Peru not only offers some of the best cuisines worldwide but is also an essential Latin America jurisdiction for commerce, trade, and investment.
The reasons for the rush on the Peruvian markets are extensive. First of all, the country has an economic growth of approx. 5.9% over the past decade and is expected to maintain it’s GDP growth at 3.82% over the coming years. Additionally, thanks to recent structural reforms and policies supporting businesses and simplified administrative processes, Peru has been able to lure foreign companies into local markets. One of those key sectors is the mining industry, that makes up 60% of the country’s exports and supports the GDP growth to a great extent. Unsurprisingly, Peru is the world’s 58th easiest country to do business in and stands out as a Latin American leader due to the great protection of foreign investors and a facilitated process of registering property.
It seems that Peru is an optimal place for foreign investors seeking to expand their business into a prosperous economic environment. After deciding to do so, a somewhat challenging company formation process awaits. Therefore, our legal team based in Lima wants to give you an overview of the most important matters to consider when looking to establish a company in Peru.
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Essential Guide to Form a Company – Incorporation Steps
Before starting the company formation process, you should have a sound understanding of the different Peruvian legal entity structures. Apart from publicly held corporations (S.A.A.), joint stock companies (S.A.) and limited liability companies (S.R.L), a foreign business can open a foreign branch office. Nevertheless, the entity structure that is used in most of the incorporation cases is the Closely Held Corporation (Sociedad Anónima Cerrada, S.A.C.), which is a variable stock/share entity which requires a minimum of 2 shareholders and liability is limited to the capital contribution of the shareholder. Therefore, we will concentrate exclusively on the formation of an S.A.C. in this piece.
The company incorporation process generally encompasses the following:
- Draft a Power of Attorney (POA)
- Create the company bylaws
- Register the company with the Superintendence of Public Registries (SUNARP)
- Obtain a taxpayer ID number (RUC)
- Legalize accounting books
- Obtain a Municipal License
- Open a corporate bank account
- Deposit the required capital to activate the corporate bank account
FAQ’s – Closely Held Corporation (Sociedad Anónima Cerrada, S.A.C.)
To illustrate the key characteristics of a company formation in Peru, we have provided you with answers to some of the most frequently asked questions:
Is foreign ownership allowed? – Yes, up to 100% foreign ownership is allowed
Can the company sponsor foreign employees? – Yes, but no more than 20% of the company’s local workforce can be foreigners
Are there capital controls? – No
Is there a minimum share capital? – Yes, PEN$500
What is the minimum number of shareholders? – There must be at least (2) shareholders
Are a fiscal address and legal representation required? – Yes
How long does the process take (including the opening of a corporate bank account)? – Between 6 and 8 weeks
Necessary Company Information
After deciding to establish your business in Peru, you need to give a thought about possible company names (these need to be unique and must end with S.A.C), and the business activities you wish to undertake. In addition, the following company formation requirements need to be complied with:
Company Shareholders
Being a shareholder means that you as a natural or legal person (an individual or a company, respectively) of any nationality can own part of a company in the form of shares. For the establishment of an S.A.C., a minimum of 2 shareholders is required and ownership of the company cannot exceed 20 shareholders. Moreover, a shareholder’s liability is limited up to the par value of his/her share contribution to the company. If a legal entity decides to acquire shares in a company, additional documentation will be required.
DON’T FORGET: An S.A.C. cannot register shares publicly on the Lima stock exchange (BVL).
Company Share Capital
The company share capital is the amount of capital raised through the purchase of shares by the shareholders. For the formation of an S.A.C., there is generally a minimum share capital requirement of S/500 PEN, whereas the establishment of a financial institution requires a minimum share capital of S/1000 PEN. Please note that after the establishment of the business entity, its shareholders can increase or decrease the share capital at any point. Additionally, it should be noted that the company share capital plays a major role for the application of bank loans, the entrance into a joint venture, the bidding on government contracts, or the ability to obtain preferable interest rates.
Corporate Governance
A Peruvian company is normally managed by a General Director and guided by a Board of Directors, who oversees the company’s activities. In the case of an S.A.C., a general director (manager) is required and a board of directors is optional. All the managers and directors can be of foreign nationality, provided that they are legally in the country with a foreigner’s identity card. An essential part of a company’s corporate governance is the annual general meeting (AGM) that must take place within the first 3 months of the year and can be held by a legally authorized proxy representing the absent party at the AGM.
Company Legal Representation
Apart from the general manager and the board of directors, another party plays a key role, namely the Legal Representative, who acts as the “legal face” for all company operational activities, assuring that the business is operated responsibly while taking legal liabilities himself. This person must be a Peruvian national or a foreigner in possession of the foreign identity card, permitting him to legally reside in Peru.
Fiscal/Legal Address
One of the most important requisites for establishing a company is the registration of a fiscal address together with the unique taxpayer registry number (RUC) that must be registered with the Peruvian tax superintendence (SUNAT). This will be the legal and fiscal address of the company and will be used for all official communication and tax purposes.
Bank Account
The last key requisite for the company formation is the opening of a corporate bank account. In order to activate the account, a minimum of S/500 PEN and/or $500 USD needs to be deposited that, in turn, can be used for the minimum company share capital requirement of S/500 PEN.
Need Local Support
Now is a great time to establish or expand your business into the Peruvian market. A strong economy, a range of attractive business sectors and a government that is tearing down barriers is encouraging foreign participation in the region.
Local group, Biz Latin Hub provides tailored market-entry services for foreign investors interested in entering the Peruvian market. If you need more information or personalized advice, don’t hesitate to contact us now.
Interested in operating in a Latin American market? Watch this short video to learn about our market-entry services and how they can support your Latin American expansion.
