Simplified Joint Stock Companies (SAS) in El Salvador
On December 6, 2023, the Legislative Assembly approved vital reforms to the Commercial Code. Specifically, these changes allow the incorporation of Simplified Joint Stock Companies (SAS) in El Salvador. Consequently, this new mechanism significantly facilitates the registration process. Now, a single natural or legal person can easily establish a business operation in the country.
Furthermore, this reform actively includes informal commerce and unregistered micro, small, and medium-sized enterprises (MSMEs). The government reduced the enrollment processes to help them become formalized quickly. As a result, this promotes financial and banking inclusion. Ultimately, it generates new business opportunities for individual merchants who register as Simplified Joint Stock Companies (SAS) in El Salvador.
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Regulatory Framework for the SAS
The recent reform to the Commercial Code regulates these entities through 11 articles and introduces 28 new sections. In fact, lawmakers incorporated a specific chapter covering all the regulations for the Simplified Joint Stock Companies (SAS) in El Salvador. Their main objective is to expand the alternatives for incorporating new companies. Therefore, this legal structure belongs to the capital mercantile companies. This classification strictly follows Article 18, literal II, of the Commercial Code.
Having established this general context, we must analyze the key elements of these new legal structures.
What is a Simplified Joint Stock Company (SAS) in El Salvador?
A simplified joint-stock company represents a legal entity created by the will of one or more persons. Importantly, these individuals or legal entities have limited liability. This means their responsibility only covers the amount of their respective contributions. Additionally, its nature will always remain commercial, regardless of its specific corporate purpose.
What are the advantages of a Simplified Joint-Stock Company (SAS)?
- Sole Ownership: A single natural person or legal entity can easily form these companies.
- Asset Protection: Individual traders gain a massive advantage. They can legally separate their personal assets from those of the corporation.
- Remote Creation: Salvadorans residing abroad get the opportunity to establish companies from afar. To do this, they simply use certified electronic signatures.
- Flexible Capital: Shareholders freely determine the share capital starting from a minimum of US$1. Moreover, they can provide contributions in the form of labor.
- Foreign Investment: A foreign company can seamlessly establish a SAS. However, they must submit their original incorporation documents in Spanish and duly apostilled. Also, they need to provide the legal representation document of their attorney-in-fact.
- Easy Transformation: Any existing company can adopt this new business type. Generally, they achieve this through transformation or merger with a general meeting approval.
- Clear Dissolution: The law establishes clear reasons for dissolution. For instance, the expiration of the term or the impossibility of carrying out its corporate activities.
- Fee Exemption: During the first year, the Commercial Registry waives all tariff fees. Therefore, founders will not pay for the registration of incorporation forms, premises, or branches.
- Virtual Onboarding: The government provides an easy, unassisted virtual onboarding process.
- Financial Inclusion: In conclusion, this model strongly contributes to financial inclusion by offering a modern way to start businesses.
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Comparative analysis
Simplified Stock Company (SAS) vs. Anonymous Companies (SA) in El Salvador
Simplified Joint Stock Companies (SAS) |
Public Limited Companies (SA) |
| Founders can create it as a sole proprietorship, using a single natural or legal person. | Its creation requires at least two natural or legal persons. |
| The Commercial Registry issues specific forms for its incorporation, modification, transformation, and dissolution. Thus, founders execute all corporate actions through these simple forms. | Founders must incorporate, modify, and dissolve the company using a Public Deed. Consequently, they must complete all legal formalities before a notary. |
| It requires 100% subscribed share capital. If the company uses a variable capital regime, the shareholders must indicate the minimum. They freely establish this amount starting from US$1.00. | The share capital cannot be less than $2,000.00. However, shareholders can subscribe with an initial 5% contribution ($100.00). |
| Shareholders can adopt the Variable Capital Regime in El Salvador. | Shareholders can adopt the Variable Capital Regime in El Salvador. |
| Administrators can process forms using certified electronic signatures. Additionally, they may submit shares electronically and hold online shareholder meetings. Furthermore, the law allows any technological means for books to ensure data preservation. | Accountants or auditors must physically authorize the accounting and legal books. Likewise, authorized representatives must handle processes in person. Technological means require explicit permission in the articles of incorporation. |
| Companies with fewer than 10 employees and income below 482 minimum wages avoid appointing an external auditor. Instead, they only need to maintain formal accounting records and comply with commercial obligations. | A corporation must annually appoint a mandatory external auditor and a tax auditor. This rule applies when it has total assets of US$1,142,857.14 at the previous year’s close. |
| If the document sets no time limit for the administration, authorities consider it indefinite. | The Social Pact determines the term of office. Importantly, this term may not exceed seven years. |
| The legal personality and assets remain completely independent of its shareholders. The entity acquires this personality upon registration. Consequently, liability is limited to the share value. | The legal personality and assets remain independent of its shareholders. The entity acquires this status upon registration. Similarly, its liability limits to the value of its shares. |
| Founders freely choose the company name. However, they must add the expression “Simplified Joint Stock Company” or “SAS”. Also, it must differ from any existing company. | Founders freely choose the corporate name. Next, they must add the expression “Sociedad Anónima” or “SA”. Naturally, it must be unique. |
| The law permits certified electronic signatures for its creation. Therefore, the Legal Representative does not need to reside in El Salvador. | Document legalization requires an in-person signature. Additionally, the person with legal authority must reside in El Salvador. |
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