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Introduction to
Venezuelan
Corporate Law
Table of contents
1.- Brief introduction to Venezuelan Corporate and Commercial
Legislation.
2.- Existing company forms in Venezuelan legislation.
3.- Formal requirements towards the formation of a company.
4.- Registration procedure, competent authorities.
5.- Minimum share capital required, both in cash and/or in kind.
6.- Transformation of a company.
7.- Management of a company.
8.- Corporate governance regulations, does it exist?
9.- Venezuelan “national speciality”, the Cooperative and the
Nationalization of companies.
10.- Conclusions
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Our current Commercial Code was enacted in 1955 based on previous
Italian, Spanish and French Commercial Codes dating from the XIX
century. This means that Venezuelan Corporate and Commercial
legislation is based on rules dating more than one hundred and fifty
(150) years, which, of course, is troublesome for today’s businesses
and modern requirements.
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2.1.- Corporations of persons
In this kind of corporative form, the name of the society must contain
all the last names of the members of it. ii Any provision drafted in the
bylaws of the society stating that the personal responsibility of any or
a specific member is limited, it is considered as non binding for any
third party. Furthermore, our legislation states that any partner
having its name in the society’s name is entitled to act in the name of
the company and represent it before third parties. Finally, within
partnerships there is no minimum capital required in order to
establish the company.
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2.2.1.- The Sociedad de Responsabilidad Limitada
“When the bylaws do not state another disposition, the cession of the
societal quotas in limited liability companies will be subject to the
following provisions:
a) The quotaholders will have preference to obtain the quota
subject of cession and they will exercise this right in conformity
with the bylaws.
b) Are void and with no effect for the company the cessions given
to third parties without having being previously informed to
other quotaholders and without the formal consent of the
majority of the quotaholders that represent at least ¾ of the
society’s capital (...).”
From the reading of this article we notice the stress that Venezuelan
legislation adds to the importance of the quotaholders, making, thus,
the limited liability corporation a society of capital with a very
important personal degree. This simply means that is a corporative
form that should be used among related or well known quotaholders.
In this case, the individual characteristics of the quotaholders are,
with no doubt, of pivotal importance to the Venezuelan legislator.
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We are of the opinion that the Sociedad Anónima is, without doubt,
the most important corporative instrument in order to carry out
business in Venezuela; hence, we will elaborate on the characteristics
of this corporate form.
The Registrar has the right and the duty to review the document and
determine if the same complies with all legal formalities and also to
determine if the capital of the company has been duly paid; whereas
in cash or in kind.
It occurs very often that the Registrars tend to “return” the bylaws
due to minimal mistakes or because they consider the document not
to be in order. Most of the times these modifications ordered by the
Registrar are simply made in order to make the registration process
more tortuous and they lack legal basis. However, failing to comply
instructions tends to make almost impossible the registration of a
company.
Once the company is registered, the director must provide to the
Registrar the Accounting Books of the Company which are the
following:
Lastly, once the company is registered and the books have been duly
sealed by the Commercial Registry, the director(s) must proceed to
publish the Company’s bylaws in a national newspaper. This is
normally done in newspapers that are issued just for this function and
do not normally circulate.
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practice, the Commercial Registrar demands a minimum of Bs.
10.000, in order to register the company. In this sense, article 54 of
the Law of Registries and Notaries states that “the Commercial
Registrar may reject the registration of a company if the capital of the
same is not sufficient to carry out the desired business, by applying a
rational criterion”.
In Venezuela’s case, the control over the capital is the “strict” part of
constituting a company, due to the fact that control over the balance
sheet of a company is not binding and, therefore, failure to registry
the balance sheets of a company does not allow the registrar to
dissolve the company. Nonetheless, according to article 306 of the
Commercial Code, the directors of the company are obliged to lodge
the balance sheet before the Registrar within fifteen (15) days after it
has been approved by the shareholders.
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companies to lodge and publish the general shareholder assembly
decision and the company’s balance sheets.
Our law grants a three month period after the publication of the
merger agreement in order for the same to take place. During this
three month period the creditors of the companies may file opposition
to the merger. If no oppositions are lodged, then the merger is
considered to be successful; otherwise the same is interrupted until
the opposition of a creditor is decided by the competent courts.
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The commissary must report to the general meeting of shareholders
of its considerations in regards with the performance of the directors.
Despite the existence of this “control figure”, its role is very basic and
they are not empowered to carry out many activities or to be vigilant
over the functioning of the company, which is, no doubt, an issue a
practitioner should deal with when drafting a bylaw for a company in
order to provide them with more power and functions.
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9.- Venezuela’s “national speciality”, the
Cooperative and the Nationalization of
companies.
9.1.- The Cooperative
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the competent national authority, the Cooperative Registrar,
becoming a legal person.
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During the last three years the nationalization has passed from large
portions of unused farmable land to the largest and most important
cement factory, passing by the largest supermarket chains, bottling
companies, oil industries and many more. It is out of question the
interventionist hand of government in these take-overs to “deliver
back to the people their industries stolen by foreign investors”.
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a) The amicable agreement, which basically consist of a
negotiation among parties in order to reach a settlement of the
price to be paid by the Venezuelan State and how this payment
will be carried out.
b) The Judicial manner. This procedure only applies if the parties
are unable to reach an amicable agreement and involves a
complex litigation procedure that is of little interest for
corporative law.
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10.- Conclusions
The Venezuela Corporative Law is outdated and the current
administration and the National Assembly has no interest in modifying
the national rules in order to provide investors and merchants with
new and modern mechanisms to carry out businesses.
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i
Article 201 Venezuelan Commercial Code.
ii
Article 227, ejusdem.
iii
Article 235, ejusdem.
iv
Article 276 ejusdem.
v
Article 3 of Venezuelan Law of Cooperatives.
vi
Article 4 ejusdem.
vii
Article 2, Law of Expropriation.
viii
Article 7, Ejusdem.