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Home - Legal entities in Peru

Legal entities in Peru

Peru is the fastest growing economy in Latin America. Its unique and wide diversity sets Peru in a privileged position amongst other countries. Very few are the countries that can accumulate a significant variety of climates, including diverse micro-climates, and a territorial expanse with magnificent natural resources. But it is not only nature that has blessed Peru. Its people are its biggest asset: highly educated professionals, with international academic standards and highly skilled workers. On top of these virtues, this authentic and singular country has a solid economic and industrial background.

Thus, as of today, Peru is considered one of the world’s leading emerging markets. Sixteen years of uninterrupted annual growth, an open trade policy and well-defined legal framework stablish the country as an outstanding destination for foreign investment, offering a great variety of possibilities in its different economic  sectors.

LIMITED COMPANY (“SOCIEDAD ANONIMA”)

Limited Companies are legal entities formed through shareholder contributions for carrying out economic activities. Its main characteristics are that it is a share capital company, its capital is divided into negotiable instruments, owners have limited liability, and it must have a minimum of two shareholders with no maximum limit.

There is no minimum amount of social capital, except for cases governed by special laws, such as banking, financial, insurance, among others. The social capital is represented by shares, and the rule demands that at least 25% of equity from each share shall be paid and the balance must be covered under the conditions and opportunities provided in the articles of incorporation.

There may be different types of shares, and the differences may be in the rights that correspond to their holders, in their obligations, or both at the same time. All the shares of the same type or class have the same rights and obligations; however, it is possible to create shares with or without voting rights.

The transfer of shares must be communicated in writing to the company to be recorded in the share ledger. In addition, profit sharing in these companies is carried out in direct proportion to the capital according to the Audited Financial Statements.

Finally, the board of directors and the CEO are responsible for the management of this type of company, with the general meeting/ assembly of shareholders being the supreme body of the company.

CLOSED CORPORATION (SOCIEDAD ANONIMA CERRADA”)

It is a variation of the Limited Company, designed for small businesses with simple administrative bodies. In this case, it is optional to have a board of directors, being the Top Management responsible for the entire administration.

ADVANTAGES:

  • They are created for a small number of shareholders (20 max.). However, this does not lessen its ability to handle large amounts of capital.
  • Whoever owns more shares will have greater participation in the direction of the company
  • The shareholders have the pre-emption right for shares.
  • The shareholders are only liable up to their contributions.
  • The board meeting sessions do not have to be held face-to-face.

DISADVANTAGES:

  • They have a limited number of shareholders.
  • The access of other shareholders is restricted, due to the pre-emption right for the acquisition of shares and the preferential right of suspension in cases of capital increases established by law, they are generally structured for family businesses.

PUBLICLY HELD CORPORATION (“SOCIEDAD ANONIMA ABIERTA”)

Publicly held corporations are designed for large companies, with a minimum of 750 shareholders and significant capital. The number of shareholders can be unlimited.

ADVANTAGES:

  • The articles of incorporation and the bylaws may not contain limitations on the free transfer of shares or any other form of restriction to the trading of shares, including the pre-emption right of shareholders or the company acquiring shares in the event of their transfer.
  • For financing, it must resort to the capital market and seek to register its shares in the public registry of securities, in order to list the shares.
  • The partners are not liable for the company’s debts.
  • Does not demand a minimum amount of social capital

DISADVANTAGES:

  • To be incorporated, an Initial Public Offering (“IPO”) is required Public savings are used to generate working capital.

LIMITED PARTNERSHIP (“SOCIEDAD DE RESPONSABILIDAD LIMITADA”)

A legal entity with very similar characteristics to a limited liability company, with social capital ascribed to its purposes and divided proportionally, called “membership rights”.

ADVANTAGES:

  • The capital is generated from the contribution of all partners, and none of the partners are personally liable for the obligations of the company.
  • The liability of the shareholders is limited to their contributions.

DISADVANTAGES:

  • It cannot resort to the public for the placement of shares or obligations.
  • The minimum number of shareholders is two and the maximum is 20.
  • The capacity as a shareholder is not transferred with the same speed as within a limited company; requiring an amendment to the by-laws and the registration in Public Records.
  • There is a right of pre-emption for the acquisition of shares.

SUBSIDIARIES (“SUCURSALES”)

Foreign companies may also establish subsidiaries in Peru, which must be registered in the Registry of Legal Entities. The subsidiaries legal status is not independent of the parent company since according to Peruvian law it is understood that they are the same company, so the parent company is liable for the actions of its subsidiary.

Subsidiaries must be established by the competent corporate body within the parent company, which must appoint a legal representative in the country with sufficient powers of attorney to manage it, as well as allocating sufficient capital for the development of its economic activity in Peru.

SOLE PROPRIETORSHIP (“EMPRESA INDIVIDUAL DE RESPONSABILIDAD LIMITADA – E.I.R.L”)

In addition to companies, by special legislation, the E.I.R.L. is a type of private law legal entity organized by a single member with its own equity separate from the holder. The E.I.R.L. is recognized as a company whose essential characteristic is that it belongs to a single owner. Therefore, its bodies are owned by the holder, which is the highest body of the company, and who is in charge of the decisions of the company´s assets, activities, management, administration, and representation.

ADVANTAGES:

  • It is organized by a single person, who is the owner of the E.I.R.L.
  • The owner’s equity is independent of the equity of the E.I.R.L.
  • The economic contribution to incorporate an E.I.R.L. is fixed by the holder.
  • Capital can be increased through new contributions, capitalization of profits and reserves, and revaluation of the company’s equity provided that the value of the asset is not less than the company’s share capital
  • It is worth mentioning that each natural person may own one or more Individual limited liability companies.
  • The right of the owner can be transferred.

DISADVANTAGES:

  • Only natural persons can incorporate or be holders of an E.I.R.L.

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