When Does Your Company Need a Legal Representative in Paraguay?

Seek a trusted, knowledgeable Legal Representative in Paraguay to secure the success of your company. A Legal Representative can make a number of decisions on legal matters for your company, and is legally obliged to act in its best interests.

Though consistently overshadowed by other larger regional economies, Paraguay is nonetheless drawing attention for its steadily positive growth since 2013, when now-former President Horacio Cartes took office.

Paraguay is putting up increasingly stiff competition for foreign investment.

Though small, the country’s diversifying economy is presenting new opportunities for foreign companies expanding into the region.

To take advantage of these opportunities and begin commercial activities, expanding multinationals must first engage a Legal Representative in Paraguay.  

Role of a Legal Representative in Paraguay

A legal representative is a person who acts on behalf of another natural or legal person. This means that the person can act for both individuals and companies. This information focusses more specifically on legal representation for companies in Paraguay.

For a company or ‘legal person’, a Legal Representative in Paraguay can undertake the following activities on your behalf:

• Prepare documents for the company formation process
• Obtain a tax identification number
• Sign contracts
• Conduct legal transactions
• Make decisions on administrative and commercial activities for the company
• Hire employees
• Sell and purchase items for the company.

In Paraguay, the Legal Representatives of companies are typically identified as Directors in the case of Share Corporations, or the General Manager in the case of Limited Liability Company.

Note: If a company’s Board of Directors is chartered, the directors are responsible for the tax obligations arising from the decisions they make. Otherwise, only those directors who are the direct decision-makers on tax related matters are responsible.

Power of Attorney mandate

A company formally appoints a Legal Representative in Paraguay through a ‘Power of Attorney’ (POA) contract. This is the first step to forming a company in Paraguay.

This POA contract is a legal mandate that sets out the extent of the Legal Representative’s power to make decisions on behalf of the company. Both the company and Legal Representative must sign this document.

The Power of Attorney also outlines the obligations of the Legal Representative in Paraguay to act in the company’s best interests. While your company must accept responsibility for the decisions your Legal Representative makes, Paraguayan law upholds a number of checks and balances to ensure your representative makes decisions that best support the company and doesn’t act on any conflicts of interest.

Why is a Legal Representative necessary for companies?

Simply put, you can’t lawfully conduct business operations without a Legal Representative in Paraguay. Under local law, you can’t represent your own company on legal matters.

Companies must necessarily appoint someone to act in their name, make decisions, assume the responsibilities that the Law empowers them to, and act according to their obligations.

Legal representation in a Sociedad Anónima (Corporation)

The Corporation (known as the Sociedad Anónima or SA in Paraguay) is the most widespread type of legal entity in Paraguay. A Board of Directors is the governance structure of a Corporation in Paraguay. This Board is made up of one or more directors – typically this is an odd number to ensure majority-vote decisions. Directors are appointed by ordinary shareholder meetings or on the spot.

In principle, the Board makes decisions as one unit, rather than as individual directors. The powers and main responsibilities of directors are set by a management contract (civil contract), the content of which is determined in by law and relevant statutes.

Although in the Paraguayan Civil Code does not explicitly establish the generic guideline for these contracts, both the administrators and representatives of the company have the duty to act with due diligence.

Legal representation regulations

Imperatively, a Legal Representative in Paraguay must be a local resident, and they may designate or delegate their functions through other resident attorneys, who would become jointly liable.

A shareholder or partner may act as the Legal Representative as long as they can act in accordance with their obligations and without conflict of interest.

In Paraguayan legislation, this figure is regulated by the Civil Code, its modifications, and other laws that regulate specific matters.

Depending on the context and legal entity type, Legal Representatives may take different titles with the company. This includes Directors and General Managers (as mentioned above), but also Attorneys.

How do I choose my Legal Representative in Paraguay?

Ideally, your company should appoint someone with extensive knowledge of local corporate law, which in many cases may mean engaging with a local law firm and signing a Power of Attorney with a corporate legal expert external to your company. If your company is predominantly English-speaking, it’s especially valuable to seek a local bilingual corporate lawyer to be your Legal Representative in Paraguay.

A Legal Representative is crucial for the proper and lawful functioning of your company. Appointing someone to this role who is not familiar with local law could damage your company’s ability to conduct commercial operations.

Due to the level of responsibility a Legal Representative assumes, it’s important to find a trusted partner who can support your company’s activities and communicate clearly your senior executives and local government authorities.

Engage with a trusted Legal Representative in Paraguay

Paraguay offers an exciting environment to conduct business. Its speed of economic growth and development, and international connections raise the attention of investors and entrepreneurs expanding to the region.

Local law dictates that you cannot conduct commercial operations without appointing a Legal Representative to act on your company’s behalf. It’s therefore crucial to appoint a trusted legal expert to the role.

At Biz Latin Hub, our corporate accounting and legal specialists have over 5 years’ experience supporting foreign multinationals expand into Latin America. As a market leader in the region, we’re now offering our full suite of market entry and back-office services in Paraguay.

Use our multilingual team as your single point of contact for company formation, commercial representation, accounting and taxation, and human resource support, among other services.

Contact us today here at Biz Latin Hub for a customized quote.

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