A number of mergers and acquisitions in recent years have resulted in more multinational companies conducting business in El Salvador through the companies they have acquired. As a result, the commercial sector has come under pressure to internationalize the corporate governance regulations that apply to local subsidiaries of foreign companies.
Since January 2006 the Integral Business Shop has provided individuals and entities with a simpler and more efficient procedure for incorporating and registering a business. Registration can now be completed at one agency, thereby considerably shortening the timeframe for incorporation.
The Commerce Code requires that all corporations and partnerships hold at least one ordinary general meeting by May 31 of every year. The purpose of the meeting is to inform the shareholders or partners of the financial status of the entity over the preceding tax year, so that they can decide on corrective measures - if necessary - and make the necessary provisions for the next year.
An amendment to Salvadoran commercial legislation, originally introduced in January 2000, set a minimum capital stock requirement for all new and existing companies, to be met within three years. The deadline was deferred by a succession of extension periods, the latest of which expires in April 2006. Non-compliant companies risk losing their legal status and may be subject to voluntary or judicial liquidation.
The Commerce Code establishes different terms for the lapse of legal actions that are the result of various mercantile contracts. Following the approval of amendments to Article 995 of the code, the term for the lapse of legal actions over a credit agreement is five years, commencing from the date of the last acknowledgment of debt granted by the debtor in favour of the borrower.
Once new amendments to the tax laws take effect, a new precondition of fiscal solvency must be satisfied in order to incorporate, transform, merge, dissolve or liquidate a Salvadoran company. Fiscal solvency will be recognized as long as the company does not have tax returns pending to be filed or due taxes unpaid.
New legislation which took effect in August 2004 aims to introduce uniform procedures for the filing and registration of documents in the real estate records, the Trade Register and the Intellectual Property Register. Among other things, it makes the amendment of filed documents a legal obligation, rather than an ethical responsibility as previously.
Salvadorian law requires companies to hold at least one ordinary shareholders meeting a year, in order to discuss issues such as the general balance sheet and the appointment and remuneration of directors and auditors. They must also renew annually the business licences under which they operate.
Including: Incorporating a Company; Establishing a Branch of a Foreign Company; Representative Agents and Distributors; Mercantile Obligations.