Find out about the new legal entity in Paraguay – the EAS, or Simplified Shares Company – and what this entity can offer business owners entering the market.
Paraguay is one of the most underrated jurisdictions in Latin America for doing business. The country has demonstrated astonishing annual rates of economic growth, averaging around 4% between 2015 and 2017, and has increasingly diversified market opportunities, including the blossoming agricultural, service, and mining sectors. Although it may be enticing, conducting business in a country where one does not fully understand the local laws and regulations can be challenging.
To encourage entrepreneurs to enter the market and reduce bureaucracy, the Paraguayan government has encouraged simplification in the creation of legal entities.
Recently, Paraguay introduced the Empresa por Acciones Simplificadas (EAS), otherwise known as a Simplified Shares Company entity for business. While the law establishing this entity has yet to fully enter into force, this move to open the business environment in Paraguay is promising for foreign executives looking to expand into the country.
6 key characteristics of the Simplified Shares Company (EAS) in Paraguay
The Empresas por Acciones Simplificadas (EAS) in Paraguay was established through Law No. 6480/2020 and is an excellent tool for business development in Paraguay.
As a Simplified Shares Company, the entity’s main characteristics and innovations to benefit business include:
1. Requirements to incorporate an EAS in Paraguay
An EAS in Paraguay can be incorporated by one or more physical or legal persons. It is the first corporate type legal entity in Paraguay that can be integrated with a single partner.
In all cases, a legal representative must be appointed.
Business owners can incorporate their EAS in Paraguay by a contract or unilateral act that consists of either:
- Public Deed or;
- Private instrument with a signature certification by a notary public or the registry official of the office before which the registration is made.
If the constitutive act provides assets that are required for the transfer of a public deed, this formality must be completed in order to incorporate and register the EAS in Paraguay.
Required documentation to incorporate the Simplified Shares Company (EAS) in Paraguay
The constitutive act of the company, without prejudice to the clauses that the members of the EAS decide to include, must indicate the:
- Name, identity document, and address of the company’s members.
- Name of the legal entity followed by the words “Empresa por Acciones Simplificadas” or its initials (EAS).
- Main address of the company.
- Purpose of the company.
- Duration of the company, which will be understood to be indefinite if the constitutive act does not contain a provision in this regard.
- Share capital, the issued, the subscribed and the integrated, the class, number and nominal value of the shares and the form and terms in which they must be incorporated.
- Rules according to which the profits and the share of each member in them, and the losses must be distributed.
- Organisation of the administration, of the meetings of members of the company and, where appropriate, of the inspection.
2. Registration
The application for registration must be entered solely and exclusively through the Unified System for Opening and Closing Companies (Sistema Unificado de Apertura y Cierre de Empresas, or SUACE).
Executives must register the statutes of the EAS (drafted by the law), as well as any amendments to the regulations and their liquidation with the Ministry of Finance. The newly registered legal entity in Paraguay will be communicated to the General Directorate of the Public Records, or Dirección General de los Registros Públicos.
Unlike other companies, the EAS acquires its legal personality once registered in the dependencies of the Ministry of Finance, rather than in the Public registries; therefore, the processing time is faster, and businesses can start operations more quickly.
The Simplified Shares Company in Paraguay will always be of a commercial nature and will be governed by the tax regulations applicable to its activities.
Note: A one-person EAS cannot constitute or participate in another one-person EAS in Paraguay.
3. Share capital
The capital for an EAS in Paraguay will be divided into shares that must be registered, endorsable or not, ordinary or preferred or with special voting rights. The subscription and integration of capital may be carried out under conditions, proportions and terms different from those provided for in the regulations contemplated in the Civil Code for corporations. In no case may the term for integrating shares exceed 2 years.
The responsibility of EAS members will be limited to the amount of contributions they have made to the company.
4. Administration and inspection
The Law recognises two mandatory governing bodies for this new legal entity in Paraguay:
- The meeting of EAS members (with equal powers of the Ordinary and Extraordinary Assemblies of Public Limited Companies), and
- The legal representative.
There is no obligation to have either an administrative body (similar to a board of directors) or an inspection body (such as the Trustee or the Supervisory Board).
Meetings of EAS members must be called in writing to the members’ addresses at least 5 working days before the meeting date. There is no obligation to publish this notification in public newspapers. Meetings of the EAS members and the management body (if applicable) can be held remotely and recorded in minutes, provided that a single member signs off.
The liability of administrators and legal representatives will be regulated by the rules governing the administrators of Public Limited Companies in the Civil Code.
5. Accounting compliance
The EAS legal entity in Paraguay is required to maintain accounting and company records.
However, the Ministry of Finance may regulate and implement mechanisms to facilitate the use of these books through digital means.
The EAS must keep the following corporate and accounting records:
- Minutes book of the governing body
- Share registration book
- Minutes book of the administrative body
- Daily book
- Inventory book.
They must also present their financial statements by current regulations.
6. Simplification of bank procedures
Financial institutions must provide mechanisms that enable the EAS in Paraguay to open an account within a maximum period yet to be established by regulation. The intention is to offer executives a faster incorporation process for the EAS in Paraguay and a minimum wait time to begin operations.
In all matters not addressed in this Law, the rules governing corporations in the Civil Code, with its modifications and regulations, will be applied in a supplementary manner.
Note: Some legal aspects are yet to be defined
As a newly established legal entity, some regulatory requirements for the EAS in Paraguay are still pending. Once the regulatory resolutions are published, the law will take full effect.
Source: Biz Latin Hub ( Full article )
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