Paraguay: Business Entities - Procedures For The Registration And Supervision In Paraguay

This report deals with the different requirements and procedures for the registration and supervision of corporations (sociedades anónimas) and limited liability companies (sociedades de responsabilidad limitada) in Paraguay, as established by the recently issued Decree No. 14122 of July 31, 2001.

Corporations and limited liability companies (LLCs) are the two mostly used legal entities for doing business in Paraguay.

Corporations are basically the unique form of business organization offering public share subscription. They have a minimum requirement of two shareholders who are liable for the debts of the company solely to the limit of their investment.

LLCs are closed and more simple entities most commonly utilized for small businesses. Like corporations, the liability of members is limited and the entity is legally distinct from the quotaholders and the company´s losses may not be set off against quota holders´ personal assets.

The legal status of both types of legal entities is acquired through the registration of their By-laws in the public registries (Public Registry of Juridical Persons and Public Registry of Commerce) that has to be ordered by a first instance civil and commercial judge. A prior favorable legal opinion of the Treasury Attorney Office of the Ministry of Finance is required. The dissolution of the company and cancellation of the legal status also demand analysis and study of the requisites and conditions established by law.

In accordance with administrative laws establishing the functions of the Treasury Attorney's Office of the Ministry of Finance, the Department of Registration and Supervision of Companies (DRSC) of that office is in charge of the study and analysis of the charter documents of the companies as well as the supervision of the compliance with the applicable legal provisions regarding shareholders' meetings.

The DRSC of the Treasury Attorney Office (Ministry of Finance), shall verify that the By-laws of the companies in process of organization are in accordance with the provisions of the Civil Code, specifically the following:

1. The name, nationality, civil status, profession and domicile of the shareholders, and the number of shares paid in by each one of them;
2. The company's name and domicile and that of the eventual branches in Paraguayan territory or abroad;
3. The corporate purpose,
4. The amount of issued and paid in capital;
5. The face value and number of shares and if they are registered or to the bearer;
6. The value of the assets contributed;
7. The rules by which the profits shall be distributed;
8. The participation of the profits by the founding shareholders or incorporators;
9. The number of managers and their powers with the indication of those that represent the company;
10. The duration of the company.

In analyzing the files of companies requesting their dissolution the Treasury Attorney's Office shall verify if they are in compliance with the applicable legal provisions and that the payment of the corresponding taxes and fiscal and municipalities contributions have been effected. If the latter is negative, this shall be indicated in the file and the corresponding tax authorities notified.

The Treasury Attorney's Office shall verify if the amendment of the companies comply with all the applicable legal provisions, and shall indicate if there are requisites that are missing.

If the dissolution and cancellation of the legal status of a company is petitioned, a notarized copy of the Minutes of the Shareholders' Meeting that has resolved the dissolution of the company, duly recorded in the corresponding public registry shall be submitted to the Treasury Attorney Office.

Once the analysis of the file on the organization, transformation, By-laws amendment and dissolution of companies is concluded, the DRSC shall issue a legal opinion and submit it to the superior (Treasury Attorney) for its further remittance to the corresponding judicial court for its further registration in the Public Registries.

The companies shall submit to the Treasury Attorney Office copies of the public deeds amending the By-laws and duly registered in the public registries within 10 business days after their registration is effected. If not the company will be subject to the sanctions established by law.

The DRSC shall make its better efforts to avoid the authorization of organization of companies with names identical or similar to those already authorized.

Within the first 10 days after the registration in the public registries the companies shall submit to the DRSC the following documents:

1. The By-laws duly legalized and registered;
2. The opening balance sheet certified by the tax authority, and
3. Petition of registration.

The companies shall provide notice to the DRSC with 10 days in advance of any shareholders' meetings, with indication of the type of meeting (regular or special) date, time and place where it will be held as well as the meeting's agenda. Proof of payment of fiscal taxes and municipalities contributions shall be enclosed.

The Treasury Attorney Office through the DRSC shall supervise the regular and special shareholders' meetings. Supervision shall be performed in accordance with applicable laws with special emphasis on:

1. The correct publication of calls within the right term;
2. If the books of the company are kept in accordance with the applicable commercial laws;
3. If the required deposit of the shares for attendance to the meetings was made;
4. If the amount of the issued, subscribed and paid in capital is correct;
5. The existence of the right quorum and voting rules;
6. In general, the strict compliance of all the legal formalities and shall also observe that the matters treated do not depart from the agenda specified in the call.

The minutes of the shareholders' meetings shall consign the names of the shareholders present in the meeting or of their representatives, the amount of shares deposited, the votes that the existent quorum confer, the analysis of each item of the agenda and the resolutions adopted, and the number of votes for each of said resolutions.

The commissioned officer of the DRSC shall submit a report to the Treasury Attorney Office regarding the mentioned matters and of any other circumstance that may be relevant for the analysis of the meeting.

Within 30 days after a shareholders' meeting is held, the companies shall submit to the DRSC the following data:

1. Minutes of the shareholders' meeting, and report of the board of directors and the syndic's report,
2. General Balance Sheet certified by the tax authorities;
3. Note of the fiscal deposit regarding the publication of the board's report and Syndic's report;
4. Letter detailing the previous documents;
5. In case of a special shareholders' meeting, the minutes of such meeting.

The branches and agencies of foreign companies shall submit to the DRSC within 10 days after the registration of their By-laws in the public registries, the following:

1. By-laws duly legalized and registered in the public registries;
2. General power of attorney granted to the local agent duly registered;
3. Opening balance sheet certified by the competent authorities;
4. Letter detailing the above documents.

If the annual regular shareholders' meeting established by law is not held, the DRSC may require from the board of directors or syndics its performance. If the meeting is not held as required, the DRSC may submit a report to the Treasury Attorney Office indicating the measures to protect the fiscal interests and that of the shareholders.

Non compliance of remittance of documents pursuant to this Decree No. 14122/2001.

The same procedure indicated in the precedent section will be implemented in the case the submission of documents pursuant to this Decree is not complied with.

Corporations are basically the unique form of business organization offering public share subscription. They have a minimum requirement of two shareholders who are liable for the debts of the company solely to the limit of their investment.

LLCs are closed and more simple entities most commonly utilized for small businesses. Like corporations, the liability of members is limited and the entity is legally distinct from the quotaholders and the company's losses may not be set off against quota holders' personal assets.