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May 2019

Recent Advances in the Law for the Simplified Corporation

Recent Advances in the Law for the Simplified Corporation

Uruguay is the latest state in the region to initiate legislative reforms to simplify incorporation. In April the House of Representatives voted unanimously in favor of a bill entitled “Promotion of Entrepreneurs” (Promoción de Emprendimientos), which has now been sent to the Senate for approval. Title II of the bill provides for the establishment of a simplified corporation (“SAS”) and, as noted in its accompanying report, the legislation has been inspired by the Model Law on the Simplified Corporation (“Model Law”). Ecuador is also in the process of drafting legislation to provide for the SAS and, as was reported previously, Peru took similar steps last fall.

In 2017 the OAS General Assembly took note of the Model Law as approved by the Inter-American Juridical Committee (CJI) and instructed the Department of International Law (Secretariat for Legal Affairs) to disseminate the Model Law as widely as possible. The General Assembly also invited states to adopt, in accordance with their domestic laws and regulatory framework, those aspects of the Model Law that are in their interest, with collaborative support from the Department. In furtherance of that mandate, the Department requested that each Member State consider the appointment of a Focal Point for the Model Law to enable a channel of communication between the OAS and those offices, ministries or bodies responsible for the modernization of corporate legislation and simplification of business incorporation (Verbal Note OEA/2.2/27/18). By means of this mechanism, a network is being established for the effective dissemination of the Model Law throughout the hemisphere. To date, six Member States have appointed a Focal Point, namely, Argentina, Brazil, Ecuador, Mexico, Paraguay and Peru. The Department is presently exploring the possibility of organizing a meeting of Focal Points this summer.

In response to this growing interest, the Department of International Law and the Department of Economic Development are joining forces to organize, in preparation for the VII Inter-American Dialogue of High-Level MSME Authorities that will take place in Chile in 2021, a virtual meeting to provide states with the opportunity to continue sharing good practices and identifying concrete opportunities for horizontal cooperation. This event, which will take place in late summer on a date as yet to be determined, will include presentations by legal experts on the Model Law and an exchange of lessons learned among officials from states that have initiated the reform process.

While the Model Law has as its objective to simplify incorporation, an effective process for dissolution is equally important. Accordingly, the CJI has included the topic of “dissolution of companies” on its working agenda. Here too, inputs from the aforementioned Focal Points will be helpful in addressing the legal needs of businesses to improve outdated, complex and costly procedures for dissolving a corporate enterprise.

The need to simplify business incorporation and dissolution is beginning to be recognized across the region, as evidenced by a number of activities on the topic, such as those forthcoming in Ecuador and Argentina. In large measure, this is thanks to the Model Law on the Simplified Corporation.

» To obtain more information about the Model Law on the Simplified Corporation, click on this link

» For the Uruguay Legislation, click on this link

For further information on this matter, please contact the Department of International Law of the Secretariat for Legal Affairs of the OAS +1 202 370 0743.

» For additional information about the Department of International Law (DIL), please visit our Website


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