Ecuador has become an increasingly attractive destination for foreign investors seeking opportunities in Latin America, and understanding the country’s corporate legal structures is essential for success. Companies can be established by Ecuadorian nationals and/or with foreign capital, but specific legal frameworks and restrictions apply, particularly for those aiming to contract with the Ecuadorian government.
A key legal provision establishes that companies intending to engage in contracts with the State must ensure that none of their shareholders is a legal entity domiciled in a tax haven (e.g., Panama). This restriction does not apply to natural persons residing in tax havens, who may legally act as shareholders. However, legal entities with such a domicile may disqualify a company from public procurement under Ecuadorian law.
Ecuadorian law offers three primary corporate structures for investors:
Corporation (Sociedad Anónima – S.A.)
A Corporation is capital-based, meaning that shareholder influence is determined by the amount of capital contributed. Shares are freely transferable without restrictions.
- Capital Requirement: Minimum of USD 800 (not required upfront).
- Shareholders: May be a single person; no maximum limit.
- Management: At least one legal representative and one alternate (e.g., President or General Manager).
- Advantages: Flexibility in management and share transfers; suitable for large-scale ventures and multiple investors.
Limited Liability Company (Sociedad de Responsabilidad Limitada – S.R.L.)
This structure emphasizes the identity of the partners over the amount of capital contributed. All significant decisions, including the admission of new partners, require unanimous consent.
- Capital Requirement: Minimum of USD 400.
- Partners: May be a single person; no maximum limit.
- Management: At least one legal representative and one alternate; may or may not be partners.
- Restrictions: Shares cannot be transferred without unanimous partner approval; ideal for closely held companies.
Simplified Stock Company (Sociedad por Acciones Simplificada – S.A.S.)
A modern and highly flexible structure designed for entrepreneurs and small to medium-sized enterprises (SMEs).
- Shareholders: May be formed by a single person; no maximum limit.
- Capital Requirement: No minimum capital required.
- Management: Highly customizable; oversight bodies are optional.
- Registration: Only with the Superintendence of Companies, not the Mercantile Registry.
- Advantages: Limited shareholder liability, indefinite duration, broad corporate purpose, and significant flexibility in bylaws and management.
Incorporation Procedure and Timeline
Companies must establish bylaws regulating their structure and operations, which are reviewed and approved by the Superintendence of Companies. The incorporation process includes registering the bylaws, appointing legal representatives, and obtaining the company’s Single Taxpayer Registry (RUC). A notarized and duly apostilled Power of Attorney is required from all foreign shareholders to be represented in Ecuador. The full process typically takes approximately one (1) month from the submission of complete documentation.
Conclusion
Ecuador’s corporate legal framework provides both flexibility and accessibility for national and foreign investors. Special attention must be paid to the legal domicile of shareholders when planning to engage in public contracts. With professional legal guidance, establishing a company in Ecuador can be a streamlined process that facilitates entry into the national market.
Janet Hernández Cruz
