Ecuador is promoting business in the country by introducing a new legal entity, the Simplified Shares Company, or SAS (Sociedad de Acciones Simplificadas).
On February 28, 2020, the new Law of Entrepreneurship and Innovation came into force in Ecuador. This law is a very important advance in Ecuadorian legislation and is accompanied by the implementation of a series of new regulations in the field of business promotion in this country.
Among the most important points of this law is the creation of a National Council for Entrepreneurship and Innovation to support commercial development in Ecuador, and to promote entrepreneurship education and culture.
Ecuador is the seventh-largest economy in Latin America, with a gross domestic product (GDP) of $101,7 million in 2019 (all figures in USD). It is also one of the main recipients of foreign direct investment (FDI) in the region, with inflows of $937 million that same year. Furthermore, gross national income (GNI), an important indicator of prosperity, reached $11,500. A number that places the country amongst upper-middle-income countries according to international standards.
Besides being an important logistic hub in the Northwest of the South American continent, Ecuador’s capital Quito is becoming a startup hub in the region, with a high concentration of skilled labor available at competitive rates. Furthermore, Ecuador is rich in hydrocarbon reserves, with oil drilling responsible for 40% of the nation’s export income, whereas the services sector has become a key source of employment for the economy.
However, the most striking point of this new law is that it establishes the opportunity to form a new legal entity, the SAS in Ecuador. This follows in the footsteps of countries such as Uruguay and Colombia, which have established the same entity in the name of business growth.
What are SAS Simplified Stock Companies and what is their creation process?
Simplified Stock Companies (SAS) are a type of company whose shareholders are held liable up to the amount of their respective capital contributions to the entity only. Shareholders can choose to waive this limitation to insure with their own assets any operation of this type of entity.
It is important to mention that the SAS in Ecuador cannot not be listed on the stock exchange. The SAS is constituted by means of a private document that will be registered in a new Registry of Companies by the Superintendence of Companies. Additionally, SAS entities do not have a minimum capital requirement.
This type of legal entity in Ecuador cannot carry out activities or their line of business cannot be related to the financial, stock market, insurance or other systems that have special treatment under Ecuadorian law.
What are the benefits of SAS Simplified Stock Companies?
Firstly, this new corporate structure comes with lower administrative costs. The SAS in Ecuador can be executed and implemented by means of private acts and documents. The obligation to do them by public deeds is eliminated and therefore, notarial costs are eliminated.
The second benefit is the reduction of time in its registration processes, both in the incorporation process and subsequent activities. Since it is not necessary to register this type of corporate acts in the Commercial Registries and is only executed before the Superintendency of Companies, business owners can form the SAS in Ecuador with reduced bureaucratic requirements and wait time.
Furthermore, unlike other traditional corporate structures, the SAS only requires a single shareholder for its constitution. A one-person requirement for the SAS facilitates the generation of new formal businesses in Ecuador.
A fourth benefit of the SAS in Ecuador is that restrictions on the transfer of shares can be established in the incorporation statutes. Additionally, it can be established that the shares can give multiple votes, thus streamlining the management of corporate governance for this type of entity.
Another benefit is that after setting up an SAS, you are entitled to carry out several activities, which is not possible with other types of companies.
Finally, this new structure allows other types of companies to transform into an SAS structure, unless they have a particular or special legal treatment. To understand how to do this, and if your company can make this transition, consult with a local legal expert.
Biz Latin Hub can be your single point of entry to Ecuador
In general terms, a Simplified Shares Company (SAS) in Ecuador offers an interesting and flexible alternative for your business in this country. Whether you are making the choice to expand into the Ecuadorian market, or considering your options to transition your company into this new structure, you’ll need trusted legal guidance and expertise to navigate this process.
At Biz Latin Hub, with extensive knowledge of company law at the regional level, our team of bilingual legal professionals will support you in all your needs and the necessary procedures to carry out your business in Ecuador.
For advice on opening or incorporating a SAS in Ecuador, and to get assistance to comply with the processes derived from this legal process, get in touch with us.
Contact our friendly team here at Biz Latin Hub for support to do business in Ecuador and throughout Latin America.