Incorporating an SpA in Chile: six decisions settled in the bylaws before signing

Article 424 of the Commercial Code defines the SpA as a legal entity created by one or more persons, with bylaws that set the rights and obligations of the shareholders, the administration regime and the other agreements the founders decide, except where Paragraph 8 provides otherwise. The article adds the rule that governs the rest: what the bylaws do not regulate is decided first by Paragraph 8 itself and, only where the bylaws and that Paragraph are silent, by the rules for closed corporations, insofar as they do not conflict with the nature of the SpA. The choice between SpA and Limitada, covered in SpA or Limitada?, is the first decision; once the SpA is chosen, the company is designed in its bylaws.

Article 425 lists the minimum content of the bylaws: the name ending in "SpA", the object, the capital and the number of shares, the form of administration and of appointing its representatives, with those who will exercise it provisionally where applicable, and the duration. The rest is optional, and that is where the three clauses an investor reads first sit: series, preemptive rights and transfer limits.

• Share series. Shares may be ordinary or preferred, and the bylaws must set precisely the burdens, privileges or special rights of each series (art. 436). The rule is one vote per share, but the bylaws may create series without voting rights, with limited votes or with more than one vote, provided they state how they count toward quorums (art. 437). A fixed dividend for a series is paid with preference and, unless the bylaws say otherwise, if profits fall short the holder may accumulate the balance in a special account or exercise the right to withdraw its preferred shares (art. 442).
• Preemptive rights in issuances. New shares are offered at the price set by the shareholders or by whoever they delegate, with no obligation to offer them first to the existing shareholders; the bylaws may require that options to subscribe new shares, convertible securities or other securities conferring future rights over shares be offered at least once pro rata (art. 439). If the bylaws establish this preference, they should say expressly whether it extends to convertible notes and to SAFEs (simple agreements for future equity). The law refers to "securities" conferring future rights over shares, and whether those instruments are covered is a matter of interpretation. For the conversion to be possible, the company needs an approved capital increase with shares available. The law requires that unsubscribed margin to be kept only while convertible bonds are outstanding (art. 439); in a SAFE or a convertible note, the margin is agreed expressly.
• Transfer limits. The bylaws may set minimum or maximum percentages or amounts of the capital that a shareholder may control, directly or indirectly, and may allow the sale of shares to be demanded in defined circumstances, in favor of another shareholder, of the company or of third parties. Both clauses must regulate their own effects and the obligations they create, or the law deems them unwritten (art. 435). The shareholder registry records every transfer, lien and unpaid subscription, and the administrators and the general manager are jointly liable for the damages caused by an inaccurate registry (art. 431).

The shareholders agreement completes these clauses with what the bylaws do not order: who can sell and to whom, how a round is valued, what happens on exit. The agreement is covered in shareholders agreement; the instruments of a first round, in SAFE or convertible note and venture capital in Chile. If the agreement regulates the transfer of shares, it must be deposited with the company and recorded in the shareholder registry to be enforceable against third parties (Article 14 of Law 18.046, applicable under Article 424 of the Commercial Code).

• Traditional route. The company is formed, exists and is proven by a written act of incorporation, executed as a public deed or as a private instrument whose signatures a notary authorizes and which is protocolized in the notary's registry (art. 425). Within 60 days of that act, an extract authorized by the notary must be registered in the Registro de Comercio of the corporate domicile and published once in the Diario Oficial; done on time, the company takes effect from the date of the deed or of the protocolization (arts. 425 and 426). Later amendments follow the same extract, registration and publication (art. 427).
• Online regime of Law 20.659. The SpA is one of the entity types that may opt in (art. 2 N° 6). Incorporation, amendment, conversion, merger, division and dissolution are done by signing an electronic form that is entered in the Registro de Empresas y Sociedades, a single, public and free registry administered by the Ministry of Economy (arts. 1, 4 and 11). The bylaws are those recorded in the registered form (art. 5). The signatories sign with an advanced electronic signature or before a notary, who adds their own (art. 9). The regime is voluntary. While the company remains in it, its amendment, conversion, merger, division, termination and dissolution must follow that law (art. 1), unless it migrates to the general regime (arts. 19 and 20).

Bylaws with several series, transfer limits or a tailored arbitration clause are usually drafted under the traditional route, where the text is negotiated without starting from a form. Migration between the two systems is allowed; unless the bylaws say otherwise, migration requires the absolute majority of the issued shares with voting rights (arts. 18 to 20 of Law 20.659). Even so, it is simpler to start in the system the company will keep.

• Inicio de actividades. Whoever starts a business or activity capable of producing income taxed under the First Category, in the cases listed in Article 68 of the Tax Code, must file with the SII a sworn declaration of commencement within the two months following the month in which the activities began. That article deems activities to have begun with any act or operation that is a necessary element for determining the periodic taxes of the activity.
• The shareholder registry. From day one the company must keep the registry of Article 431, with each shareholder, their shares, the date of registration and, for subscribed and unpaid shares, the form and timing of payment. If the SpA was incorporated under the regime of Law 20.659, that registry is kept exclusively in the Registro de Empresas y Sociedades, and each subscription, transfer or lien is recorded by form (art. 13 bis of that law). Investors ask for it in any prior legal review (due diligence).
• The shareholders agreement. With more than one founder, the bylaws order the company and the agreement orders the relationship among the owners: gradual consolidation of the founders' shares (vesting), tag along and drag along rights, and exit. It is advisable to sign it together with the bylaws, in which the vesting should also be anchored (see founder vesting).