Ecuador

• Author: Bruce Horowitz - María Edith Játiva - Bolívar Figueroa Martínez
• Pages: 179-228

179

Ecuador

Bruce Horowitz

María Edith Játiva

Bolívar Figueroa Martínez

Paz Horowitz Robalin o Garcés

COUNTRY OVERVIEW

Taken over from the Inca Empire by the Spanish Empi re in 1535, the territory that

currently makes up the Republic of E cuador was a part of the Republic of Gran

Colombia that existed for a few years followi ng the liberation from Spain of the

Andean Region of South A merica. In 1830, Ecuador bec ame a separate republic.

Ecuador is a founding member of t he Andean Commun ity, a free-trade zone,

whose other members are now Peru, Colombia, and B olivia. The Andea n Com-

munity has supranational leg al control of a number of commerce-related area s,

including, among others, t rade, intellectua l property, sanitary cont rols, and anti-

trust. The supranationa l laws of the Andean Com munity are Decision es.

Ecuador’s main trading pa rtners are the United States, Peru, Chi le, China,

Colombia, Brazil, Venezuela, and Pana ma.1 The United States has long been

Ecuador’s main trading pa rtner. The Andean C ommunity members have a very

strong trading and politic al relationship with Ecu ador. In recent years, Canada

has become a close trading a nd investment partner. In order to expa nd its trad-

ing network and lower its political and st rategic dependence on the United St ates,

the present government has sought stronger trade , investment, and politica l ties

CHAPTER 6

180 Chapter 6

with other countries , including China a nd, to a lesser extent, Ind ia. As part of its

attempt to gain commercial a nd political independence , the present government

has placed a high priority on its relat ionship with Iran.

Since March 200 0, Ecuador’s currency h as been the USD.

Under the present government, Ecu ador has been limiting and terminating

its existing bilateral i nvestment treaties, but it is looking for st ronger trading and

investment ties in par ticular with C hina, Indi a, Brazil, A rgentina, Venezuela, and

Chile.

Ecuador is a member of the Organ ization of American States and is a founding

member of the recently organi zed Union of South Americ an Nations.

ESTABLISHING A BUSINESS PRESENCE

Permanent Structures

Suitable Corporate For ms

There are two typ es of companies in Ec uador:

• business association (regul ated by the Law on Companies)

• civil corporation (regulated by the Civi l Code)

Business associations are incorporated to conduct only “commerce acts” as

characterized by t he law, and civil corporations are incorporated to conduct other

activities.

The Law on Companies2 recog nizes the followi ng species of business

associations:

• general partnersh ip

• limited part nership, divided by stocks

• limited liability corporation

• corporation

• mixed economy company

• incidental company (cuentas en participación)

The corporate forms depend upon the par ticular need s of the individuals who

constitute the business presence; nevertheless, t he suitable corporate forms for the

business presence’s legal and commercia l use are the corporation, the limited liabil-

ity company, and the civil corporation. Alternat ively, for foreign investors, it may

also be appropriate and useful to est ablish a local branch of the foreign company

in Ecuador. This sec tion will disc uss each business assoc iation’s key characteristics

in turn.

Ecuador 181

Corporations

The main charac teristics of this t ype of company are the following:

• It is under the control and super vision of the Superintendence of Companies.

• It requires a mini mum of two persons as founding sh areholders.

• It is an open corporation that w ill issue shares in direct relation to its paid-in

capital .

• The min imum subscribed capita l is USD 800, out of which at least 25 p er-

cent must be paid in at the time of incorporation, with the other 75 percent

required to be paid in with in 24 months of its incorporation.

• Liabilities of the shareholders are l imited to their paid-in c apital.

• There is freedom to transfer sha res.

• The only restriction on foreign ownership is that the foreign owner must

hold “registered shares.”

• The shareholders must hold at least one shareholder meet ing per year (actual

shareholder presence is not required).

• The company should have at least two off icers (president and general man-

ager, or any other name for these positions).

Incorporation a nd Regist ration

According to the Organic L aw for the Strengtheni ng and Optimiz ation of the Cor-

porate Sector,3 the pro cess of incorporation and registration of a corporation in

Ecuador was amended. The ne w process has the following step s:

• The number of shareholders required by Ec uadorian law for the establish-

ment of a corporation is at least two shareholders; there is no ma ximum of

shareholders.

• The process star ts with reserving the name under which t he company will

operate.

• Subsequently, the social object or the purp ose of the company is developed,

which determines t he parameters with in which the corporation is going to

develop the activities of the company, address, and admi nistration, among

others. A public notary wi ll subsequently convert this docu ment into a

public deed. Additionally, the deed includes the st atus of the company, an

affidavit in which capital it will operate is determined, and the governing

bodies of the company, with the appointment of persons to exercise these

charges.

• T he next step is to obtain t he approval of the bylaws in the Mercantile

Registration.

• Once the Mercantile Regist ration has approved the bylaws, the legal exis-

tence of the corporation initiates.