Formation of Companies and their litigation needs

By Luis Vidal Hamilton-Toovey

Posted: 8th September 2015 09:04

Chile has taken a huge step forward in recent years by enacting laws and regulatory procedures that permit the incorporation of a company in one day. This has been accomplished by means of a web page (www.tuempresaenundia.cl) that guides the person forming the company, step-by-step to draft the articles of association, and the principal aspects of them such as the name of the company, its capital, its purpose, who will act as its administrator, and other matters related to the incorporation of the new company.
 
The execution of the public deed that creates the new company and stipulates its article of association can be signed by the partners by advanced electronic signature or by signing a public deed in the offices of a Public Notary, which has advanced electronic signature.
 
Furthermore, the registration of the company can be completed online, giving the founders the chance to obtain the certificate of incorporation immediately.  The new company will be assigned a tax payer number (“RUT rol único tributario”) which is the company’s tax and multipurpose ID number.
 
To start commercial operations, the legal representative of the new company must file a sworn statement before the Chilean Internal Revenue Service (“Servicio de Impuestos Internos, SII)”, declaring that the company will start its business activities.
 
The rest of the necessary procedures to establish a company operating in Chile are fairly easy.  There is a complete system of electronic invoices to be used by the new company.
 
A recent law provides, also, that most of the value added tax (“IVA, Impuesto al Valor Agregado”) can and should be issued electronically (invoices, debit and credit notes, among others).
 
There are some other steps that must be taken to hire workers, or to get a municipal or local town permit from the proper Municipality, but the core procedure is simple as we have stated before.  Professional advice is probably a recommended must to this process.
 
Chile has also taken important steps forward in matters relating to accountability of companies, for which a new company must seek for professional advice.
 
Chile has developed an important set of laws that regulate consumer’s rights, antitrust behaviour, corporate legal responsibility, regulatory infringements, offences or breaches, tax regulations, including harsh rules on simple evasion, and environmental offences.  These laws and rules describe and state the legal duties of companies in all these matters.  They also have a catalog of infringements that may cause fines to be imposed to companies by the regulatory authorities in charge of the enforcement of these laws and rules.
 
All these laws and rules provide for adequate means of defence.  A competent counselor will be very important to stand up against these threats, and probably more important to avoid being threatened by them, in a previous stage.
 
On another hand, in relation to commercial litigation, the most common type of litigation encountered in Chile are claims for breach of contracts or employment or labour issues. 
 
Claims for breach of contracts and related commercial litigation are normally submitted to arbitration by the provisions of said contracts.  The best reputed centre for arbitration in Chile is the Center of Arbitration and Mediation of the Santiago Chamber of Commerce.  This Centre has provides rules for the arbitration procedure and appoints the arbitrator, unless the parties agree on this appointment.
 
Nevertheless, due to lack of provision in the contract or lack of agreement between the parties, the commercial litigation can be submitted to Civil Courts.  The normal procedure for a civil suit starts in the hands of a civil judge.  Cases are submitted to them making a division between them in the different jurisdictions of the country, and by the matter of the controversy, such as criminal offences, commercial issues, family law, labour law, tax and customs law, etc.  The decision of the judge may be appellated to Courts of Appeals, (generally three members sit on it) whose jurisdiction is determined by territory.  The highest court is the Supreme Court, which will hear some cases only, normally in annulment actions filed against lower courts.
 
Labour or employment matters must be submitted to specialised labour courts.
 
Luis Vidal Hamilton-Toovey is a litigation lawyer ranked in the high segment of Chilean Litigation lawyers.  He is a Consultant in his law firm Carey & Allende which is one of the 10 biggest law firms in Chile.  He has successfully represented a big number of cases in Appellate Courts, Antitrust Tribunal, Supreme Court of Chile, in number of arbitrations in matters such as Engineering, Construction, EPC and EPCM contracts, Antitrust Cases, Criminal and Civil Corporate Responsibility Cases, Contract Breach Cases, among others.  Has been a teacher in Chilean Catholic University and sits and has sat in Boards of Companies in the Investment, Asphalt, Building, Telecommunications Companies, ranging from large quoted Chilean companies to smaller ones.

Luis can be contacted on +56 2 24852073 or by email at lvidal@careyallende.com

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