In Nicaragua, corporations are legally required to hold, at least once a year, an Ordinary General Shareholders’ Meeting, in accordance with the provisions of the Commercial Code. This meeting, which generally must be held within four months following the close of the fiscal year, allows shareholders to approve the financial statements, review the performance of the Board of Directors, and define key strategies for the company’s development.
The responsibility for convening the Annual General Meeting lies with the Board of Directors. However, shareholders representing at least one-twentieth of the share capital may also call the meeting, unless the bylaws establish a different percentage (art. 251 of the Commercial Code). Transparency in the convening process is essential, as it ensures adequate shareholder participation in corporate decision-making.
In accordance with articles 33 and 257 of the Commercial Code, every corporation is required to prepare an annual balance sheet, a fundamental document that reflects the financial condition of the company. This balance sheet must be reviewed and approved annually at the Shareholders’ Meeting, thus ensuring transparency in the company’s financial management. Subsequently, it must be recorded in the Book of Inventories and Balance Sheets, ensuring proper documentation and access for shareholders. Additionally, the Board of Directors must present a detailed report on the company’s status, which will be supplemented with the opinion of the supervisory body, in compliance with art. 258 of the Commercial Code.
During this meeting, the distribution of dividends may also be agreed upon, provided that the company has generated actual profits. Legislation prohibits the distribution of fictitious dividends or those based on unrealized profits (art. 259 C. de C.), a measure aimed at ensuring financial stability and protecting investors.
During the Annual General Meeting, and in accordance with the corresponding term and the company’s bylaws, the election of the Board of Directors and the appointment of the Statutory Auditor (Vigilante) or Supervisory Board may also take place. The Board of Directors is responsible for the company’s administration and strategic direction, and its members may be re-elected unless otherwise specified in the bylaws (art. 244 of the Commercial Code). Unlike other countries in the region, Nicaraguan law requires that directors be shareholders. The election of the Board of Directors must be duly registered with the Commercial Registry where the company is incorporated.
For its part, the Statutory Auditor or Supervisory Board is responsible for overseeing the company’s administrative management and presenting an annual report to the General Meeting (Articles 246, 293, and 295 of the Commercial Code). Despite this obligation, many corporations fail to appoint and register the Statutory Auditor with the Public Registry, in violation of the provisions of the Regulations of the General Law on Public Registries (art. 204 RLGRP).
Complying with the obligation to hold the Annual Meeting is not only a legal requirement but also strengthens transparency and corporate governance. Companies that follow these procedures ensure efficient management and better decision-making. In this sense, specialized legal advice is crucial to ensure that the decisions made at these meetings comply with the current regulatory framework.