposed of within a maximum period of five years from their acquisition, otherwise they will be redeemed through the corresponding share capital reduction. 

b) Action for oppression of minority shareholders: A new action is created that may be brought by minority shareholders (understood as those who do not have control over the company) against majority shareholders for conducts that violate their rights under the law.
c) Agreements between directors/shareholders and the company: The transfer or encumbrance of assets in favor of the director or a shareholder, the acquisition of personal property of the director or a shareholder, and any other act or contract entered into between the company and the director, require the prior approval of at least 75% of the capital attending the respective shareholders’ meeting. The directors or shareholders involved may not vote.    

d) Transformation into a S.A.S.: Any legal entity of any nature (including non-commercial organizations), and contractual partnerships, may transform into a simplified stock corporation (S.A.S.).

e) Corporate acts that require prior approval: In corporate acts that require prior approval by the Superintendence of Companies (capital decrease, merger, spin-off, among others), the review will be formal, only referring to the legality of the acts, without the need for a prior inspection for their approval or registration, unless there is a request from a shareholder. The minutes of the shareholders’ meeting must include a statement from the shareholders and the legal representative of the veracity and authenticity of the information provided. The Superintendence of Companies may carry out an inspection process within seven years after the approval of the corporate act.

f) Expedited cancellation: The expedited cancellation process is created, by means of which, when the company demonstrates that it has no outstanding obligations with the Superintendence of Companies, it may request the Superintendent to declare the company dissolved and cancel its registration in the Commercial Registry or the Superintendence’s Companies Registry, as the case may be, by means of a resolution. For this purpose, the Superintendent will not require the filing of corporate or accounting records, but instead, a statement of the veracity and authenticity of the information provided and that the final balance sheet is supported by the respective corporate and accounting records must be included in the minutes of the meeting. Although the Superintendence of Companies may not require the filing of compliance certificates with other governmental entities in order to issue an expedited cancellation resolution, they may verify, on their own means, the compliance of obligations with such entities. 

g) Corporate groups: With respect to corporate groups, the following are particularly noteworthy:


a. In the case of a corporate group with subsidiaries, both the managers of the subsidiaries and those of the parent company must submit a special report to the annual general shareholders’ meeting, in which the intensity of the economic relations existing between the parent company and the subsidiaries shall be detailed, that is, a detail of the most important transactions between the parent company and its subsidiaries or carried out in the interest of the parent company and/or the subsidiaries.

b. When the bankruptcy of a subsidiary company is caused by the actions of the parent company or its controlling companies, the parent company, its controlling companies or any of its subsidiaries or related companies shall be liable, on a subsidiary basis, for the unpaid claims of the bankrupt company.

c. The arbitration agreement entered into by one or more companies of the corporate group shall be binding for the other companies of the group, when, due to their role in the signature, performance or termination of the agreements which contain such arbitration clauses, the non-signatory companies are considered parties to the arbitration agreement.

d. If the parent company owns all the shares or units issued by a subsidiary company, the members or shareholders of the parent company may authorize, at a general shareholders’ meeting, the transfer or encumbrance of the corporate assets of the subsidiary.

h) Consultations to the Superintendence of Companies: Companies may submit consultations to the Superintendence of Companies on matters related to their area of competence. The answer to a consultation shall contain general opinions on matters legally supervised by the Superintendence of Companies. Consequently, the criteria derived from a general pronouncement may not be related to a particular company or situation.

i) Corporate acts approved by the shareholders’ meeting: The corporate acts of all companies must be instrumented in the same fiscal year in which the shareholders’ meeting resolved them. Otherwise, a new resolution of the shareholders’ meeting ratifying such decision will be required.

Foto cuadrada de Milton Carrera, socio junior de CorralRosales

Specialist in Corporate
Milton Carrera, junior partner at CorralRosales
mcarrera@corralrosales.com
+593 2 2544144

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NOTE: The above text has been prepared for informational purposes. CorralRosales is not liable for any loss or damage incurred as a result of acting or failing to act on the basis of the information contained in this document. Any additional determined situation requires the specific opinion and concept of the firm in Quito / Guayaquil, Ecuador.

CORRALROSALES

Antimicrobial Resistance – “One Health” Approach

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Foto de Bryan Yanzza más el nombre de su artículo más reciente

The purpose of antimicrobial drugs is to combat diseases that can be of bacterial, viral and parasitic origin.  But when they are misused or overused, these microorganisms can mutate genetically causing resistance to these drugs[1]. Antimicrobial Resistance (AMR) is a serious global threat to human and animal health, affecting food safety, food security and the economic well-being of millions of small and large-scale agricultural productions[2].

AMR is considered a multisectoral problem of great importance worldwide, which is why health organizations such as the Food and Agriculture Organization of the United Nations, the World Organization for Animal Health and the World Health Organization created the “One Health” approach. This approach is implemented to have a better coordination and elaboration of programs that comprise the interface between human and animal health, food production and agro-ecological environments, with the purpose of preventing and being prepared for future threats, such as zoonotic diseases, food safety and AMR.

AMR is considered a major threat to modern medicine and to the sustainability of an effective response to the threat of infectious diseases. For such reason the World Health Assembly, in May 2015, adopted the Global Action Plan on Antimicrobial Resistance, where five objectives were established : (i) to have better communication and education on antimicrobial resistance with the aim of creating understanding and awareness of the issue; (ii) to strengthen this knowledge through surveillance and research; (iii) to reduce the incidence of infections by implementing effective biosecurity, hygiene and infection prevention measures; (iv) to optimize the use of antimicrobial drugs in human and animal health; and (v) to intensify sustainable projects and investments for the development of new drugs, vaccines and diagnostic means[3]. 

This resolution commits the member countries to develop national and multisectoral action plans with a “One Health” approach, which is why in Ecuador the National Plan for the Prevention and Control of Antimicrobial Resistance was established to fight AMR and to have national action plans harmonized with the global action plan.

In order to establish a national plan, it is of vital importance to know the consumption data of antibiotics generally used in infectious diseases, both in humans and animals. Ecuador does not have this information, so it is hypothesized that the indiscriminate and inappropriate use of antibiotics has caused serious consequences such as increased morbidity and mortality of patients suffering from infectious processes, as well as an increase in the cost of health care due to the search for options that can combat infectious diseases with antibiotics that do not present resistance and that do not determine a high cost[4].

The Ecuadorian State has been working against AMR since 2017, through the Ministry of Health and the Ministry of Agriculture and Livestock, executing the National Plan for the Prevention and Control of Antimicrobial Resistance. The focus is the rational use of antimicrobials and effective sanitation measures to reduce the incidence of infections, involving health technicians from Health, Agriculture, Environment, Aquaculture and Fisheries, with the aim of integrating and working together to seek mechanisms to help mitigate AMR. This, through analysis and research work in the laboratory and in the field with activities that help to socialize and raise awareness of this problem to all those involved, especially those who are linked to food, animal health, environment and human health[5].

The Agency for Phytosanitary and Zoosanitary Regulation and Control AGROCALIDAD is responsible for regulating the registration of companies and products for veterinary use, for which it has issued Technical Manual 003. This manual makes special mention to the use of Colistin, as part of the formulation of products for veterinary use and consumption, since it represents a risk to public health as an antibiotic of restricted use in human medicine, which is generally used in multi-resistant diseases. For this reason, AGROCALIDAD prohibits the manufacture, formulation, importation and distribution of products containing Colistin[6].

AGROCALIDAD is also working on a proposal for the restriction of antimicrobials that are used as growth promoters. The aim is to eliminate the indiscriminate use of antibiotics by prohibiting the registration, importation, manufacture, formulation, and marketing of these active ingredients generally used in the animal production chain.

In conclusion, although advances in medical research are promising in the field of prevention and treatment of AMR, global actions are required to reduce the dissemination and mitigate the negative effects of resistant bacteria, viruses, fungi, and parasites that affect living beings in different ecosystems. The commitment of governments and the support they receive from the different actors in the commercialization chain (private companies, laboratories, distributors, users) play an important role in the fulfillment of actions to reduce the inappropriate prescription of antimicrobials, increase immunization against pathogens, disease prevention and control measures, and strengthen pharmacovigilance of resistant pathogens in human, agricultural and veterinary medicine.

Veterinarians, as the main actors in animal health, have a fundamental role to play in the fight against antimicrobial resistance, for which they must encourage their proper use under prescription, promote good hygiene, biosafety, and vaccination practices, and promote the correct diagnosis of infectious diseases in animals.

[1] Resistencia a Los Antimicrobianos. OPS/OMS | Organización Panamericana de la Salud. (n.d.). Retrieved January 31, 2023, from https://www.paho.org/es/temas/resistencia-antimicrobianos.

[2] CCNASWP / Fiji calls for closer collaboration as FAO/WHO regional meeting gets underway in Nadi. Home | CODEXALIMENTARIUS FAO-WHO. (n.d.). Retrieved January 31, 2023, from https://www.fao.org/fao-who-codexalimentarius/en/

[3] Publications. Food and Agriculture Organization of the United Nations. (2016). Retrieved December 22, 2022, from http://www.fao.org/publications

[4] Ministerio de Salud Pública del Ecuador, Plan Nacional para la prevención y control de la resistencia antimicrobiana; Quito, Viceministerio de Gobernanza y Vigilancia de la Salud,, 2019, Disponible en: . (2019, November 18). Retrieved from https://www.salud.gob.ec/msp-presento-plan-nacional-para-la-prevencion-y-control-de-la-resistencia-antimicrobiana-ram-2019-2023/.

[5] Agrocalidad prohíbe El Uso del Antibiótico Colistina en animales. AGROCALIDAD. (2019, February 25). Retrieved December 25, 2022, from https://www.agrocalidad.gob.ec/agrocalidad-prohibe-el-uso-del-antibiotico-colistina-en-animales/

[6] Resistencia Antimicrobiana en producción animal. OPS/OMS | Organización Panamericana de la Salud. (n.d.). Retrieved December 20, 2022, from https://www.paho.org/es/panaftosa/resistencia-antimicrobiana-produccion-animal .

Bryan Yanzza
Technicians at CorralRosales
veterinarios@corralrosales.com

Amendments to the law on companies

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Boletín societario de CorralRosales - Foto edificio con cristalera
In the supplement to the Official Gazette No. 269 of March 15, 2023, the amendments to the Law on Companies for the Optimization and Promotion of Business and for the Promotion of Corporate Governance were published, the most relevant aspects are as follows:

a) Sole shareholder/member:  Corporations and the limited liability companies may be incorporated by unilateral act by a single shareholder/member. 

b) Transfer of units: Units issued by limited liability companies are freely transferable, provided the transfer is between members of the company, and may be carried out by means of a private document. 

c) Pledge over units: Units issued by limited liability companies may be pledged with the unanimous consent of the members.  

d) Suspension of dividend distribution: Foreign members/shareholders who do not disclose their chain of ownership until the corresponding beneficial owner is identified, in addition to the prohibition to attend, intervene and vote in the ordinary shareholders’ meetings, may not receive the corresponding dividends declared by the company until such information is provided.

e) Right of accretion: The bylaws of a corporation may recognize the right of accretion, i.e., a shareholder will have the possibility of subscribing the shares resulting from a capital increase that are not assumed by another shareholder, with priority to third parties. If there are several shareholders interested in assuming the shares offered, these will be allotted in proportion to the participation of each one of them in the capital of the company. In the event of silence in the bylaws, the general shareholders’ meeting, at the time of establishing the basis for the capital increase, may grant the shareholders the aforementioned right of accretion.
f) Enforceability of shareholders’ agreements vis-à-vis third parties: As a general rule, shareholders’ agreements concerning any lawful matter shall be binding among the shareholders, but not enforceable against third parties. However, the agreement will become enforceable against a third party when it is proven that such third party knew of its existence and provisions. The breach of a shareholders’ agreement will give rise to the aggrieved counterparty’s right to request, at its discretion, the performance or termination of the agreement, and in both cases, compensation for damages.

g) Financial solvency report for capital reduction processes: When the general shareholders’ meeting resolves to reduce capital, it must simultaneously approve a solvency report of the company, prepared, and signed by its legal representative. This report must demonstrate, based on the company’s projected financial indicators, that after the capital reduction the company will continue to be able to meet its obligations and finance its operational activities. The legal representative who prepares a solvency report that is unfounded or does not accurately reflect the company’s financial situation shall be jointly and severally liable for the company’s obligations.

h) Suspension of the effects of the resolutions adopted by the general shareholders’ meeting: If upon a request of any shareholder, the Superintendence of Companies, Securities and Insurance establishes that: (i) the general shareholders’ meeting or any other body of the company approved one or more resolutions in contravention of the Law on Companies, its implementing regulations or the bylaws of the company; or that (ii)  in their approval, the shareholders or managers incurred in abuse of their majority, minority or parity voting rights, the Superintendent shall issue a reasoned resolution in which he/she shall order the suspension of all the effects of the respective resolution. The suspension does not proceed if the resolution has been implemented when the petition was received. 

i) Addition of items to the agenda: Shareholders who individually hold at least 5% of the capital stock are entitled to have an additional item included on the agenda of a duly called shareholders’ meeting. However, no more than five additional items may be included in addition to those included in the call to the meeting. If there are several requests, they will be dealt with in the order of their submission. 

j) Shareholders’ non-compete obligation: The bylaws of a corporation may prohibit its shareholders from participating in acts or operations that imply competition with the company, or from taking business opportunities that correspond to the company, unless expressly authorized by the shareholders’ meeting. This non-compete obligation may also be included in a shareholder’s agreement. 

k) Limits on the provision of services by external auditors: The external auditor may not provide any other service or collaboration to the audited company, through individuals or entities, directly or indirectly related, as long as it continues to be hired as external auditor. An individual or entity who has rendered services other than external auditing services to the audited company in the immediately preceding year may not be an external auditor of a company. Likewise, the external auditor may not, within the year following the termination of its agreement, render any other service to the audited company. No person or auditing firm may perform external audits for more than five consecutive years for the same company. 

l) Effects of the merger and subrogation of operating permits: In cases of merger, the absorbing company shall automatically subrogate the contractual and non-contractual rights and obligations of the absorbed companies in the exercise of their business activity. It will also be subrogated over any operating licenses, permits, property titles, or other authorizations that may have been granted to the absorbed company in the exercise of its operational activity, provided that the absorbing company has all the necessary powers or capacity to exercise rights with respect to such operating licenses, permits, property titles, authorizations, etc.

m) Effects of the change of domicile of a foreign company to Ecuador with respect to its branch: If a foreign company decides to transfer its corporate domicile to Ecuador and it already has a branch in the country, the Superintendence of Companies, Securities and Insurance will provide, at the time of approving the change of domicile, the revocation of the operating permit granted to the foreign company, without liquidation, and the cancellation of the documents related to the branch in the country. The company domiciled in Ecuador will be responsible for the obligations previously acquired by its branch.

n) Corporate acts by private instrument: Limited liability companies and corporations may be incorporated either by public deed or by means of a private document, which shall not be subject to any notarial process. Likewise, any corporate act subsequent to the incorporation of the aforementioned companies may be executed in a private document, without being subject to any notarial process. The public deed or the private document must be registered in the corresponding registries. When the assets contributed include assets whose transfer requires a public deed, the incorporation of the aforementioned companies and the amendments to the by-laws must observe said formality. The companies that carry out activities related to financial, stock market and insurance operations must be incorporated and their bylaws must be amended by public deed.

o) Elimination of grounds for dissolution due to losses: The grounds for dissolution due to losses are eliminated as well as the grounds for revocation of the operating permit of branches of foreign companies due to losses.

p) Term for the issuance of the taxpayer number: The Internal Revenue Service, upon request of a party, shall issue the taxpayer number (RUC) within a non-extendable term of 24 hours from the registration of a simplified stock corporation in the Superintendence of Company’s Company Registry, and of any other type of company in the Commercial Registry.

q) Joint and several liability of the legal representative: The company’s legal representatives will not be liable for labor obligations or of any other nature incurred by the company. However, Article 36 of the Labor Code establishes that the employer and its representatives will be jointly and severally liable in their relations with the employee.

r) Sole shareholders and wholly-owned companies: In corporations in which a an individual or an entity is the sole shareholder, it will not be mandatory to hold shareholders’ meetings. In these cases, the shareholder will record the resolutions approved in minutes signed by him. 


In the case of a merger, if the absorbing company is the holder of all the shares or equity interests issued by the absorbed company or companies, or when the absorbed and absorbing companies are owned, directly or indirectly, by the same partner or shareholder, the operation may be carried out by a resolution adopted by the legal representatives or by the boards of directors of the absorbing company and without the approval of the merger by the shareholders’ meeting of the absorbed company or companies.

Foto cuadrada de Milton Carrera, socio junior de CorralRosales

Specialist in Corporate
Milton Carrera, junior partner at CorralRosales
mcarrera@corralrosales.com
+593 2 2544144

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NOTE: The above text has been prepared for informational purposes. CorralRosales is not liable for any loss or damage incurred as a result of acting or failing to act on the basis of the information contained in this document. Any additional determined situation requires the specific opinion and concept of the firm in Quito / Guayaquil, Ecuador.

CORRALROSALES

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