In the plenary session of December 6, 2023, the Legislative Assembly of El Salvador approved a series of new reforms to the Commercial Code to implement certain provisions with innovative elements to facilitate business in the country, boost the economy, and contribute to economic growth. All of this is achieved through the modernization of commercial legislation, adapting it to the current dynamics of national and international trade, and leveraging technological advances to achieve this goal.
In this regard, a new chapter on Simplified Joint Stock Companies (SAS) was introduced, inspired by the model law of the Organization of American States. The implementation of this new type of company aims to promote economic development by expanding the options for business formation, reducing bureaucracy through online forms via the Trade Registry and the National Registry Center, and abolishing obstacles such as financial and banking inclusion for entrepreneurs seeking formal establishment in the country.
Some key points highlighted regarding SAS in El Salvador are:
- Mercantile nature: Although the activities of SAS may vary, the legislation establishes that they will have a mercantile nature, regardless of the activities envisaged in their purpose.
- Limited liability: SAS shareholders will have limited liability up to the amount of their respective contributions. This means that, except for a judicial decision, shareholders will not be responsible for labor, tax, or other obligations of the company.
- Sole incorporation: The main feature and innovation is the possibility of being incorporated by a single natural or legal person, allowing a single individual or entity to be the sole shareholder.
- Social capital: The economic amount of the constitution of these companies will be set by the shareholders, freely established from a minimum of $1.
- Simplified process: The constitution, modification, transformation, dissolution, liquidation, and other social acts of SAS will be carried out through forms provided by the Trade Registry, eliminating the need for public deeds or additional formalities for their constitution.
- Transformation: Any company can adopt the SAS type through its transformation or merger.
- Freedom in structural determination: The articles of incorporation of SAS have the freedom to determine the organizational structure, operating rules, and the powers and obligations of each organ.
- Mergers between Salvadoran and foreign companies: Notaries or subscribers are tasked with verifying and submitting documentation for foreign companies in mergers, including approval from the Competition Superintendent when required. A new procedure is introduced for Salvadoran companies participating in mergers with foreign entities, which must request the cancellation of their registration in the Trade Registry of El Salvador, attaching documentation demonstrating that the merger has been registered in the foreign country. (this item is a reform applicable to all commercial companies)
- Virtual meetings: Meetings of the Board of Directors of the company (Board of Directors) will be governed by what is established for anonymous societies, allowing the use of any technological means that ensures the identification of attendees, confidentiality, and the preservation of information.
It is worth noting that not only El Salvador has this type of company, but other countries, including Latin American ones, have adopted them. For example, in Colombian legislation, SAS was created through Law 1258 of 2008, to facilitate the creation of companies in the country and promote foreign investment, characterized by its flexibility and contractual freedom, allowing partners to adjust the corporate model according to their requirements. However, its implementation has generated controversies, as its use has been evidenced for illicit activities, tax evasion, and responsibilities regarding the evasion of social security for employees.
Another example is in Argentina, where the Commercial Companies Law was modified in 2017 to include the figure of the Simplified Joint Stock Company (SAS), after which several of these companies have been established in the country due to the simplification of the registration process, the reduction of costs, and formal requirements. However, concerns have also been raised about the lack of adequate control and supervision by regulatory bodies and the need to establish stricter requirements to ensure transparency and accountability.
Based on all the above, it can be concluded that this type of company will undoubtedly open a wide window for the formalization of trade given its great ease of establishment and operation. However, attention must be paid to the reactions in the country, hoping that the advantages of its implementation outweigh any contingencies due to its great flexibility.