What is the main source of law authorising this entity form?

Uruguayan Corporations Act No. 16,060

Give a brief summary of the entity form:

Does the entity possess separate legal personality?

SA are legal entities and have legal personality

(Maximum) period of existence

The maximum period of existence is the one stated in the SA’s bylaws (customarily, 100 years)

Governing document(s)

The SA is governed by its bylaws, as amended (if applicable)

Liability of incorporators / shareholders

The liability of the shareholders is limited to the amount of capital they have paid-in or they have undertaken to pay-in.

(Governing) bodies

Board of Directors (Directorio) and Shareholders Meeting (Asamblea de Accionistas)

Can this type of entity be involved in international transactions and restructurings (e.g. cross border mergers, asset acquisitions, equity acquisitions, etc.)?

An SA is able to be involved in cross border mergers, asset acquisitions, equity acquisitions and any other type of change of control transaction.

Can this type of entity be publicly listed or held?

Yes, provided that the SA is incorporated (or transformed into) a publicly traded company (Sociedad Anónima Abierta).

Can this type of entity be used for a non-profit or charitable organization?

No. By definition, an SA is a commercial company, that is, an organization of individuals or legal entities who or which undertake to allocate a certain amount of money to perform an organized commercial activity, with the aim of sharing profits and losses.

Give a brief summary of the process of incorporation, formation, or organization, including:

Main documents required and involvement of notary, company register, governmental authorities

Bylaws are executed by the incorporators (at least two) with their signatures notarized by an Uruguayan notary public. Bylaws have to be approved by the national authority that supervises corporations (the “Auditoría Interna de la Nación” – “AIN”), then registered with the National Registry of Commerce (Registro Nacional de Comercio) and certain information about the corporation must duly published in the official gazette and another newspaper published in Uruguay.

Timing (estimate)

The estimated timing for setting up an SA is approximately 7 months. However, it is quite common to acquire an already incorporated corporation (“shelf company”) which has done no prior business, which may be ready to start in about five business days. Also, an SA can be incorporated as a “empresa en el día” which means to adopt the bylaws already approved by AIN and available online. This kind of SA does not carry out the approval proceedings with AIN and it only needs to be registered and published as described above (approximately 3-4 months).

Main costs, including registration and similar fees (excluding legal fees)

The fees incurred to incorporate an SA are the legal and notary fees, as well as registration and publication fees.

Is a description of the anticipated business or purpose of the entity required for incorporation, formation or organization?

The corporate purpose of the SA must be be clearly stated in its Bylaws. However, such corporate purpose may be generic (“objeto ómnibus”) meaning that the purpose is broad enough to cover any commercial activity that the SA may choose to perform.

Minimum number of incorporators / shareholders and residency requirements

A minimum of two incorporators (individuals or legal entities) is required to incorporate an SA. Once incorporated, there is no minimum number of shareholders. Further, no residency nor nationality requirements exist.

Minimum number of directors (or other applicable officers) and residency requirements

There must be at least one director or administrator. However, a minimum number of directors may be established in the Bylaws. No residency nor nationality requirements exist.

However, in the case of publicly traded companies (sociedad anónima abierta) with a net worth above UI 25,000,000 (approximately USD 2,730,000), the Board must be formed with at least 3 members.

Minimum share capital, or equivalent, and payment requirements (including opening a bank account)

On or before signing the Bylaws, the incorporators must pay in capital in an amount equal to at least 25% of the authorized share capital as stated in the Bylaws, and then subscribe at least another 25% until reaching 50% of the authorized share capital. No minimum authorized share capital is required. Payments of paid-in capital made in cash must be deposited in a bank account in the name of the SA.

Is the physical presence of incorporators / directors required in the jurisdiction for incorporation, formation or organization?

No, incorporators can act through attorneys in fact.

Is a tax identification number, or equivalent, required? If so, how is it obtained?

Yes, an SA must be registered with the tax authority (Direccion General Impositiva -DGI) at the Registro Unico Tributario (RUT). It is a simple proceeding that is carried out through DGI’s website.

What is the title of the applicable company registry?

National Registry of Commerce (Registro Nacional de Comercio).

However, certain acts related to the SA must be registered in different registries (as set forth below):

• National Registry of Personal Acts (Registro Nacional de Actos Personales) in case of liens (embargos genéricos o específicos) of the SA.
• Central Bank of Uruguay Registry of Stakeholders (Registro de Titulares de Participaciones Patrimoniales del Banco Central del Uruguay) regarding direct and indirect owners and beneficial owners of the SA.

What types of information must be filed at the (company) register, and which of them will it be publicly available, e.g.:

The following information must be filed at the National Registry of Commerce and it will be publicly available:

• Bylaws (only those registered before 1994; after such date, bylaws are indirectly available by giving the name and domicile of the Notary Public who notarized the incorporators’ signatures) and any subsequent amendment
• Share capital
• Directors
• Good standing
• Dissolution and Liquidation

The following information must be filed at the National Registry of Personal Acts and it will be publicly available:

• Liens and encumbrances on assets of the entity
• Liens and encumbrances on the shares owned by shareholders

The following information must be filed at the CBU Registry of Stakeholders but it will not be publicly available (unless the Uruguayan competent tax authority issues a resolution in certain cases expressly allowed by law):

• Ownership identification (direct and/or indirect ownership, 'beneficial owners')

 

What is the title of the executive body and its members? What are their main duties, tasks and responsibilities?

Board of Directors (Directorio). The Board is in charge of administrative and management tasks. Also, it is normally stated in the Bylaws that the representation of the SA is also performed by certain members of the Board (commonly the, President or Vice-president acting individually, or, and notwithstanding any powers of attorney that the SA may grant.

How are the members of the executive body appointed, dismissed and replaced?

They are appointed/dismissed/replaced by the Shareholders’ Meeting. Exceptionally, the Board may appoint a substitute director when it is necessary as a result of any vacancies, who will be in such position until the next Shareholders’ Meeting.

Any appointment/dismissal/replacement shall be registered with the National Registry of Commerce in order to be effective against third parties.

Is it possible to appoint corporate directors or must all directors be natural persons?

No.

Is there a requirement to have non-executive directors? How are they appointed, dismissed and replaced? Do non-executive directors serve on a separate body (two-tier structure) or can a one-tier board (with executive and non-executives) be appointed, or is some alternate structure used?

No. However, in the case of publicly traded companies (sociedad anónima abierta) with a net worth above UI 25,000,000 (approximately USD 2,730,000), at least 50% of the members of the Board must be non-executive directors.

What is the title of the body of owners / shareholders / members, and what are the main tasks / responsibilities / powers of that body?

Shareholders’ Meeting (Asamblea de Accionistas)

The duties of an Ordinary Shareholders’ Meeting are the following:

1. approval of the financial statements, distribution of corporate profits, and any other issue concerning the company’s management submitted by the directors or comptroller for its consideration;
2. appointment or removal of directors and comptroller; and
3. liability of directors or comptroller.

Further, the duties of an Extraordinary Shareholders Meeting are the following:

1. Amendment to the company’s bylaws;
2. increase of capital;
3. reinstatement of capital;
4. redemption and cancellation of shares;
5. merger, transformation and division;
6. dissolution, liquidation, appointment of liquidators;
7. issuance of bonds;
8. limitation or suspension of rights of first refusal; and
9. any other urgent issue that is out of the scope of an Ordinary Shareholders’ Meeting.

Note that recently enacted Law 19,924 provides that the shareholders may attend the meetings via videoconference or any other telecommunication media that provides certainty as to the identity of the participants.

What are the majority and quorum requirements for decisions by the shareholders? Can they be varied or changed?

In general, decisions are taken by an absolute majority of shareholders, attending the meeting, unless otherwise stated by law or the bylaws However, to be validly convened and held, shareholders representing at least half plus one of the paid-in capital have to attend an ordinary meeting, and shareholders representing at least 60% of the paid-in capital have to attend an extraordinary meeting.

Any special governance regimes (e.g. depending on size, being listed at a stock exchange, or other criteria)?

No, except in the case of publicly traded companies (sociedad anónima abierta) for which the Securities Market Act and the Regulatory Compilation of the Central Bank of Uruguay provide a specific corporate governance regime.

What are the periodic accounting obligations incumbent upon the entity? To whom must those accounts be submitted?

An SA must furnish financial statements in accordance with adequate accounting rules for each fiscal year. The same must be approved annually by the Ordinary Shareholders’ Meeting. An SA must register its financial statements with the AIN when its income is above certain amounts.

In the case of publicly traded companies, approved financial statements must be submitted to the AIN for acceptance by it. Recently enacted Law No. 19,924 abolished the requirement to publish the financial statements.

Is the entity permitted to determine its own financial year?

Yes, by its Shareholders’ Meeting but in general, the Board of Directors is allowed to determine it in the SA’s bylaws. However, there may be restrictions for certain business activities (e.g., financial sector)

Is the entity subject to any statutory (external) auditor obligations?

No, unless it is a publicly traded company (Sociedad Anónima Abierta)

Requirements to appoint other persons (officers, secretary, internal auditor / accountants). If so, what are their functions? Are there any residency requirements?

Please refer to the comments above regarding appointment of the Board

What is the title designated for 'ownership interests' (e.g. shares, quota, interests, membership)?

Shares (Acciones)

Are different classes of ownership interests possible? If so, what are some examples of different classes?

Yes, ordinary shares and preferred shares (acciones ordinarias y acciones preferidas) (granting additional rights to the holder, e.g., the right to receive a fix dividend, appoint certain number of directors, etc.) The preference has to be precisely stated in the Bylaws.

What documentation is required for the transfer of ownership interests?

In general, no special documentation is required for the transfer of ownership interests. However, it is usual to execute a share purchase agreement.

Are there any additional formal requirements required for the transfer of ownership (notary, approvals, stamping, filings, corporate records)?

In the case of bearer shares (“acciones al portador”), the simple delivery of the share certificate is enough to transfer the ownership interest.

In the case of registered shares (“acciones nominativas”), the delivery and endorsement of ownership of the share certificate as well as the annotation of such transfer in the applicable corporate book (“Libro de Registro de Titulos Nominativos”) are also required.

In the case of book entry shares (“acciones escriturales”), the annotation of such transfer in the applicable corporate book (“Libro de Registro de Acciones Escriturales”) is also required.

Also, any change in the direct or indirect ownership or beneficial owners of the share certificates must be communicated to the CBU Registry of Stakeholders.

Are there any applicable stamp duties imposed when transferring ownership interests?

No.

How are shares issued? (including information on payment obligations, registration requirements)

Shares issuance and any increase of the paid in capital must be approved by the Shareholders Meeting. The Shareholders Meeting is allowed to delegate to the Board of Directors the time and circumstances for the issuance of approved shares. Any increase of paid-in capital must be communicated to the AIN. Also, if such increase requires an increase of the authorized share capital, the bylaws must be amended, and such amendment must be registered and published, and communicated to the AIN.

In the event of a capital increase, existing shareholders shall have the following rights:

1. Pre-emptive rights (“derecho de preferencia”), that is, to pay in the applicable amount to maintain their respective shareholding percentage. If not exercised by all current shareholders within 30 days from when the capital increase was published, any shareholder shall have the right to increase its shareholding percentage within the following 30 days. These rights may be limited by the Shareholders’ Meeting, in particular cases where required for the benefit of the corporate interest (for instance, because both the paid-in capital increase and the permanence of the minority shareholders are fundamental to the business).
2. Rights to dissent (“derecho de receso”), provided that they voted against it or were absent from the meeting where the capital increase was resolved. Bylaws may provide that these rights are not granted in the event of a capital increase. Shareholders of publicly traded companies (sociedad anónima abierta) are not entitled to exercise these rights in case of a capital increase.

Also, if the capital increase entails a change in the shareholding percentage of the existing shareholders or a transfer of shares to new shareholders, such changes must be communicated to the Central Bank of Uruguay.

 

Further information on equity contributions, e.g., non-cash payments on shares, (share premium) contributions without issuances of shares, can partially paid shares/ownership interests be permitted and what are the restrictions on them?

Non-cash contributions require the completion of additional formalities before the AIN, i.e., the submission of an accounting certificate issued by independent accountant certifying that the value given to the non-cash contribution is accurate and true and indicating the calculation method used to assert that. Further, in recent years, AIN has also requested additional documentation, e.g., audited financial statements (at least when the contribution consists of shares of a different company) and a notarial certificate stating that the non-cash contribution is not subject to any liens or encumbrances.

Shares may be issued with a premium determined by an extraordinary shareholders’ meeting. The amount of the premium after costs shall be considered an earning allocated to the legal reserve or to future capitalizations.

Any requirements with respect to share cancellation, share repurchase and other capital reductions

Cancellation of shares certificates and the reduction of paid in capital must be approved by a Shareholders Meeting. The Shareholders Meeting is allowed to delegate to the Board of Directors the destruction of cancelled share certificates. Any reduction of paid-in capital must be communicated to the AIN. Also, if such reduction requires a reduction of the corporate capital, the bylaws must be amended, and such amendment must be registered and published, and communicated to the AIN.

The capital reduction must be published so that the company’s creditors may object to the reduction within a period of 30 days following such publication, provided that they have an interest and are not sufficiently secured.

With respect to share repurchases, an SA is only allowed to purchase its own shares in the following events:

1. exceptionally, when there are liquid earnings or free reserves, such shares are totally paid in and the repurchase will prevent a severe damage (for instance, an event of mandatory dissolution pursuant to article 159 lit. 6 of Law No. 16060, which provides that in case the net equity is reduced to less than ¼ of the paid-in capital, the company must be dissolved) which must be justified in the next ordinary shareholders’ meeting.
2. when such shares are part of the assets of an establishment acquired by or merged with the company.

However, any such shares purchased by the SA must be sold within a year and such shares shall have their rights suspended and will not be considered for quorum purposes until such sale is completed.

Any requirements with respect to distributions to shareholders?

Distribution of dividends is an essential right of shareholders. An SA is obliged to distribute dividends among its shareholders (at least, 20% of the net earnings) arising out of the financial statement approved by the shareholders meeting, once all losses are covered and at least 5% of said profits are allocated to the legal reserve (formed by an amount equivalent to 20% of the paid-in capital of the SA) unless otherwise resolved by shareholders representing 75% of the paid-in capital.

Can the owners or shareholders adopt a restrictive or governing agreement among themselves such as a Shareholders Agreement?

Yes.

Which are the typical annual maintenance costs of maintaining the existence and legal good standing of such an entity (excluding legal fees)?

There are no special fees or costs for maintaining the existence and good standing of the SA (other than legal and accounting fees and taxes).

What are the general corporate tax rates? (Specify if there is a national versus local distinction).

Typical taxes applicable to SA include the following:

• IRAE (Income Tax on Economic Activities): 25%
• IP (Net Worth Tax): 1.5%
• VAT: 22% (basic rate)
• ICOSA (Tax on the Incorporation of Uruguayan Corporations: approximately USD 500 per year

 

Summary of any specific matters, e.g. recent or prospective major legal developments

N/A.