Overview of Dominican Corporations

[Fabio J. Guzman]

INNOVATIONS IN THE NEW COMPANY LAW

New Business Entities:

Sociedad de Responsabilidad Limitada (SRL)

• Based mostly on the current SRL’s in French Company Law.
• Certain similarities with American LLC’s.
• Chief company officer(s): one or various managers (“gerentes”). Must be individuals, no companies allowed.
• Minimum of 2 shareholders; maximum of 50.
• RD$100,000 minimum capital.
• Shares not readily transferable to third parties; other shareholders have right of first refusal.
• Shareholders’ liability limited to their investment in the company.
• Ideal for small or family businesses.

Empresa individual de Responsabilidad Limitad (EIRL)

• No shareholders; one sole person owns the business.
• Owner must be an individual, not a company.
• Owner’s liability limited to his or her investment in the company.
• No minimum capital.
• Chief Company Officer(s): the owner and the manager. The owner may name himself manager.
• Ideal for businesses owned by a single individual.

Old Business Entities

Sociedad Anónima (S.A.)

• Minimum capital: RD$30,000,000.
• Minimum of 2 shareholders; no maximum.
• Governed by a “Consejo de Administración” of at least 3 members.
• Shares readily transferable.
• Shareholders’ liability limited to their investment in the company.
• Ideal for medium and large businesses

Changeover from Old to New Law

• All existing companies must adjust to the new statute by June 11, 2009. Adjustment process cannot start, however, until the Business Registry (“Registro Mercantil”) issues a so-called “instruction manual”. Because of the lack of trained personnel at the Registro Mercantil and the DGII, and the high number of companies involved (approx. 100,000), it is to be doubted that the process will go smoothly.

• Most existing S.A.’s will have to change to SRL’s or EIRL’s or increase their authorized capital to RD$30 million pesos.
• Of the approximately 100,000 existing S.A.’s, less than 1% have an authorized of RD$30 million or more.

PRELIMINARY THOUGHTS
[*]Definitely an advance in comparison to the old legislation[*]Legislation comparable to present-day French and Spanish company law[*]Adjustment process will be a mess, though.[/LIST][/LIST]

[Fabio J. Guzman]

Most present-day companies (S.A.) will have to be "transformed" into SRL's (LLC's) or EIRL's. This does NOT entail the creation of a new company, just making a publication in the papers, drawing up a mid-year financial statement and holding a shareholders' meeting.

There will be no need to change bank accounts, titles or anything else. The company will be same except that instead of being called "My Business, S.A." now it will be called "My Business, S.R.L." or "My Business, E.I.R.L." Also, there will be no need any longer for nominee shareholders and directors.

I'm part of the team working on the new company forms for bylaws, etc. We're holding a seminar on the new company law at the Banco Central Auditorium on Saturday, Jan. 31, beginning at 8:30 a.m. A similar seminar will be held in Santiago on Saturday, Feb. 21, at the PUCMM. You should advise your lawyers to attend.

[Robert]

Thanks for the update Fabio

[MikeFisher]

thank you very much for that update.
that been clear and understandable even for non-lawyer-guys like myself.
very appreciated.
Mike

[Robert]

Fabio, what about the share holders names appearing in the company name? Is this only for new SRL's?

[Lambada]

I'm probably terribly out of date here, but what is the position vis-a-vis CporA companies? Same as SA?

Thank you.

[MikeFisher]

i did not even realize that the CxA not been mentioned, Ginnie.
would assume that it is handled like the S.A.,
but let's wait what the expert tell's us about it,.
Mike

[Alfredo Guzman]

what about the share holders names appearing in the company name? Is this only for new SRL's?

That requirement, or a form of it, is only applicable to partnerships (“sociedad en nombre colectivo”) and limited partnerships(“sociedadesencomandita”), which are barely used in the DR, as they lack the limited liability component found in SA's, SRL's and EIRL's.

EIRL's cannot have an individual's name, last name, nickname, or part of these, as the company's name, and by "individual" you should understand that of any physical person, including its owner's (Art. 454); SRL's are allowed to be named after one or more of its shareholders, but are not required to (Art.90).

I'm probably terribly out of date here, but what is the position vis-a-vis CporA companies? Same as SA?

i did not even realize that the CxA not been mentioned, Ginnie.
would assume that it is handled like the S.A.,

Under the old law, C por A's and SA's were practically the same legal entity. The old law allowed founders/shareholders to chose between "S.A." or " C. por A." when forming their new per share corporations, but legally they were (are) the same. The new law now requires that the names of all corporations formed under the "Sociedad Anonima" corporate structure are followed by " Sociedad Anonima" or " S.A." (Art. 155).

[Robert]

You know what's scary?

The people reading this thread are now more informed that 99% of the local business community. My guess is, that 90% of the local business community have no idea about the new requirements.

[Lambada]

Many thanks, Lic. Guzmán.

Some 15 years ago I set up a C por A in both our surnames (just for a house purchase in those days) & we still have it.

I have visions of all those 'off the shelf' ready made corporations now bearing the names of anyone other than the new shareholders, but as you say, if there is no requirement it won't matter.