The Salvadoran Government has recently launched a program called “El Salvador Eficiente” (Efficient El Salvador) which main objective is to simplify requirements, procedures and times for the execution, development and closing of the mercantile businesses carried out in our country. As a result of the implementation of said program, several amendments to the Salvadoran Code of Commerce had to be made. Such amendments were approved by virtue of the Legislative Decree No. 641, dated June 12th, 2008, published in the Official Gazette dated June 27th, 2008; being in force since July 6th, 2008.
The new rules have come to modify legal aspects mainly related to:
- Incorporation and operation of businessmen and Companies.
- Formal obligations of businessmen and Companies.
- Dissolution and liquidation of Companies.
INCORPORATION AND OPERATION OF BUSINESSMEN AND COMPANIES
The minimum capital to incorporate a Company, whether an Anonymous Company or a Limited Liability Company, has been decreased to US$2,000.00 (Two Thousands US Dollars), establishing the obligation to pay just a 5% of the capital stock at the time of incorporation. The pending 95% must be paid within the next year. Before the amendments, the minimum capital to incorporate a Company was of US$11,428.57 (Eleven Thousand Four Hundred Twenty Eight Dollars and Fifty-Seven Cents).
The value of each share is fixed in US$1 (One Dollar) or a multiple number of 1.
The maximum period of appointment of a Board of Directors or of a Sole Administrator has been extended to 7 years. Before, it was 5 years.
The amendments include the possibility to hold Board of Directors´ meetings by means of videoconferences.
New regulations with regard to temporary or permanent vacancies of the Company’s administrators are established providing requirements and conditions for their substitutions.
It is created the legal figure of the judicial representative of the Company whose main role will be to act in judicial proceedings on the Company´s behalf. Such an appointment is optional for the Companies.
It facilitates and develops the requirements to execute capital stock increases and decreases.
A two years period is established for those Companies already incorporated in order to modify and adequate their articles of incorporation and by-laws to the recent amendments.
Also, among the most important changes made to the Commerce Code are some new provisions to regulate the informal sector and small enterprises mostly owned by individuals. Lower costs and a better structure to develop the businesses are included. By establishing Limited Liability Enterprises, individuals have the opportunity to separate personal and familiar property from assets belonging to the enterprise.
The figure of the Limited Liability Enterprise is not an innovation since it existed before the amendments. Nevertheless, it was not used because it had some difficulties for its implementation. Now, the requirements for its incorporation and operation are more flexible. For instance, the requirement to assign a minimum capital to the enterprise has been eliminated, and it can be incorporated with a capital freely decided by the owner. Also the formal requirements for the incorporation and to increase or decrease its capital have been diminished, by creating free forms provided directly by the Registry of Commerce.
FORMAL OBLIGATIONS OF BUSINESSMEN AND COMPANIES.
Changes in the application, issuance, publication and renewal of the business license registration, as well as changes in the registration of facilities, agencies or branches, have been made.
Registral deposit of documents is regulated as an obligation for businessmen and Companies, in relation to their balance sheets, financial statements, changes in property, among others.
It is regulated the faculty to close establishments, agencies or branches, for not having paid or renewed in time their business license registration. Judges will execute such faculty based on reports given by the Registry of Commerce.
DISSOLUTION AND LIQUIDATION OF COMPANIES
The amendments also refer to the proceeding of dissolution and liquidation of Companies by providing new rules to make it easier and faster than before.
Some of the most relevant changes are related to the maximum period of time to liquidate a Company which it has been reduced from 5 to 2 years. Besides, express faculties for the liquidators to collect and pay the Company’s debts as well as rules to perform judicial consignments and banking deposits are established.