Guzmán Ariza, Attorneys at Law Company Law (“Ley de Sociedades”) #, effective Dec. 11, , as amended by Law. # of Feb. Company Law (“Ley de Sociedades”) #, effective Dec. . Bolsa de Valores de la República Dominicana (), created in. Ley No. , sobre Las Sociedades Comerciales y. Empresas Individuales de Responsabilidad Limitada, en República Dominicana.
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Any company duly organized and existing in accordance with the laws of its country of origin can set up a branch in the Dominican Republic by registering at the Business Dominciana and obtaining a tax number from dominiicana Internal Revenue Agency.
Additional approvals may be required in certain regulated industries. Registration is not necessary if the activity of the foreign company is limited to acquiring equity in a local business entity or to occasional transactions in the Dominican Republic.
Local branches of foreign companies receive the same tax treatment as Dominican companies and are subject to the same local laws and regulations in labor and other matters. For tax purposes, they must keep separate accounts from their head office so as to facilitate the determination of their income. The most common structures available for investors to establish a local subsidiary as an independent local business entity in the Dominican Republic are the Limited Liability Company, the Corporation and the Simplified Corporation.
These three types of companies enjoy limited liability for its shareholders, meaning that if the company fails, they will be liable only for the amount of capital invested, and that shareholders, individually or collectively, are not liable for the debt obligations of the company. This limited liability protection afforded to shareholders of these entities is strictly observed under the law, except in case of fraud or misrepresentation.
Other business structures exist Individual Limited Liability Companies, Partnerships, Limited Rfpublica and Limited Partnerships with Shares but they are rarely used by investors because, in the case of Individual Limited Liability Companies, the sole shareholder must be an individual, and in other 49-08, the partners do not have limited liability. All business entities are taxed in the same manner, in contrast to republiac practice in other countries such as the United States. Please refer to the chapter on taxation for details.
Shareholders, partners, members, officers and directors of a Dominican company do not need to be Dominican citizens or residents, except in very special circumstances.
They are the only entities that can raise capital through public stock offerings. Simplified Corporations are best for medium to large-sized businesses that require special shareholder provisions for corporate governance purposes.
Simple Corporations cannot raise capital through public stock offerings, but are able to issue debt instruments to the republkca.
Shares in an LLC are nonnegotiable. Nonetheless, if the transfer is rejected, the shares in question must be purchased or redeemed by the other shareholders or the company.
Management of an LLC is in the hands of one or several managers or a board of managers. Managers must be natural persons, not other companies. Unless otherwise stipulated in the bylaws, no inspection officer comisario de cuentas is required to oversee management. Shares in a Simplified Corporation are negotiable, although restrictions may be established in its bylaws.
Management of a Simplified Corporation is freely determined by its shareholders in the company bylaws. It could consist of a board or of one republicaa several individual managers.
Members of the board and individual managers do not need to be natural persons. Dominicanaa corporations can issue debentures and bonds privately, although not publicly.
Corporations must have a minimum of two shareholders. There is no limit on the maximum. Shares in a corporation are negotiable, although certain restrictions may be established in its bylaws. Corporations can be private or public.
Only public corporations can offer the sale of stock and bonds to the general public. The management of corporations must consist of a board of directors of at least three members, which do not have to be natural persons. The value of company shares as well as its capital can be stated in foreign currency. All companies can issue common shares and preferred shares. Preferred shares may grant the shareholder the right to a fixed dividend or a fixed percentage of profits, or both at the same time, as well as priority rights over the company capital in case of liquidation.
Company formation is best managed by a local attorney, and carefully monitored by you. If your attorney does not guide you in selecting the best company structure for your needs by explaining the advantages and disadvantages of the various options, change your attorney. Make your selection only after you are well-informed.
Formation should be customized to fit the needs of company members. Note that a member need not be a Dominican citizen or resident to form a Dominican company, except in very special circumstances. The process involves five basic steps. Clearing a company name can be time consuming as most commonly selected names are already in use by others. Therefore, if time is important and the company name is not immediately critical, you have some options.
Many law firms retain shelf companies that are ready to go and available for purchase at a premium price.
This two-step process will incur extra costs, but will expedite the registration process with the advantage that you will establish a legally recognized company more quickly. Be forewarned that Dominican company organization taxes are higher than those imposed on American companies.
A company is deemed to legally exist from the time its documents are recorded at the Business Registry. After incorporation, any documentation related to important corporate activities must be also registered at the Business Registry. To begin operation, newly-formed companies must obtain a tax number at the Dominican Internal Revenue Agency.
Also, shareholders of the company, foreign or local, who do not already have an individual tax number must obtain it at this time. Without a tax number, a company cannot open bank accounts, buy real estate, nor, in general, operate within the country. Minutes of this meeting must be recorded at the Business Registry. Joint ventures in the Dominican Republic generally consist of a contractual arrangement between two or more existing business entities for the purpose of carrying out a particular project or task.
The joint venture itself is not a legal person nor enjoys limited liability unless a new business entity is formed according to Dominican company law. We actively produce and disseminate information that shapes this practice area in the country.
Together, the two have contributed to preparing regulations to assist existing companies in the transition to current Company Lawand have co-authored additional articles on the SRL LLC company structure in the only Dominican law review, Gaceta Judicial. Our knowledge of company law is widely available, respected, and regularly referenced, and covers company formation, corporate governance, mergers and acquisitions, and dissolution; and related business areas such as contracts, employment, labor, company finance, company tax, litigation, dispute resolution, and intellectual property.
Gaceta Judicial, Santo Domingo, Interest and dividends on approved securities traded on the exchange are exempt from all taxes, and securities placed on the BVRD by the Ministry of Treasury are afforded special exemptions under the laws governing their issuance.
Paperless or electronic securities are also available reducing the risk of loss, theft, or forgery, and improving the speed of transfers, liquidation, and compensation. Finally, the law expressly permits the sale of approved securities in foreign currency and the payment of dividends in the currency consigned in the certificate. Stock Market Law No. The law establishes the agencies responsible for supervising the market, and governs who can offer securities, the public offering procedure, and the roles of all market participants involved in the exchange of securities.
The law defines a security valor as a right or amalgamation of rights having economic value, and that is freely negotiable on a securities market.
The definition includes stock shares, stock options, bonds, warehouse receipts and other documents representing present or future commodities, certificates, debentures, securitized forms of debt, and any other type of negotiable commercial document. A 749-08 offering is republia invitation delivered to the public via some form of mass communication to sell, purchase, or trade securities.
Two agencies are responsible for monitoring market activities: The Superintendent of Securities regulates the BVRD and classifies and approves offerings and the companies that issue them, and publishes complete information republics promote market transparency.
Repubblica listing of issues and the issuing companies is maintained at. The agency also imposes administrative penalties specified by law. The National Securities Council is a seven-member body comprising a representative of the Central Bank, ,ey representative appointed by the Ministry of Treasury, the Chair of the Superintendent of Securities, and four private-sector members.
Once properly structured, capitalized, and approved by the Superintendent rspublica Securities, a company can offer equity shares or other financial instruments on the BVRD through a public offering.
All security offerings must be public. The Superintendent of Securities authorizes all dominiczna and securities before placement on the market. The procedure for security placement is a three-step process: The application requirements differ for a foreign applicant and a domestic applicant.
A foreign applicant repulbica apply through a securities broker who provides the Superintendent of Securities with a registration certificate from the regulatory agency in the country from which the security originated. A Dominican applicant must attach a prospectus including i financial statements for the last three years audited by an external auditor that is registered with the Securities Exchange Registry, ii proof of the legal status of the issuer, and iii dominiicana description of the securities to be offered including any applicable risk rating.
The Superintendent of Securities must respond to the application within thirty days from the date of application. Once the offering is approved, the securities and issuer must be registered with the Securities Exchange Registry, which will publish for public notice the name of the issuer, the types of securities and their ratings, and the broker handling placement of the securities on the exchange.
Securities are placed on either the primary or secondary market, and can be issued either in paper form as a stock certificate or dominicanna electronic form Art.
Securities issued for the first time are offered to dominixana through the primary market, and are typically placed by companies to raise capital to start or expand operations. Subsequent trading of issued securities is done on the secondary market, providing liquidity to the security holders.
Primary market placement may be managed directly by the issuer or by a registered securities broker. Secondary market placement must be managed by a registered securities broker. Many participants organize and coordinate market transactions to promote efficiency and transparency.
Constitution of the Dominican Republic
The BSRD, supervised by the Superintendent of Securities, comprises self-regulated companies with registered seats on the stock exchange for the purpose of exchanging securities in an orderly manner. BARDmanages trading activities related to agricultural, agro-industry, and mining products including commodity and futures contracts and commodity derivatives. A broker can be any Dominican or foreign individual or company that is regularly engaged in broker activities either on or off the stock market.
All information obtained about an issuer for risk analysis is kept confidential. A security exchange, individual, or company may function as a depository upon approval by the National Securities Council.
A company seeking working capital can put its securities into one of these pension funds. Closed funds involve investments in securities and commodities that are designated by law to have a fixed expiration or maturity date.
The types of assets that can be securitized may vary in nature, but they share the common trait of restricted liquidity.
These securities are collateralized by the value reflected in the individual assets being securitized and receive a credit rating that is separate from and typically higher than that of the originating company because the securitization relies solely on the cash flow created by the pool of assets and not on the payment promise of the issuer. A separate accounting of the pool of asset-backed securities is kept, and is considered distinct from the accounting of the originating company.
These companies must be approved by the National Securities Council. Those with access to non-public market information that has market relevance to the price of publicly offered securities privileged information may not legally trade using this information for their own benefit or the benefit of third parties. Their trading activities are scrutinized by the Superintendent of Securities who is charged with maintaining the integrity of the market.
Trading based on privileged information is considered a felony, and a person found guilty of insider trading faces a fine, imprisonment, or both.