simplified-joint-stock-company-corporate-milton-carrera-lawyers-ecuador

The main advantage of the Simplified Joint-Stock Company is its flexibility to adapt to the particularities of each business. Its formation process is very agile and its shareholders have ample freedom to establish the rules of its operation in the bylaws. Therefore, entrepreneurs can count on a legal figure that allows them to develop formal businesses that are entirely adapted to the will of the partners and the peculiarities of the businesses.

Small and medium-sized companies will be the most benefited by this new type of corporate association. Its main advantages are the following:

  1. Incorporation of the company: The creation of this company does not require a public deed, it is constituted by a private document, with the exception of those cases in which real estate property is contributed.
  2. It can be a single-member company: The company can be incorporated and exist with a single shareholder, natural or legal person.
  3. Flexible capital structure: There is no minimum capital and there is no percentage that must be paid at the time the company is incorporated. However, the term for the payment of the capital will not exceed 24 months.
  4. Multiple corporate purpose: The corporate purpose can be broad, that is, it can include many activities without being related to each other. If the corporate purpose is not specified in the act of constitution, it is understood that the company may carry out any lawful activity.
  5. Indefinite term: It is not mandatory to establish a term for the company. Failure to do so implies that it is indefinite.
  6. Principle of existence of the company: The existence of the company occurs with the registration of the contract or unilateral act of creation before the Registry of Companies of the Superintendence of Companies, Securities and Insurance. It is not required the registration before the Mercantile Registry, which simplifies the procedure and reduces costs.
  7. Free negotiation of the shares: The shares are freely negotiable unless the bylaws states the prohibition to do so. This prohibition may not last for more than 10 years.
  8. Change of control in the shareholder company: The bylaws can establish the obligation of shareholder companies to inform the Simplified Joint-Stock Company about any operation involving a change of control. In the event of a change of control, the general meeting of shareholders of the Simplified Joint-Stock Company may exclude shareholder companies in which such event has occurred.
  9. Shareholder agreements with binding force: Shareholder agreements on the transfer of shares, preference and restrictions to transfer them or to increase share capital, exercise of the right to vote, share´s representative at the meeting and any other lawful matter are mandatory for this type of company. To comply with this, such agreements must be kept in the offices where the administration of the company works. Otherwise, without affecting the force and effect between the parties, such agreements do not bind the Simplified Joint-Stock Company.
  10. Auditis optional: The existence of an audit body is not mandatory, but the bylaws may foresee its creation.

Milton Carrera
Senior Associate at CorralRosales
mcarrera@corralrosales.com