Simplified Joint Stock Companies (SAS) in El Salvador
In El Salvador, on December 6, 2023, the Legislative Assembly approved reforms to the Commercial Code of El Salvador that allow the incorporation of Simplified Joint Stock Companies (SAS) in El Salvador. This is determined to be a new mechanism that will facilitate the registration and enrollment process for a single natural or legal person to establish a business operation in El Salvador.
The important thing about this reform is that it includes informal commerce, micro, small and medium-sized enterprises (MSMEs) that have not yet been registered, and it reduces the registration and enrollment processes so that they can become formalized. This promotes financial and banking inclusion in El Salvador, generating new business opportunities for individual merchants who register as Simplified Joint Stock Companies (SAS) in El Salvador.
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It is important to establish that the reform to the Commercial Code of El Salvador includes Simplified Joint Stock Companies (SAS) with 11 articles and introduces 28 sections in which a specific chapter is incorporated on all the regulations that Simplified Joint Stock Companies (SAS) will have in El Salvador, with the objective of expanding the alternatives for the incorporation of new companies in El Salvador, therefore, this type of company will belong to the capital mercantile companies, as established in Art. 18 literal II, of the Commercial Code of El Salvador.
Having established a general context for the reasons for incorporating Simplified Joint Stock Companies (SAS) into the legal system in El Salvador, it is important to develop the following elements:
What is a Simplified Joint Stock Company (SAS) in El Salvador?
A simplified joint-stock company is a legal entity resulting from the expression of the will of one or more natural or legal persons, with limited liability up to the amount of their respective contributions, and whose nature will always be commercial, regardless of the activities intended for its purpose.
What are the advantages of a Simplified Joint-Stock Company (SAS) in El Salvador?
- Among the particularities of Simplified Joint Stock Companies (SAS) in El Salvador is that they can be formed by a single natural person or legal entity.
- It provides an advantage for individual traders, as they will be able to separate their personal assets from those of the Simplified Stock Company (SAS) in El Salvador.
- In addition, it will provide Salvadorans residing abroad the opportunity to establish companies within the country through the use of certified electronic signatures.
- The share capital for the incorporation of these companies will be determined by the shareholders and must be freely established starting from a minimum amount of US$1. The contribution may also be in the form of labor or labor.
- A Simplified Joint Stock Company (SAS) in El Salvador may be established by a foreign company. To do so, it must have the incorporation documents filed in the country of origin, submitted in Spanish, and duly apostilled. In addition, the document proving legal representation of the attorney-in-fact in that country must be submitted so that the same applies in El Salvador.
- Any existing company may adopt the Simplified Joint Stock Company (SAS) type in El Salvador through transformation or merger with the approval of a general meeting or by a bylaw.
- Simplified Joint Stock Companies (SAS) in El Salvador will be dissolved due to the expiration of the term provided in the form, due to the impossibility of carrying out activities included in their corporate purpose, among other reasons.
- For one year after the reform comes into effect, the registration of simplified joint-stock company incorporation forms in El Salvador, as well as the registration of their business, premises, branch, or agency for the first time, will not incur any tariff fees with the Commercial Registry of the National Registry Center in El Salvador.
- Easy onboarding via virtual means, without assistance.
- It will contribute to financial and banking inclusion in the country, as a new way to start businesses in El Salvador.
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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) |
| It can be created as a sole proprietorship, that is, by a natural or legal person. | For its creation it must have at least 2 natural or legal persons. |
| It will be incorporated, modified, transformed, dissolved, liquidated, and all its corporate actions will be carried out using forms issued by the Commercial Registry in El Salvador. | It shall be incorporated, modified, transformed, dissolved, liquidated, and all its corporate acts shall be carried out by means of a Public Deed, with the legal formalities and before a notary. |
| It must have 100% subscribed share capital and when the company is subject to the variable capital regime, the minimum must be indicated, which is freely established from the minimum amount of US$1.00. | The share capital cannot be less than $2,000.00, and can only subscribe with a contribution of 5%, that is, $100.00. |
| They can adopt the Variable Capital Regime in El Salvador. | They can adopt the Variable Capital Regime in El Salvador. |
| Forms will be permitted to be processed with certified electronic signatures. Shares may also be submitted electronically. Shareholder and board meetings may be held with online deliberation. Books may also be used, allowing for any technological means that ensure attendee identification, confidentiality, and data preservation.
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Accounting and legal books must be physical and duly authorized by an accountant or auditor, as applicable.
Likewise, in the event of absence, the process is carried out by a person authorized in letters of representation, and technological means are only permitted if so determined by the articles of incorporation. |
| Companies with fewer than 10 employees and income below 482 minimum wages do not need to appoint an external auditor; they only need to maintain formal accounting records and comply with their commercial obligations in El Salvador. | A corporation must annually appoint a mandatory external auditor and a tax auditor when it has “total assets” of US$1,142,857.14 at the close of the immediately preceding year. |
| If no time limit is set for the administration of the company, it will be taken indefinitely. | The term of office will be determined by the Social Pact and may not exceed seven years. |
| The legal personality and assets of a simplified joint-stock company are considered independent of its shareholders. Such legal personality is acquired upon registration in the Commercial Registry of El Salvador, and its liability is limited to the value of its shares. | As with SAS, the legal personality and assets of a corporation are considered independent of its shareholders. This legal personality is acquired upon registration with the Commercial Registry in El Salvador. Its liability is limited to the value of its shares. |
| The company name must be freely entered into, followed by the expression “Simplified Joint Stock Company” or its abbreviation SAS, and be distinct from any other company existing in El Salvador. | The corporate name must be freely incorporated, followed by the expression “Sociedad Anónima” or its abbreviation SA and be distinct from any other company existing in El Salvador. |
| Certified electronic signatures are permitted for its creation, so it is not necessary for the Legal Representative to reside in El Salvador. | An in-person signature is required for document legalization, along with a person with legal authority who resides in El Salvador. |
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