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 Empire in 1535, the territory that

currently makes up the Republic of Ecuador was a part of the Republic of Gran

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

Andean Region of South America. In 1830, Ecuador became a separate republic.

Ecuador is a founding member of the Andean Community, a free-trade zone,

whose other members are now Peru, Colombia, and Bolivia. The Andean Com-

munity has supranational legal control of a number of commerce-related areas,

including, among others, trade, intellectual property, sanitary controls, and anti-

trust. The supranational laws of the Andean Community are Decisiones.

Ecuador’s main trading partners are the United States, Peru, Chile, China,

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

Ecuador’s main trading partner. The Andean Community members have a very

strong trading and political relationship with Ecuador. In recent years, Canada

has become a close trading and investment partner. In order to expand its trad-

ing network and lower its political and strategic dependence on the United States,

the present government has sought stronger trade, investment, and political ties

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with other countries, including China and, to a lesser extent, India. As part of its

attempt to gain commercial and political independence, the present government

has placed a high priority on its relationship with Iran.

Since March 2000, Ecuador’s currency has been the USD.

Under the present government, Ecuador has been limiting and terminating

its existing bilateral investment treaties, but it is looking for stronger trading and

investment ties in particular with China, India, Brazil, Argentina, Venezuela, and

Chile.

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

member of the recently organized Union of South American Nations.

ESTABLISHING A BUSINESS PRESENCE

Permanent Structures

Suitable Corporate Forms

There are two types of companies in Ecuador:

• business association (regulated by the Law on Companies)

• civil corporation (regulated by the Civil Code)

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

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

activities.

The Law on Companies2 recognizes the following species of business

associations:

• general partnership

• limited partnership, divided by stocks

• limited liability corporation

• corporation

• mixed economy company

• incidental company (cuentas en participación)

The corporate forms depend upon the particular needs of the individuals who

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

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

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

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

in Ecuador. This section will discuss each business association’s key characteristics

in turn.

Ecuador 181

Corporations

The main characteristics of this type of company are the following:

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

• It requires a minimum of two persons as founding shareholders.

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

capital.

• The minimum subscribed capital is USD 800, out of which at least 25 per-

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

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

• Liabilities of the shareholders are limited to their paid-in capital.

• There is freedom to transfer shares.

• 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 officers (president and general man-

ager, or any other name for these positions).

Incorporation a nd Regist ration

According to the Organic Law for the Strengthening and Optimization of the Cor-

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

Ecuador was amended. The new process has the following steps:

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

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

shareholders.

• The process starts with reserving the name under which the company will

operate.

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

which determines the parameters within which the corporation is going to

develop the activities of the company, address, and administration, among

others. A public notary will subsequently convert this document into a

public deed. Additionally, the deed includes the status 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.

• The next step is to obtain the approval of the bylaws in the Mercantile

Registration.

• Once the Mercantile Registration has approved the bylaws, the legal exis-

tence of the corporation initiates.