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Dominican law recognizes the following types of corporate structures and business forms, and sets forth a general framework that may be used by the parties to regulate everything from an entity’s name, capital, and transfer provisions to the administration and supervision of these entities, decision making of their corporate bodies, transformations, mergers, divisions and corporate dissolutions.
The Corporation (Sociedad Anónima) is an entity with a legal existence, formed by two or more partners who only assume the risk of losses up to their capital contributions in the entity.
The Corporation structure has been designed with the purpose of organizing great companies that require, above all, important levels of control over their corporate governance. Corporations may or may not seek funding from the securities markets as a form of financing and expansion of their operations. If they do so, they will be required to obtain an authorization from the Dominican Republic’s Securities Superintendent.
Capital and Transfer Provisions: Corporate capital is represented by shares, which are essentially negotiable securities. The minimum Authorized Corporate Capital is RD$30,000,000.00 and 10% of such amount must always be paid and represented by outstanding shares. The law does not establish any restriction on the assignment of shares. Nevertheless, it provides that shareholders may agree to restrictions, so long as they do not contain any permanent prohibition on the transfer of shares.
Administration, Supervision, and Decision Making by Shareholders: A board of directors composed of a minimum of three members is normally in charge of managing these companies. In terms of supervision, the law establishes that corporations must be supervised by one or several vigilance officers that are named for two (2) fiscal periods and are primarily appointed to verify the annual accounts presented by the board of directors and the documents addressed to the shareholders indicating the annual accounts and financial situation of the entity.
The supreme decision making entity is the general meeting of shareholders, who annually receives a report of all the company’s operations, decides on the distribution of dividends and also approves the management’s annual report.
The Simplified Corporation (S.A.S.) is a limited liability company formed by two or more partners whose losses with respect to the company’s activities are limited to their capital contributions. Unlike a corporation, this company allows some freedom to shareholders to regulate the organizational structure of the entity in its bylaws, according to the needs and objectives of the company.
Capital and Transfer Provisions: The capital of a simplified corporation is divided into shares, which can only be issued in registered form. The minimum Authorized Capital Requirement is RD$3,000,000.00 and at least 10% of such amount needs to be subscribed and paid in.
Administration and Supervision: The partners may, by means of the bylaws, freely determine the organizational structure of the company, which can be managed and directed by a board of directors or by one or more directors. Also, a simplified corporation does not require the supervision of a vigilance officer, unless it issues debt instruments.
LIMITED LIABILITY COMPANIES
A limited liability company (S.R.L.) is the entity formed by a minimum of two and a maximum of 50 partners, none of whom may have personal responsibility for company debts. This form of commercial organization is used for medium-sized businesses and closed capital entities.
Capital and Transfer Provisions: The social capital of an SRL is divided into equal parts denominated corporate quotas or units, which cannot be represented by negotiable shares or have a nominal value below RD$100.00.The minimum corporate capital of an SRL is RD$100,000.00, which must be fully paid-in and outstanding.
Quotas or units, which represent the capital, are securities which are not in essence negotiable securities. There are generally transferable in cases of a succession due to the death of a partner, or in case of liquidation of marriage property, and between family members. The assignment of corporate units to third parties, as well as the constitution of pledges on it, requires the consent of three fourths of the partners, apart from other conditions and formalities.
Administration, Supervision, and Decision Making: The administration is handled by one or several managers, who must be individuals and who are individually equipped with the broadest powers to act in the name of the company under any circumstances. The designation of a vigilance officer is not necessary, but the financial statements of the company must be audited.
Each partner has the right to vote on SRL decisions and has the same number of votes as the corporate quotas that the partner possesses. The general meetings of unit owners may be held for the approval of SRL decisions but are not necessary.
INDIVIDUAL ENTERPRISE OF LIMITED LIABILITY
An Individual Enterprise of Limited Liability (E.I.R.L.) is a company of limited liability that belongs to one person, that has the legal ability to exercise rights and obligations, and that forms an independent and separate entity from the rest of the assets of the person who owns the E.I.R.L. Legal entities may not incorporate or purchase companies of this type.
Capital and Transfer: The amount of contributions to be made by the owner of an E.I.R.L. may be freely established and increased, in accordance with the procedures established by law. An E.I.R.L. may be transferred in accordance with the rules established by law, but only to another natural person.
Corporations, duly incorporated anywhere in the world, are recognized in the Dominican Republic upon confirmation of its legal existence by the appropriate authorities, according to the formalities prescribed by the law of the place of incorporation. The Law provides that foreign companies, as to their existence, capacity, operation and dissolution, are governed by the law of the place of incorporation, and regarding its operations and activities in the country are subject to Dominican law.
Foreign companies setting a branch or permanent establishment in Dominican Republic or when commercial transactions regularly in the country must be registered in the Commercial Register and join the National Taxpayers Registry keep by the Directorate General of Internal Revenue.
The Law recognizes the equality of foreign companies with local companies and, therefore, declares that they have no obligation to provide any kind of bail or guarantee before initiating litigation.
A permanent establishment is defined by Dominican legislation as a fixed place of business in which an individual or a company, either local or foreign, does all or part of its business, including having a place of management, offices, branches, services, among others, provided they exceed six months within a year period.
Following the enactment of Regulation No. 50-13 dated February 13, 2013; the concept of foreign company was broadened to include entities that in their home country may or may not have legal personality, such as partnerships, trusts, branches, among others. It also requires non-resident taxpayers with permanent establishments to register before the DGII, and submit information, such as data identifying their taxpayer registration number in their country of tax residence, and data concerning equity holders with more than 10% of the capital or interest in such non-residing person or entity, in addition to any other information that may be required from any taxpayer.
Likewise, non-resident permanent establishments will be required to appoint and notify to the DGII, a local taxpayer to represent such establishment in regards to its tax obligations. This designation of a local representative will also be required for persons or entities residing in countries or territories with preferential tax regimes, that have low or no taxation or are considered tax havens, if the own property or rights in Dominican territory.