Entity annual compliance in Ecuador: how to make sure you get it right.

Nestled in the northwest corner of South America, this small country packs a punch well above its weight. An increasing number of foreign investors are looking towards the territory and with good reason. However, as with any other nation, entity annual compliance in Ecuador is something that needs to be taken into account before you start operations. This will avoid you inadvertently breaking the law and facing consequences.

There are stringent regulations for entity annual compliance in Ecuador for companies operating in the territory. Each industry (oil and gas, mining, banking, corporate finance, etc.) has its own set of rules, regulations, and statutory requirements which companies must comply with.

Biz Latin Hub is the leading provider of corporate support in the region, with 18 dedicated offices throughout Latin America and the Caribbean. Our array of back-office services can support you as you set up a company in Ecuador and throughout the business life cycle, including entity annual compliance in Ecuador.

Entity annual compliance in Ecuador: What regulations must companies follow?

Generally, all companies, regardless of industry, are required to be in compliance with the rules and regulations set out below.

Financial compliance requirements

The presentation of financial statements is important so that shareholders understand the company’s economic activities. These details also need to be communicated to shareholders at annual shareholder meetings, and include information such as how much the company made in overall profit, gross vs. net revenues, operating expenses, etc. Annual financial reports must be sent to the Ecuadorian tax authority every year.

Corporate compliance requirements

Entity annual compliance in Ecuador requires that the following issues be discussed and resolved in a corporation’s annual shareholder meeting:

1. Annual Shareholders Meeting:
   A shareholders’ meeting must be convened at least once annually within the first three months of the year. The purpose of this meeting is to approve accounts, financial statements, and the administration of the legal representative.
2. Annual strategy report:
   Company management has the obligation of presenting the shareholders with an annual report of their activities, and how they relate to the company’s financial statements. These reports must provide a detailed explanation of the financial strategy throughout the year, for all aspects of the company (labor, marketing, sales, etc.) This report is a compulsory part of the annual shareholder meeting and shareholders must approve the report.
3. Update and maintain corporate books:
   Part of legal entity compliance is having corporate books up to date.
4. Profit and loss report:
   Shareholders must be made aware of the company’s financial performance for the past year. Shareholders must be informed about the profit level (was it higher or lower than forecasts predicted?) and if applicable, explain why the company suffered a quarterly loss.
5. Disclosing Foreign Shareholders or UBO Report: 
   Compliance regulations stipulate that the number of foreign shareholders be reported, as well as how much of the company’s stock they own. Each year, before January 31st a company must provide the names, nationalities, and contact information of foreign shareholders to the appropriate government authorities. If a shareholder is a foreign company and not an individual, the name, nationality, and contact information of the representative of the institutional shareholder must be reported.
6. Reports to Regulatory Bodies Must be Carried Out for Entity Annual Compliance:
   Compliance rules and regulations also stipulate that a company needs to carry out the following actions: Make available a report detailing the discussions and decisions ratified at the annual shareholder meeting; Send all relevant compliance documents to the superintendency.
7. Company Structure: 
   Depending on the type of structure of the company (public, limited liability, SAS, etc.) there are additional requirements that must be met. This is where the corporate secretary again becomes essential, as it will be her/his duty to inform company management about the additional items/actions that will be needed to ensure corporate compliance.

FAQs on entity legal compliance in Ecuador

Based on our extensive experience these are the common questions and doubts of our clients on regulatory compliance in Ecuador:

Biz Latin Hub can help with entity annual compliance in Ecuador

At Biz Latin Hub, we provide integrated market entry and back-office services throughout Latin America and the Caribbean, with offices in Bogota and Cartagena, as well as over a dozen other major cities in the region. We also have trusted partners in many other markets.

Our unrivaled reach means we are ideally placed to support multi-jurisdiction market entries and cross-border operations.

As well as knowledge about entity annual compliance in Ecuador, our portfolio of services includes hiring & PEO, accounting & taxation, company formation, bank account opening, and corporate legal services.

Contact us today to find out more about how we can assist you in finding top talent, or otherwise do business in Latin America and the Caribbean. If this article on entity annual compliance in Ecuador was of interest to you, check out the rest of our coverage of the region. Or read about our team and expert authors.