Joint Stock Company (SpA)
The sociedad por acciones – Spanish for joint-stock company – entity was created in Chile by Law N° 20.190 as a simplified form of corporation, and it was originally conceived for venture capital companies.
SpA’s pros and cons
One of the Chilean joint-stock company’s main advantage comes from the fact that it can be incorporated by a single shareholder, allowing new partners to join as the business grows. It also allows to have a plurality of corporate purposes, besides of allowing other legal entities of persons to incorporate a SpA.
This is kind of company suited for those who want to start a business and add new partners on any capacity on the way, or just investors.
A Chilean joint-stock company can have one or more shareholders and a rather light management structure, since a board of directors is not required.
The main con against a sociedad de responsabilidad limitada (Spanish for limited liability company, LLC) steams from the ability of any partner to sell his/her shares to anyone who is willing to buy him/her out. Also, the main shareholder can increase the capital and leave the majority shareholders out of any decision. That is why family offices prefer LLCs instead of SpAs.
Capital and shares
The capital is divided into shares, shareholders being liable up to the amount of they promised to buy. The shares must be subscribed and paid in the term indicated in the bylaws – lacking a special provision on those, it must be done in the maximum term of 5 years from the moment of incorporation or the increase of capital.
Capital increases have to be agreed by the shareholders. On the other hand, there may be authorized capital – that is to say, capital increases that may be carried out by the manager without the need for an agreement of the shareholders’ meeting, either to finance the administration of the company or for specific purposes.
SpAs allow to issue shares that only give shareholders the right to payment of dividends for a determined business. This would make it possible to look for capitalist partners for a new business to be developed and assure them that the business will be profitable – that it will not interfere with existing businesses.
The most advisable ways to raise capital for a SpA-based business is:
- 1.- To ask a bank for a loan. Banks usually ask the partners to act as guarantors.
- 2.- To make an increase of capital, in which partners put the money or invite new partners. SpAs allow issuing shares for a specific business.
- 3.- To issue bonds, which are debt instruments that can be hold by anyone, payable by the company at the end of a certain period.
Different kinds of shares can be issued: some of them only entitled to profits and not to a vote, or to force a shareholder to sell his/her shares to other shareholders or to the company itself if they want to get out of business.
The sale of the shares can be made through a private deed signed before a Notary Public or by means of other formalities established in the company’s bylaws. The sale of the shares to their husband or spouse is null and void in any case.
Incorporation of a SpA
Sociedades por acciones can be incorporated either in the traditional way – a public deed is drafted, and an extract of it is published in the official gazette and listed in the Registrar of Commerce) or via the fast-track Your company set out in a day (known in Spanish as Tu empresa en un día) electronic system.
Articles of incorporation, whether set by one or more natural or legal persons, must be set by public deed or private document with signatures authorized before a notary public. The act of incorporation of the company has to be accompanied by its statute or bylaws, which must include, at least, the following matters:
- The name of the joint-stock company, which must be followed by the expression «SpA»
- The business purpose of the joint-stock company, which will always be considered mercantile
- The capital and the number of shares into which the capital is divided and represented;
- The management structure and how the officers and directors shall be appointed, including a mention of those who will exercise it provisionally, as the case may be, and
- The duration of the company, which may be indefinite by default. Within a period of one month from the date of incorporation, an extract thereof, authorized by a notary public, must be submitted to the Registrar of Commerce corresponding to the domicile of the company and published in the Official Gazette.
Taxation of a SpA
It is important to mention that SpAsare taxed as a Sociedad Anónima – a corporation. However, the advantage it has over the latter is that before the SII (the Chilean Internal Revenue Service) it is possible to choose between taxing under the integrated or semi-integrated scheme, according to the needs of the shareholders and the company.
It should also be kept in mind that the SII does not accept that a person has more than one employment contract for the companies he or she owns.
Termination of a SpA
This company, like the rest of the companies, must be terminated by the partners through a common agreement or by an arbitrator judge, and are not subject to external inspection by any body, not being mandatory the appointment of account inspectors.