Corporate Law at Ecuador
Here’s a summary of Corporate Law in Ecuador:
Corporate Law in Ecuador
1. Legal Framework
Corporate law in Ecuador is mainly governed by:
The Ecuadorian Commercial Code (Código de Comercio)
The Organic Code of the Economy, Commerce, and Enterprises (Código Orgánico de la Economía Social de Mercado - COESM)
Specific laws regulating corporations, companies, and business activities.
The legal system is based on civil law tradition.
2. Types of Business Entities
Sociedad Anónima (S.A.) – Corporation / Joint-stock company
Minimum two shareholders.
Shares can be publicly or privately held.
Sociedad de Responsabilidad Limitada (S.R.L.) – Limited Liability Company
Suitable for small and medium businesses.
Liability limited to contributions.
Comandita – Limited partnerships.
Empresa Individual de Responsabilidad Limitada (E.I.R.L.) – Sole proprietorship with limited liability.
Sociedad por Acciones Simplificada (S.A.S.) – Simplified joint-stock company offering more flexibility.
3. Company Formation and Registration
Must register with the Superintendence of Companies, Securities, and Insurance (Superintendencia de Compañías, Valores y Seguros).
The process requires:
Drafting and notarizing the Articles of Incorporation.
Registering the company name.
Publication of the formation in the official registry.
Tax registration (with the Internal Revenue Service - SRI).
The process can take several weeks.
4. Corporate Governance
Corporations (S.A.) require:
Shareholders’ meetings (ordinary and extraordinary)
Board of Directors (mandatory in S.A.)
Legal auditors (depending on company size)
LLCs (S.R.L.) are managed more flexibly by partners.
5. Capital and Shares
S.A. must declare a minimum capital but no fixed minimum is strictly imposed by law.
Shares can be transferred unless restrictions are included in the bylaws.
S.A.S. allows for simplified share structures and transferability.
6. Taxation
Corporate Income Tax rate: Generally 25% (can vary).
Other taxes: VAT (12%), withholding taxes on dividends.
Tax incentives may apply to certain sectors.
7. Foreign Investment
Ecuador welcomes foreign investment.
No general restrictions on foreign ownership.
Foreign investors must register and comply with regulations from the Central Bank and Investment Promotion Agency.
8. Dispute Resolution
Commercial disputes handled by civil and commercial courts.
Arbitration is recognized and frequently used.
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