BACKGROUND

The commercial companies reform project proposes a partial and profound modification of the current regime on the matter. Although the Commercial Companies Law (LSC) represented, together with the Bankruptcy Law, the most important modification in our commercial legislation, after the sanction of the Commercial Code of 1866, with more than 30 years of validity it has shown a series of aspects in its operation that must be improved.

Also, new and better regulatory solutions have appeared in Comparative Law, which make its review necessary. The experience of applying the LSC has revealed a multiplicity of practical problems, which have made the functioning of companies difficult and have limited the possibility of economic operators to adapt them efficiently to business needs.

Furthermore, corporate legislation has advanced exponentially in the world since the 1990s, incorporating much more innovative and modern solutions. In this way, our LSC has been relegated in an international context of permanent regulatory improvement. It is necessary and essential that commercial corporate regulations remain contemporary and receptive to what is happening in the business world.

It is worth mentioning that our own corporate legislation has made significant progress with the approval of Law 19,820 passed in 2019, on the Simplified Joint Stock Companies (SAS) regime. This Law was inspired by several European and Latin American reforms of the last three decades and by the Model Law approved by the OAS in 2017. It introduced a series of innovative regulatory solutions into our corporate system, many of which need to be extrapolated to our entire corporate regime.

REMODELING

UNIPERSONALITY OF COMPANIES

The existence of sole proprietorships is currently a possibility considered by the vast majority of comparative law. In our law, this possibility has already been established for the SAS. The reform provides in Art. 1 that both Limited Liability Companies and Public Limited Companies may be established and operate with a single partner or shareholder.

AUTONOMY OF THE WILL

It is established that the social contract, the instrument of constitution, the statute, its modifications and resolutions of the social bodies, are governed by the principle of autonomy of will. It is the grantors of the corporate business who are in the best position to decide which rules will regulate the operation of the company. The necessary limitations are established for reasons of general interest. The debate of whether the LSC is of Public Order or not is put to an end, with the dispositive nature of the articles predominating, except when the law expressly establishes nullity in the event of its violation, a public interest or rights of third parties is protected, or regulates issues linked to liability or judicial actions.

STATUTORY MODIFICATIONS

In Art. 10 it is established that the effectiveness against the company and/or shareholders will no longer be from its registration or publication, but from the moment of the corporate resolution. Opposability against third parties is from the registration of the document in the Registry of Legal Entities, National Registry of Commerce Section.

CORPORATE TERM AND PUBLICATIONS

Art. 15 establishes that there would be no more term limit, but that it will be free and determined in the contract or corporate statute, without prejudice to the automatic extension clauses. Art. 17 provides that companies that require publications for their regular constitution are limited only to the Official Gazette and its incorporation into the corporate website, if it exists.

INVESTMENT COMPANIES

Art. 47 eliminates the sanction in the case of non-compliance with the provision of Art. 47 and provides, instead, the express responsibility of the administrators for the decision to exceed the established limit. The possibility is foreseen that the Governing Body of the company authorizes the departure from the legal limits referred to above, generating a right of withdrawal for the shareholders who vote against it.

RESPONSIBILITY OF ADMINISTRATORS AND REPRESENTATIVES

Art. 83 provides for a detailed liability regime for the administrators and representatives of Commercial Companies. The responsibility is extended and equalized to those natural or legal persons who, without being administrators or representatives, act or perform in fact, in a stable and permanent manner, positive activities of management, administration or direction of the company, who will incur as de facto administrators in the same responsibilities applicable to the administrators or the legal representative.

CONTRACTING REGIME WITH THE COMPANY

Art. 84 adds that, in order for representatives to enter into contracts with the company, prior authorization from the majority of the Social Governance Body is required. If the contracts refer to registrable assets, the authorization must be recorded in the public deed or in a reliable private document. Likewise, contracts entered into without authorization are given validity, making the representatives responsible.

RESERVATIONS

In Art. 93, it is proposed to eliminate the constitution of the mandatory legal reserve, it is established that companies may establish reserves as long as they are reasonable, respond to prudent administration and are approved by partners or shareholders representing the majority of the share capital, without prejudice to those agreed in the contract

FINANCIAL STATEMENTS

In Art. 97 bis it is established that when there are companies with annual operating income that exceeds 37,500,000 UI, they must present their financial statements with an audit report, in accordance with the regime and conditions established by the regulations. The company may not distribute profits resulting from corporate management without having previously registered the financial statements corresponding to the last closed fiscal year.

DISTRIBUTION OF DIVIDENDS

Art.98 establishes that benefits that do not derive from distributable net profits cannot be distributed. These are defined in the article itself as those resulting from a balance sheet drawn up in accordance with appropriate accounting standards, in the functional currency of the company and approved by the competent corporate body, provided that it does not seriously jeopardize the current or future solvency of the company. the company, or renders the company’s capital resources insufficient or inadequate for the exercise of its activity.

RIGHT OF RECESS

New grounds for termination are introduced in Art. 129. In the case of transformation and merger, the right of withdrawal is limited; the partner/shareholder who does not want to or is not present in the decision can only recede if the transformation or merger implies a notable deterioration in the property rights, which is understood to be when the negotiability of their social participation is limited or diminished or when the liability of the partner/shareholder with respect to third parties is aggravated. In the case of a merger, four causes are foreseen that are understood as a notable deterioration in property rights.

MEMBER EXCLUSION

Art. 147 provides for the exclusion of partners and shareholders who have a participation in the share capital of no more than 15%, by resolution of the governing body by the favorable vote of partners or shareholders who represent at least 75% of the social capital with voting rights.

SETTLEMENT AND PAYMENT OF PARTICIPATION

In Art. 154, the value of the outgoing partner’s participation is set according to the corporate assets (proportional equity value) or the present value in the expected income flow of the company or by any other reasonable criterion, in accordance with current practices of commerce.

CAUSES OF DISSOLUTION

Art. 159 provides for the elimination of the cause of dissolution that occurs when the number of partners is reduced to one and that which refers to the case in which there are losses that reduce the assets of the company to a figure less than 25% of the Integrated capital.

REGISTRATION CANCELLATION OF LEGAL PERSONNITY

Art. 181 establishes that, without prejudice to the registration cancellation, if assets or liabilities arise subsequently, the registration cancellation is revoked and the liquidation process is resumed, until their total extinction is achieved.

IRREVOCABLE CONTRIBUTIONS

The irrevocable contributions that the company receives on account of future capital integrations are recognized expressly. As in the SAS, a maximum period of two years is established for its integration.

CORPORATE CONFLICTS

The 4-year statute of limitations is regulated for all actions provided for in the law, and as for the SAS, the possibility is provided for at the statutory level, for corporate problems to be resolved via arbitration.

FOREIGN COMPANIES

In Art. 193, 3 important modifications are established: a) all reference to “isolated act” is eliminated, allowing companies to carry out any legal act and be in court without the need for registration in the country; b) “permanent representation” is replaced by “permanent establishment”; c) the consequence of non-compliance with the requirements required for the foreign company to be able to develop its corporate purpose in the country is regulated in express text, said consequence being the unenforceability of the statute/corporate contract in relation to the acts carried out in Uruguay.

CORPORATION WEBSITE

The reform project provides for the possibility of commercial companies having a corporate web page, on the legal publications website, as determined by the regulations. The calls and notices provided by the LSC may be published there. If this mechanism is adopted, the resolution creating the website must be registered in the Registry of Legal Entities, National Commerce Registry Section.

LIABILITY OF IRREGULAR AND FACTUAL COMPANIES

The partners would become equally responsible for the social obligations.