BUILDING BUSINESS

How to operate in Chile

Foreign people and companies that are not residing in Chile may develop commercial activities by:

- appointing a representative
- having an agency or branch of a foreign company
- having a company of people or public limited company
- having a private limited company

Companies can be private or public. Private ones provide profits for the associate members and public ones according to contributions. In the latter, members can change without the authorization of other members, which is exactly what happens in incorporated companies. There are mixed companies, such as those in limited partnership by shares. In private companies, the contract to create, modify or terminate a contract requires the agreement or consent of all members. Conversely, in public companies the majority vote is sufficient

In Chile, companies can have any money-making objectives long as it is within the boundaries of the law, morality and good practice. However, the law requires that certain companies of a particular specialisation can only exist in a determined form, in public limited corporations, and are under particular supervision. This is the case in: banks, financial institutions, insurance companies, global equity, investment funds, funds administration, pensions, health provision institutions, commercial stock brokers and to a lesser extent stock valuers and stock exchange agents are also in this category. Furthermore, as a general rule, Chilean law does not demand a minimum of capital to form a company, except in the case of some particular public corporations.

Companies regulated by the Civil Chilean Code, collective civil companies and partnerships, are subject to terms agreed by both parties where the law does not cover their specific case. The other companies, that is, public and private limited companies are formed public decree.

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Types of companies

General Partnerships

In general partnerships, partners are liable up to their personal wealth and possessions. A debt of an insolvent partner burdens other partners and agreements on payments are, as a general rule, taken unanimously. In partnerships with private investors, the company directors or owners are liable up to their personal wealth and possessions but private investors or silent partners only up to their contribution. The dissolution of these companies is a spoken agreement and it is therefore enough with the consent of all parties without having to register or publish these decisions officially.

In Corporate enterprise, the contract of the business constitution is formal and must be published in the official weekly newspaper and registered in the Registry of Commerce. Essential information which the notification must contain is the name of the all partners-as it is legally binding to all parties. This along with the trading headquarters will determine which assets supervisor and which court of justice will regulate the business and determine the applicable legislation.

Private Limited Liability Company

In private limited liability companies, partners are liable up to the amount which they have contributed to the company. Private limited companies, civil or commercial, are always publicly registered. They must be legalized by public decree in the Registry of Commerce and published in the official newspaper. Modifications in terms of the partners are acts where the same formality applies: amendments must be published and registered in the Registry of Commerce. All for which norms do not exist relating to private limited companies are subject to by-laws in the Civil Code and Code of Commerce

Individual Limited Liability Company

An Individual Limited Liability Company is an individual whose capital is different from the holder´s . To create this company you just need a Chilean or foreign individual.

An Individual Limited Liability Company is constituted through a public deed which must at least contain the stipulations indicated in the law.

An abstract of the public deed authorized by the Notary is registered in the Commerce Registry of the company´s address and is published in the Diario Oficial within the sixty days after the deed´s date.

Limited Co-Partnerships

In limited co-partnerships there are two types of associate members; the directors are the only ones with administrative power and the shareholders are passive or capitalist members. In turn, there are two types of limited co-partnerships. In simple limited co-partnerships, share holders have the rights of general partners and in partnerships limited by shares, the issue of shares represents the extent of the ownership of shareholders as in public limited companies. Simple co-partnerships are by spoken agreement whereas commercial limited partnerships and partnerships limited by shares are by official announcement in the official newspaper and by decree in the Registry of Commerce.

Public Limited Company

The public limited company is defined by law as an entity formed by joining a common fund, provided by shareholders who are liable only up to the amount which they invested. It is administered by a board of directors subject to modifications. The public limited company has the same characteristics as the other companies: it is a business entity, shareholders provide capital or goods valued in monetary terms, it pursues lucrative goals, losses are sustained by a pool of shareholders, but shareholders are distinguished from one another in their rights as individual title holders. These companies are always commercial, even when they were formed for civil ends. The public limited company constitution, modifications and the dissolution are made lawful by public decree, registered in the Registry of Commerce and published in the official newspaper.

Public corporations can be open or closed. The first is where shares are offered publicly and for this the company should be registered with the Registry of Securities within 60 days of its creation and being subject to the auditing system agreed by this registry. Banking entities are audited by the SBIF. Closed corporations, on the other hand, cannot offer shares publicly except where they voluntarily undergo auditing by the Registry of Securities. Notwithstanding, by the authority of the shareholding representatives, they have the power to become closed to the public and consequently no longer need to be registered in the Registry of Securities or be subject to their auditing system. The law does not require a minimum amount of capital for the forming of a public limited company except in special cases such as for banks and insurance companies.

Operations through a representative

A representative operates according to a mandate, contained in agreement, which is provided by a non-resident investor to a resident individual or entity. The representative acts on behalf of and at a risk of the foreign investor to carry out one or more business operations. The mandatory and representative are free to agree the existence of a payment for the last one.

Chilean branch or agency of a foreign company

A foreign company must appoint a legal representative to constitute the branch. The legal representative should authenticate, among other formalities, the following documents which must be registered in the official language of the foreign country and its corresponding translation into Spanish. In case of a different language:

- A verification that the company is legally established abroad.
- A certification that the company still exists
- An authentic copy of the current statutes of the company
- A general power of attorney issued by the company to the legal representative to be represented in Chile. This power should clearly establish that the legal representative acts in Chile under the direct responsibility of the company with wide powers to act on behalf of it.