On September 11th the Senate passed Law 19,820 for the Promotion of Entrepreneurship. It was promulgated by the Executive Power on September 18 and will come into force shortly.
The Innovation, Science and Technology Commission of the Chamber of Representatives has been working since last year on the content of a bill to promote entrepreneurship, which was finally transformed into a law, articulated on two main pillars: the creation of a new type of company and the establishment of a Collective Financing System commonly known as crowd funding.
Law 19,820 contains 4 titles with regulations related to: (I) promotion of Entrepreneurship; (II) Simplified Stock Company; (III) Crowd funding (IV) Other provisions.
It is a new type of commercial company with a more flexible structure than those already known regulated in Law 16.060, which is regulated around the principle of autonomy of will, thus enabling the partner or partners to shape the most relevant aspects of corporate performance in the way that best suits their interests.
The law establishes that it is a type of commercial company, whose capital will be represented by shares and its shareholders will not be liable for social obligations, beyond their respective contributions. The shareholder(s) are not responsible for labor, tax or other obligations incurred by the company, except if the legal personality of the company is declared unenforceable.
Companies that make a public offer of their shares, companies in which the State, a Departmental Government, an Autonomous Entity, a Decentralized Service or a non-state public person are a direct or indirect shareholder, and also the companies that are dedicated to activities for which the law provides the adoption of a specific type, such as banking activity or the exploitation of rural real estate, may not take the form of SSC.
Despite the restriction on making public offer of their shares, they are nevertheless enabled to issue corporate bonds.
The SSC can be constituted by a single natural person, a legal person as long as it is not a public limited company, or by several natural or legal persons (without limitations in the latter), which means a notable change to the incorporation regime of the social types known in our law until now.
It is predicted that the Executive Power will implement an incorporation procedure by digital means and with an advanced electronic signature or other authentication mechanism provided for in the regulations, so that the process can be carried out completely via web.
3. Autonomy of will
As noted, the Law builds the new social type on the basis of the principle of autonomy of will, leaving it up to him or the partners to organize the company in the way that best suits their interests, with certain exceptions and the limit of not injuring rights of third parties in good faith.
The Law establishes that the instrument of incorporation of the company must contain a clear and complete statement of the activities included in the social purpose, unless it is stated that the company may carry out any lawful commercial or civil activity, recognizing in this way the largest possible object width.
5.- Capital and Shares
The share capital may be represented in endorsable or non-endorsable and deed nominative shares. Bearer shares are not admitted.
6.- State Audit
It is anticipated that SSC with annual revenues greater than 37,500,000 IU will be subject to the same control of closed corporations, except in relation to the constitution and modification of the statutes that will not require intervention by the state control body.
It is established that the SSC that are not included in the previous case, will only be subject to the inspection of the state control body in the terms established by the regulations. We understand that it was intended to establish that the regulation will set the scope of state control for the companies included in the first paragraph of article 10.
7.- Other provisions
In addition to those just mentioned, the new social type contains several other particularities and solutions of interest, all oriented to grant greater organizational flexibility with solutions often necessary in practice, to which we will return in other articles.
This provides the following: the possibility of granting multiple votes to the shares; establish minimum capital tenure rules; the possibility that the company receives irrevocable contributions on account of future capital integrations; establish restrictions and even prohibition in the negotiation of shares; the possibility that the statute freely determines the organic structure of the company and the rules that govern its operation; that the social bodies may meet in places other than the registered office; the use of technical means such as videoconferencing or any other means of simultaneous communication for the sessions of the social bodies, among other innovative solutions.
Montevideo, September 2019