File the information of the Foreign Partners or Shareholders of the companies subject to control by the Superintendence of Companies, Values and Securities

According to the current Legislation; and, as we have done on previous years, the Ecuadorian companies that are subject to control by the Superintendence of Companies, Values and Securities must receive from their foreign partners or shareholders the documentation detailed below, so their legal representatives can present it upon the aforementioned institution between January 1st and January 31st, 2020.  The Administrator of the company that does not receive this documentation, is required to notify the names of the reluctant partners or shareholders of the company until February 5th, 2020:

  1. The Legal Existence Certificate duly issued by the competent control authority of the country of origin of the foreign partner or shareholder. This document must come duly apostilled or legalized by the Consul of Ecuador; and, if it is applicable, with its respective translation into Spanish language.  However, this translation may also be performed locally.
  2. The Special Power of Attorney must be granted in favor of a legal or natural Ecuadorian person or foreign person resident in Ecuador through which the attorney is empowered to fulfill the obligations that the shareholder or partner, foreign legal entity acquired in Ecuador (Art. 6 Companies Act). This document must be duly apostilled or legalized by the Consul of Ecuador; and, if it is in a different language than Spanish it should come translated or will be translated locally. It should be noted that foreign shareholders or partners in previous years and have delivered the said power shall not issue it again this year, unless the term had expired.
  3. Finally, it must submit a complete list of who are the partners or shareholders of a foreign legal entity, which in turn is a partner or shareholder of the local company, which detail the following information: the company name or the full name, nationality, address, telephone number, e-mail; and, in case of natural persons, should provide the marital status and passport number.

At this point, it is necessary to mention that through the amendments performed to the Companies Act on October 23, 2018, included in the Law for the Optimization and Efficiency of Administrative Procedures, published in the Official Gazette Supplement 353 dated October 23, 2018, it is established that: “In the event that in the list of partners or shareholders there are legal persons, the list of its members must also be provided, and so on until determining or identifying the corresponding natural person partner or shareholder”.

If the appropriate document is granted abroad, it shall be duly apostilled or legalized by the Consul of Ecuador, with a translation into Spanish, and can also be translated in the country; or, alternatively that this detail of shareholders, with the information that the client will send may be performed locally and signed by the attorney of the company. For this purpose, a special form developed by the Superintendence of Companies, Values and Securities  will be used.

Exceptionally, it will not be necessary to reach the natural person at the end of the shareholding chain if the following occurs: if the foreign company, partner or shareholder of the local Company, is registered in one or more foreign stock exchanges, instead of the list mentioned above, it must present a sworn affidavit of such registration, specifying the stock exchanges in which it is located and the fact that all of its capital is represented exclusively by registered shares or participations. Such document must be dully apostilled or legalized before the Ecuadorian Consul, with its translation into Spanish or it may be translated in the country.

OBSERVATION: If: (i) the special power of attorney detailed in item No. 2 is still in effect, (ii) the foreign companies that are shareholders or partners of the Ecuadorian entity maintain their legal existence and (iii) the chain of shares up to a natural person has not changed in relation to that presented in January 2019, for fiscal year 2018, the Authority may be notified through a form created for this purpose. The abovementioned conditions ratify the information and documentation submitted the past year, making it unnecessary to present any other document or information.

Apart from the exception mentioned above, if the local company has not received all or some of the documents required above (items 1, 2 and 3) from its foreign partner or shareholder, it must be informed the respective competent control authority.

In the event that, the above obligations are not fulfilled within strict time limits outlined above, the following effects will occur:

  1. The foreign company partner or shareholder of the local company may not participate in the celebration of the Annual General Shareholder Meeting corresponding to the reports and balance sheet approval, in regard to the financial report of 2019.
  2. In case of default by the foreign partner or shareholder for two consecutive years, the local company may proceed to remove or exclude unfulfilled partner or shareholder according with Articles 82 and 83 of the Companies Act, previous agreement of the General Shareholder Meeting, applying in this case the relevant rules on the exercise of appraisal rights under the transformation, but only for the purposes of the compensation.
  3. Until the requested information is not provided to the control authority will be issued the corresponding Compliance Obligations Certificate with the non-compliance observation.
  4. If the local company does not submit certified copies of the above information for two or more consecutive years, the control authority may declare its intervention.

We remain at your disposal in order to analyze each specific case and should you require further information, please do not hesitate to contact us.

The inquiries can be performed at (5932) 222 – 0550 ext. 250 / 252 or at the following e-mails: mvillagomez@fabara.ec; dklier@fabara.ec.

Kind regards,

MARIANA VILLAGÓMEZ A.                                         DIEGO KLIER Y.