Find out why and when it is a good idea to get an entity health check in Chile. Manage your business risks and protect yourself from potential non-compliance issues by understanding your company’s corporate ‘health’ in the eyes of the government.
Chile has well-established and solid legal and compliance frameworks designed to encourage and protect business people in the country.
To foreign executives, corporate compliance in Chile can be difficult to navigate -- especially if there is a language barrier with local institutions.
It is a key instrument to ensure your company and the companies you are perhaps interested in acquiring/investing, are fully compliant with local regulations.
What is an entity health check in Chile?
As with other countries, an entity health check in Chile -- also known as a corporate health or corporate compliance check -- is one or more audits or due diligence reviews carried out on a legal entity. These reviews aim to understand if that entity is and has been fully compliant with local corporate regulations.
These reviews cover various aspects of a company’s activities, including the legal, accountancy, tax, human resources, licenses (administrative or others) operations.
What things are covered in an entity health check?
Entity health checks in Chile can vary quite a lot in terms of the extension, depth and aspects being audited. In most cases, the entity health check should include legal, accountancy and financial reviews.
We recommend that any thorough entity health check should include and cover the following items:
- Basic company details such as the name, commercial address, industry, capital, and shareholders
- Key facts such as license numbers, operational status of business, legal address and representatives
- Risk analysis and if possible, any sort of credit rating
- Tax compliance
- Parent company/shareholder details
- Directors’ details
- Legal history of the company (changes in ownership, share capital increases, and other activities)
- Litigations or other legal burdens the company has experienced.
When and why should I get an entity health check in Chile?
There are several important situations and reasons that every company should regularly undertake an entity health check in Chile.
1. When investing or acquiring a Chile-based company
Multinationals expanding into Chile, or operating in the country already, may consider acquiring an existing company in the country. An entity health check is an absolute must if you are looking to invest or to purchase a Chile-based company. This check is the best way to fully understand the ‘compliance picture’ of the entity you are acquiring or investing in.
An in-depth audit of a potential acquisition or investment target by a local and independent contractor will eliminate the potential of discovering nasty surprises down the road. Understand before investing your money what, if any, issues the company may have with its compliance and how the government may view its activities. The entity health check in Chile will scrutinize the entity to determine were it stands in its regulatory obligations.
Be empowered to make informed decisions about your prospective investment, and weigh up the costs and benefits of getting involved. An entity health check offers complete information in order to weigh it in in the price offer and thus in the negotiations with the seller for instance.
2. When you already own a legal entity in Chile
An entity health check in Chile will ensure your company complies with all relevant legal, tax, and accountancy obligations and avoid financial or penalties from government institutions. Being consistently compliant will cost you much less to do business in Chile.
This is especially helpful for foreign national business owners and executives. They may find Chile’s corporate compliance requirements difficult to navigate due to unfamiliarity or a language barrier. Entity health checks will ensure you are up to date with payments and avoid any unnecessary complications with the government.
3. Corporate Governance
Being compliant is crucial for a good and healthy corporate governance within your company as structures, protocols and procedures tend to get more and more complex as the company grows. Local compliance is something that inevitably will be less of a priority for management within this growth process and thus, can be easy to neglect.
Corporate governance can be simpler for small businesses. But if your company is looking to expand, it is wise to complete an entity health check in Chile to properly support and allow for these shifts and increase in company ‘in-house relationships’.
4. Manage Risks
Being compliant is not just about having a good relationship with the government and its various public entities. It is also about managing risk and watching your own back. Avoid slippery slopes of small non-compliance issues growing into larger ones by conducting a regular entity health check in Chile.
Besides accumulating financial penalties from the government as mentioned above, non-compliance and discrepancies of formal documents and records present a reputational risk as well. Companies don’t need to put their credibility at risk, even if compliance measures are challenging for them to understand -- hiring a third-party auditor or entity check provider can give you the information you need to make informed decisions and protect the reputation of your company in the public eye.
Take action with the information you have
Whether you are looking to invest in a Chile based company, or are interested in acquiring one, or if you already are the pride owner of one, an entity health check in Chile is the path to information about those companies.
Information is money -- knowing the compliance picture of your own or a potential acquisition will allow you to make the best possible informed decision.
Use experienced entity health check providers in Chile
Although Chile is a very favorable business destination, there may arise some complexities when doing business abroad due to legal and cultural hurdles. This includes understanding a company’s corporate compliance requirements.
Avoid unnecessary setbacks and protect yourself and your company by seeking an entity health check in Chile from experienced and trusted experts.
At Biz Latin Hub, our group of local and expatriate professionals offers a full suite of market entry and back-office services that can support your company operations and ensure you operate in full compliance with local regulations. Reach out to us at [email protected] to receive personalized guidance on legal, accounting, tax, payroll, employment, trade, due diligence, and other matters.
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