As of the amended to the Public Registry Law, new obligations have been regulated for all companies that are registered before the Public Registry of Commerce and that should be considered relevant during their operation.
First, we will address the provisions that were already regulated in the Commercial Code of our country, in which we find the following obligations:
- Election of the Board of Directors
- Appointment of the Vigilant
- Approval of Financial Statements
- Holding of an Ordinary Shareholders’ Meeting
Although each of these matters is usually regulated specifically in each Deed of Incorporation and Bylaws, the Code of Commerce (hereinafter “CC”) establishes the following in general:
In relation to the Election of the Board of Directors, in accordance with Article 244 CC the election of Directors must be made among the same partners, for a fixed and determined term, should not exceed 10 years. It is important to consider that although each company determines the term of its Board of Directors and that even in several Deeds of Incorporation it is expressly included that if after the expiration of the term no new election is held, it will be understood that the elected Board of Directors continue in office; however, we recommend that the Board of Directors be renewed once the term has expired because there are probabilities that some institutions do not accept the automatic renewal, which in case of rejection could delay the management that is being processed.
On the other hand, in the case of the appointment of a Vigilant, our Code in its article 246 CC regulates the appointment of the Vigilant(s), whether they are shareholders or not, who will have the function of checking the accounting information of the company and must submit an annual report to the General Meeting, this is also usually regulated specifically in the Articles of Incorporation, for which we recommend reviewing the Articles of Incorporation and Minute Books to know the special requirements that must be met and thus examine if they currently have an appointed vigilant.
Then, in relation to numbers three and four, our Code establishes the obligation that the General Shareholders’ Meeting must meet at least once a year (art. 251 CC), which in most of the Deed of Incorporations indicates that it will be in the first three or four months of each year and that in this same Meeting the financial statements of the previous year must also be approved.
In addition to these obligations, with the last reform to the Public Registry Law, published in La Gaceta Diario Oficial in August 2020, we could add two new main obligations:
- Registration of shareholding composition
- Registration and updating of the basic information and of the beneficial owner.
In accordance with Article 156 of Law No. 1035 of Amendments to the Public Registry Law, changes in the shareholding structure, participation or ownership, control of the corporations and their legal representatives, as well as any change that modifies the identification and updating of the beneficial owner of the corporations must be registered in the Public Mercantile Registry. The foregoing will require that each time a transfer of shares in a Nicaraguan corporation is agreed upon, a public document for such transfer must be prepared and the corresponding registry fees must be paid in order to proceed with its registration.
Finally, in relation to the registration and updating of the beneficial owner, as of this amendment, the Registry of Beneficial Ownership was created. For companies that were already incorporated, two mandatory registration cycles were established for them to proceed with their registration according to the initial letter of their corporate name, currently they are being updated from the letter I-Z and have a deadline until April 2022.
On the other hand, for new companies it has been established that they must proceed with the Registration of the Beneficial Owner within 30 days after the registration of the Deed of Incorporation.
As a last aspect relevant to the beneficial owner registration, we have the obligation to update this information according to the provisions of article 8 of the Circular issued on November 25, 2020 by the Special Commission of Registries of the Supreme Court of Justice, the companies must update the basic and beneficial owner information in the following manner:
– Ordinary: Every 12 calendar months, declaring whether or not there are changes or modifications of the basic information and of the Beneficial Owner, or ratifying the information already declared.
– Extraordinary: When there is any change that modifies or amends the Articles of Incorporation of the Company that affects the basic information and the determination and identification of the beneficial owner.
In this order of ideas, we recommend reviewing the compliance of each of the aspects detailed above in order to avoid that your company may be affected by the non-compliance of any of these important obligations for the operation of the company, either internally or before public and private institutions.