“Chilean business links are well established with the international community and the country continues to become more and more welcoming to foreign investment”, Ivette Avaria, CLBS Country Manager“
Chilean Incorporation Factors
Ipso facto, Chilean companies can be 100% foreign owned, there are no minimal capital requirements for incorporation and there exist no capital controls; combining to make a pro-investment market. These factors, coupled with the fact that Chile has an abundance of natural resources and a skilled labour force, make this South American country a great environment for investment.
Nevertheless, the business landscape in Chile is unique, as such there are a number of points that should be considered prior to commencing with incorporation, which are outlined briefly below.
The legal entities most commonly used as an investment vehicle in Chile are:
- Limited Liability Partnerships (LLC)
- Stock Corporations (SC)
- Companies per Shares (SpA).
This last kind of entity was created as a simplified form of SC, it is regulated in the Commerce Code, and it gives to its shareholders broad faculties to set their by-laws (management system, dividend distribution, etc.), however, all matters not otherwise regulated in the provisions applicable to the SpA, or in their by-laws, will be subject to the regulations applicable to the SC.
The LLC and SC must have at least two partners or shareholders (both of them may be foreigners), and the SpA can have just one shareholder who may also be a foreigner.
There is no minimum capital requirement for the incorporation of either of these types of entities. Moreover, in the SpA and SC, the capital is divided into shares and the owners of the shares are the “shareholders”. In the LLC, the capital is divided into equity rights and the owners of the equity rights are “partners”. This difference is due to the fact that the SpA and SC are capital based entities, while the LLC is based in the personal confidence between the partners. Thus, in case of the LLC, the identity of the partners is material and, as a result, the formalities for the transfer of equity rights will differ from the ones required in the SpA or the SC.
Company Registered Office
As part of the incorporation process an official Chilean office address must be provided, which would be included in the company constitution documents, and also to be used as the contact address for both the local tax authority and the bank.
All companies established within Chile must have an appointed legal representative who must either be a Chilean national or a foreign national with a right to live in Chile (i.e. an individual with working or resident visa). This person is ultimately responsible (legally and financially) for the correct and legal operation of the company. Often companies prefer to outsource this function to an external and trustworthy legal company (such as Biz Latin Hub) in the absence of appointing a trusted and long-time employee of the company (or the owner if that is possible).
“For example, if a company fails to pay taxes in Chile, the Chilean Internal Revenue Service (Servicio de Impuestos Internos de Chile) may bring criminal or civil penalties against a legal representative directly. In a civil law suit brought against a company, it is the legal representative that is served to appear in court. Thus, for all concerned, it is not a duty to be taken lightly.”