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Investment & Legal Framework
Registry gives permission for the use of the proposed
name so as to avoid confusion with any other name
already registered.
The cost of forming a corporation can vary, depending
on the size of the share capital stated in the deed
of incorporation. Costs include professional fees
for the drafting of the documents, notary fees, and
fees for registration with the Commercial Registry.
Other professional fees may arise from necessary
investigations and legal consultations.
Capital. A corporation’s share capital may not be
less than USD$800 million. All shares must have
a par or face value and must be in nominative
(registered) form. Bearer shares may be freely
transferred at any time. The initial share capital with
which the corporation proposes to be incorporated
(its authorized capital) must be stated in the deed
of incorporation and recorded at the Commercial
Registry. The deed of incorporation and the entry
at the registry must be amended when the share
capital is modified.
A corporation cannot be set up unless its share
capital is fully subscribed and at least 25% of the
face value of each share is paid in. The balance
must be paid in within two years. The form of paying
the balance will be determined by the articles of
association or by the shareholders at the general
meeting.
Legal Reserve and Dividends At least 10% of a
corporation’s after-tax profits for each financial
year must be transferred to a legal reserve until
this reserve reaches 50% of the authorized share
capital. A legal reserve may be used to meet future
losses and, when so used, must be rebuilt out of
subsequent profits. It may be capitalized but may
not be distributed to shareholders except on the
dissolution of the corporation.
BRANCHES
Establishing a branch of a foreign company in
Ecuador requires the following documentation: proof
that the company has been legally established in its
country of origin; proof that, according to the laws
of its country of origin, the company can establish
branches and is authorized to negotiate abroad; and
the name of a permanent legal representative in
Ecuador. The branch must have assigned capital of
no less than US$ 2,000.
The documentation must be presented to the
Superintendency of Companies, along with a
certificate issued by the Ecuadorian consul nearest
to the foreign company’s head office certifying the
establishment and legality of the company in its
country of origin and authorizing it to do business
abroad. Also, the company’s legal representative
must present a certified bank deposit of the capital
paid. If the legal representative is a foreign citizen,
he or she must obtain a resident visa.
The formation procedures applying to corporations
must also be followed. A branch is easier than a
corporation to set up, but this factor should not be
the overriding consideration in deciding which type
of entity to use.
A branch cannot be reorganized as a subsidiary. The
license granted to a branch to operate in Ecuador
must be canceled before a new company can be
formed.
Instead of forming a branch, a company that simply
requires representation in Ecuador may prefer to
open a representative office.
LIMITED LIABILITY COMPANIES
Limited liability companies closely resemble limited
partnerships in other countries and are suitable for
similar types of operations. They must have at least
three members and not more than fifteen. Members
have limited liability for corporate obligations up to
the amount of their individual contributions. Capital
cannot be less than USD$ 400. At least half of the
capital must be paid in at the time of formation, and
the remainder within one year. A legal reserve must
be set up by transfer of 5% of annual after-tax profits
until the reserve equals 20% of capital. Foreign
corporations are excluded from membership.
PARTNERSHIPS
A partnership may be organized in two different
forms: as a company with a collective name in which
all partners are jointly and severally liable for all
actions taken by any partner in the firm’s name or as
a silent partnership, which has general partners and
limited partners. Silent partners are not part of the
firm’s name and do not participate in management.
The bylaws of a partnership must state the name,
nationality, and domicile of the partners; number
of payments made and future payments; form of
payments made and future payments; time period
for which the company will function; manner in
which the administration will be organized; and fiscal
control established, if any. A draft copy of the bylaws