Uruguay is advocated as one of the best countries in Latin America for investment by those interested in starting or expanding a business. Its strong political, legal and social stability and predictability make this country a haven for foreign investment and there’s no discrimination between local and foreign investors and entrepreneurs.
The Global Benchmark Complex Index ranked Uruguay the easiest state in 2015 to do business in Latin America. Following this, the financial complexity index ranked the country as one of the least complex countries in the Latin America in 2017 in terms of accounting and tax compliance.
We explore Uruguay’s latest move towards attracting foreign business: a new legal entity designed to boost local commercial activity.
What are Simplified Stock Companies?
The Special Commission of Innovation, Science and Technology of the Chamber of Deputies responded to demands of Uruguayan entrepreneurs in April, 2019, by promoting a new legal entity for business.
The creation and regulation of a new business type went forward, with a law aimed at promoting entrepreneurship through allowing regulation societies for simplified shares. This was the Simplified Stock Company.
To clarify, there are several different names for the same business model, which translates to Simplified Stock Companies or also recognized as “Simplified Joint Stock Company”, abbreviated to SAS, in the Uruguayan legislation background. Additionally, the Organization of American States (OAS) in the department of international law names this model the Simplified Stock Corporation.
Europe created SAS towards the end of the twentieth century, and soon after, the entity made an impact in Latin America. Countries such as Chile, Mexico, Argentina and Colombia, advocate and implement SAS. Colombian enactment of the SAS model was created in 2008, helping to create more than 500,000 companies in the country. In fact, after 1 year of passing this enactment of this model, SAS was much more preferred by business owners in comparison to traditional forms.
Generally, the SAS is considered as a commercial company with capital represented in capital shares. The point is to create contemporary conceptions and correlate these needs with entrepreneurs.
SAS has the same tax treatment that is granted to personal companies, however this does not include sales of shares.
Uruguay’s new business structure
The Uruguayan SAS regulates the development of enterprises, which is great for undertaking large scale projects. The SAS allows investors to self-regulate and freely determine their company rules and regulations.
The SAS also enables people to form companies digitally with electronic signatures and other authentication approaches, thanks to a newly established online process. The SAS structure also allows a digital platform for business to collect finance or crowdfund for their projects online.
Article 2 under United Nations Commission for International Commercial Law or Comisión De Las Naciones Unidas Para El Derecho Mercantil Internacional (UNCITRAL) allows shareholders to have limited liability and only be responsible for providing the capital contributions promised to the simplified stock corporation.
This means shareholders’ personal assets are not at risk, should the company experience financial difficulty.
How does SAS boost investment in Uruguay?
Uruguay is aware of the modernization of business methods and understands that the SAS model helps minimize barriers to entry. This technique updates Uruguay’s business viability and can be tweaked, going forward, to facilitate a strong commercial environment.
Always looking for improvement, Uruguay’s SAS model creates easier access to foreign business people looking to expand into the country. The SAS represents capital and is simplified with minimal regulation. This reduces requisite formalities in the formation process, compliance requirements, and transaction costs. Additionally, it facilitates the creation of new jobs. SAS helps to generate a company in a short period and helps adjust the social type to the needs of a starting business.
Evidence of SAS success
Research shows that the SAS model is not only simple but cost effective when forming a business. Large corporations’ benefits from the efficiency of the SAS through incorporation simplified the process and encouraged of foreign investment in a number of countries, including Uruguay’s economically successful partners.
The model is an alternative of traditional corporate methods because businesses decide their own rules about structuring and organizing by the shareholders in accordance to Article 17 under UNCITRAL.
Like many neighbouring countries, a large portion of Uruguay’s economy is built upon small businesses. A new business structure that offers limited liability is a great way for the country to support its sole proprietors and smaller franchises. The same is unfolding in the wider region, with Brazil’s recent introduction of a new business structure a perfect example.
The timing is right: Uruguay in the MERCOSUR-EU trade deal
Uruguay’s membership to the trade bloc MERCOSUR gives it free access to other member countries’ markets. Other members include Argentina, Brazil, Paraguay and Venezuela (though the latter is currently suspended). Uruguay’s capital, Montevideo, is currently the headquarters of the bloc’s Secretariat and Parliament.
Additionally, the trade bloc identifies seven Associated State members, who also enjoy reduced barriers to trade with each other. This includes:
Trade agreements with other partners enable flows of US$34.66 in imports and US$40.28 million in exports to and from member and associated economies. This puts Uruguayan businesses in a significant position as an easy access-point to free-flowing trade channels.
In light of the recent trade deal between MERCOSUR and the European Union, further connectivity means businesses operating out of Uruguay enjoy preferential trade access to other powerful economies in Europe.
We can help you get started
Uruguay possesses competitive business and investment opportunities for both small and large-scale commercial activities. With a new legal entity on offer, entrepreneurs can enjoy reduced barriers to entry and government support for a foreign ownership-friendly business environment.
Still, the incorporation process can be somewhat challenging without sufficient knowledge of local Uruguayan law or regulation.
Ensure your company is formed and incorporated quickly and successfully be seeking out guidance from a local group. Biz Latin Hub has the knowledge and expertise to offer personalized advice in Uruguay and Latin America. We offer customized business solutions suited to your needs to ensure compliance every step of the way.