The bylaw requirements for a Chilean company differ depending on the type of business, and are listed as follows. Although many businesses use standard form of bylaws complemented by a shareholders’ agreement that includes all the complex elements that regulate their relationships.

Corporation (sociedad anónima)

Corporations are governed by the Chilean Corporations Act (Law Nr. 18,046), Law Nr. 18,045 of 1981, Decree Law Nr. 3,538 of 1980, as amended, and the respective by-laws.

Corporations are incorporated and their bylaws are amended pursuant to a public deed containing its by-laws executed before a Chilean notary public, an excerpt of which must be filed with the Commerce Registrar and published in the Official Gazette within 60 days of the date of the deed containing the bylaws.

The bylaws of the Corporation must contain minimum considerations established in the law. An amendment to the Corporation’s bylaws requires the approval of the shareholders meeting. An excerpt of the minutes of the shareholders meeting or of the deed or private document containing the amendment must be filed with the Commerce Registrar and published in the Official Gazette.

A corporation is created by means of a notarised deed that must contain at least the following:

• The names, professions and addresses of the shareholders (at least two of which are required) who are starting the corporation
• The name of the corporation and the location of its main office.
• The specific purposes for which the corporation has been created.
• The life of the corporation, which can be indefinite; if nothing is declared, it is presumed to be indefinite.
• The corporation’s capital and the number of shares, outlining and preferred series of shares and privileges, and whether the shares have a par value or not; the manner and terms to which shareholders must abide by when paying contributions, and the indication and value of all non-monetary contributions.
• How the corporation is managed and how the administration will be monitored by the supervisors.
• The corporation’s financial year-end (the date at which financial statements must be drawn up) and when the general shareholders meeting is held.
• How the corporation will distribute its profits.
• How the corporation will be liquidated.
• How any differences amongst shareholders or between shareholders and the corporation will be arbitrated; if nothing is declared, it is understood that the differences will be submitted for resolution by an arbitrator according to the right and good.
• The names of the first directors and external auditors or comptrollers.

Profit Allocation

Dividends may be declared and paid out of the corporation’s net profits for the fiscal year in which dividends are declared, or may be paid out of profits that accrued in preceding fiscal years. In the case of closed Corporations, the shareholders can freely agree the percentage or amount to be distributed as dividends, in case nothing is said in the bylaws or in the shareholders meeting at least 30% of the net profits for each fiscal year must be declared and paid as dividends.

Transferability of interest

In general, shareholders of corporations may freely transfer their shares without the consent of the other shareholders and without amending the corporation’s by-laws.

Financial Statements

Financial statements of closely-held Corporations may be audited by account examiners or external auditors appointed by the shareholders’ meeting or through any other mechanism set out in the by-laws, including the option to exempt the company from any audit or review.

General Partnership (sociedad colectiva)

To form a general partnership the partners, or their legal representative, must sign a duly notarised deed, which must contain, as a minimum, the following:

• The names, professions and addresses of the partners.
• The partnership’s name, which must include the names of one or more of the partners, followed by the words “y compañía” (and company).
• The partner or partners who will manage the general partnership and who are entitled to use the company’s name.
• The capital contributed by each partner in cash or otherwise; if the contribution is not in cash, the value assigned to it must be noted, as well as how this value is to be determined.
• The partnership’s line of business.
• The partnership’s residence.
• How the profits or losses are assigned to the partners.
• When the partnership will start and end its legal existence.
• The amount each partner is entitled to withdraw for personal expenses each year.
• How the partnership is to be liquidated, and how its assets will given to each partner.
• How differences among partners are to be settled, whether or not an arbitrator will appointed, and if so, the conditions of his/her appointment.
• A summary of the partnership must be filed with the appropriate Register of Commerce within sixty days.

Share company (sociedad por acciones)

Share companies are governed by Law Nr. 20,190 of 2007 Unless otherwise indicated, all aspects not ruled by Law Nr. 20.190 or failed to mention in the by-laws, will be expressly governed or substituted in accordance with the Chilean Corporations Act.

Share companies can be incorporated pursuant to: (i) a public deed; or (ii) a private instrument granted and registered before a Chilean notary public.

Any of the former shall contain its by-laws and an excerpt of each must be filed with the Commerce Registrar and published in the Official Gazette within the term of one month counted as of the date of the deed or private document containing the said bylaws.

The bylaws of the share company must contain minimum considerations established in the law. An amendment to the share company bylaws requires the approval of the shareholders meeting.

Nevertheless, this requisite will not be necessary if each and every shareholder in the share company appears granting a public deed or a private instrument duly granted and registered before a Chilean notary public in which the said amendment is agreed. An excerpt of the minutes of the shareholders meeting or of the deed or private document containing the amendment must be filed with the Commerce Registrar and published in the Official Gazette

Capital Requirements

The capital of a share company must be specifically agreed in the by-laws and shall be divided in a determined amount of nominative shares. Shares in SpA may be issued by technological means. A hard copy of share titles is not required.

The capital of a share company may be paid-in with cash, assets and in compensation of personal work (not permitted in Corporations). The by-laws can establish that the share company may issue non-voting preferred shares, shares with limited- vote, or shares having more multiple votes.

Also, share companies are allowed to repurchase its own stock except if forbidden in the by-laws and limited by a special regime of rights and subject to the obligation to transfer the shares within the term agreed in the by-laws, and if nothing is stated in this regard, shares must be transferred within the term of one year counted as of its acquisition.

Capital increases shall be agreed by the shareholders. Nevertheless, the by-laws may authorize the managers of the share companies to increase the capital due to specific purposes or to finance the ordinary course of the share companies business.

On the other hand, capital reductions must be decided by the majority of the shareholders, as agreed in the by-laws. If nothing is stated on this regard, the unanimous consent of all shareholders will be requested to agree capital reductions.

The initial capital and capital increases must be fully subscribed and paid-in within a maximum of five years counted as of the incorporation or the capital increase date.

Profit Allocation

There are no restrictions with respect to the distribution of profits. It is allowed that the a share company’s bylaws establish the payment of a fixed amount as dividend (determinable or given amount) to a specific series of shares.

The law also allows share companies to pay dividends arising from certain business units. In this case, each business unit shall maintain its own separate accountancy and profits distributed as dividends from one business unit will be calculated solely in the corresponding accountancy, not considering the general results or balance sheet of the whole corporation.

Transferability of Shares

A share company is very flexible and its bylaws can set different series of shares that can participate separately in the results of different business ventures, among others. As specific stipulations are absent in the entity’s bylaws, the rules governing corporations apply in this case.

In general, shareholders of a share company may freely transfer their shares without the consent of the other shareholders and without amending the share company’s by-laws. The law expressly acknowledges the right of the share company to hold its own shares, and that in case that all the shares are gathered in the same hands the company does not become dissolved, as occurs in case of corporations.

Limited liability partnership/Limited Liability Company (sociedad de responsabilidad limitada)

LLCs are governed by Law Nr. 3,918 of 1923, the Chilean Commercial Code of 1865, the Chilean Civil Code of 1855 and the respective by-laws.

A limited liability company is organized pursuant to a public deed containing its by-laws executed before a Chilean notary public, an excerpt of which must be recorded in the Commerce Registrar and published in the Official Gazette within 60 days of the execution of the partnership deed.

A limited liability partnership is similar to a general partnership. The main difference is that each partner’s liability is limited either to his/her amount of contributed capital or to a greater amount specified in the partnership deed. A limited liability partnership also relies on the same notarised deed as the general partnership - i.e. it must contain the same items.

The bylaws of a limited liability company must contain minimum considerations established in the law. Any amendment to the bylaws of the limited liability company requires the agreement of all of its partners, which must be executed pursuant to a public deed, an excerpt of which must be recorded in the Commerce Registrar and published in the Official Gazette.

Terms

LLCs must have a limited term of existence, but automatic renewals are permitted if they are contained in the by-laws and no partner decides otherwise in the manner provided for in the by-laws.

Profit Allocation

There are no restrictions with respect to the distribution of profits, which may be freely apportioned by the partners of an LLC in its by-laws. In silence of the by-laws, profits are distributed among the partners pro rata according to each partner’s contribution to the capital of the LLC.

Transferability of Interest

Given that the transfer of partnership rights involves an amendment to the LLC’s by-laws, the partner willing to sell such rights needs to obtain the prior consent of all the other partners for such transfer.

Shareholders’ Agreements in Chile

The reasons that shareholders most often include some issues in the shareholders’ agreement rather to in the bylaws are the following: (i) whether the specific agreement cannot be included in the bylaws because the law expressly prevent it (for example the law expressly provides that the bylaws of listed corporations cannot stipulate provisions restricting the free disposition of shares); (ii) whether the agreement is binding upon all shareholders or only a group of shareholders; (iii) the need for flexibility in terms of the amendment of the agreement versus amendment of the bylaws; (iv) the duration of the agreement; and (v) the chance to determine if the agreements can be brought to bear against any purchasers or successors.

For more information on shareholders, please read more here.

Sources

• Doing Business in Chile
• International Bar Association