The liabilities and responsibilities for legal representatives differ slightly between countries in South America. The following article will give you an overview of the most important information to consider regarding legal representation in the Pacific Alliance countries of Chile, Colombia and Peru.

 

Legal Representative in Chile

Requirements

  • Any employee of the company or volunteer third-party can become a legal representative, as long as they are over 18 and a permanent resident or citizen.
  • Foreigners can not act as legal representatives of a company (even if they own a majority of the company), until they have obtained full permanent residency status.
  • A legal entity cannot become a legal representative, it must be an individual.
  • When a legal representative is appointed, the powers are typically given by a formally notarized document.
  • The will and intent of the signers is considered settled at the time the document is signed before a notary public and it’s binding on the parties. Third-parties are legally protected if they act on that document.

Legal liability for the company

The representative is the legal “face” of the company with ultimate signature authority over all official acts the company might undertake. This can lead to power concentrated in the hands of few for companies in Chile and the potential abuse of power. There have been many cases of power abuse by legal representatives where the representative decided to sell company assets or even seized full control of the company.

In the most severe cases, the legal options for the owners were very limited as they have given unrestricted power to the legal representative. Foreigners with possibly limited language skills and limited understanding of Chilean law should be very careful when choosing who will be the legal representative of their company along with what powers they will be allowed to exercise and under what conditions.

Legal liability for the legal representative

Assuming the role of legal representative, however, exposes the individual to certain personal legal liabilities as well. If the company fails to pay taxes, the Chilean Internal Revenue Service (Servicio de Impuestos Internos de Chile) may bring criminal or civil penalties against the legal representative directly. If a civil lawsuit is brought against the company, the legal representative is served to appear in court. Because of these associated risks, legal representation can be relatively expensive compared to other countries in the region.

Recommendations

When drafting the articles of incorporation in Chile, and/or any related contracts regarding the powers of the legal representative, make sure that the powers given to the legal representative are properly restricted. Require an authoritative signature from the partners or shareholders for the sale of any real estate assets. Restrict the amount of money that can be transferred without authorization. 

However, the restrictions should not be so limiting that the legal representative can not properly fulfill the role. Try to find a balance between what powers are needed for the legal representative to efficiently execute the mandate given to him/her and the restrictions that are necessary to protect the company’s owner, partners, and shareholders.

 

Legal Representative in Colombia

Requirements

  • Must be a Colombian citizen or a foreign national with the legal right to live and work in the country.
  • The representative is appointed through a document known as a Power of Attorney.
  • In this document, both parties sign and agree on the extent of power given to the Legal Representative to act on the company’s behalf and in its best interests.
  • All companies must appoint a Legal Representative in Colombia during the company incorporation process.

Legal liability for the company

The legal representative is the legal “face” of the company, which gives him/her the power to:

  • Sign contracts and agreements on behalf of the company
  • Open corporate bank accounts
  • Coordinate with government authorities and maintain corporate registrations
  • Apply for employment visas for staff with the country’s Migration agency

Legal liability for the representative

The legal representative has the obligation to act on the company’s behalf and in its best interests. Should the company break the law in any way, the company’s legal representative will be individually responsible as the ‘legal face’ of the company.

Recommendations

The Power of Attorney document should balance the extent of power and restrictions given to the legal representative. Many foreign companies work with a local law firm that can assist with the provision of a company legal representative to make sure that their company is in safe hands.

 

Legal Representative in Peru

Requirements

  • Any legal entity or natural person at least 18 years old can be appointed as a legal representative (In a small company, usually the business associates delegate the function of legal representation to the general manager and they exercise all the duties assigned to their charge).
  • A foreigner can be appointed as a legal representative as long as they have a legal permit to reside and work in Peru.
  • Having a legal representative is a statutory requirement before the local authorities in Peru.
  • There are two main ways to appoint a legal representative:
    • At the moment of the business registration — When registering the business, the associates need to present a certified copy of the act of incorporation of the business, known as the company charter. Keep in mind that this document should include a record of the agreement reached with the legal representative.
    • Through a public deed that should be submitted to the National Superintendence of Public Registries (Superintendencia Nacional de los Registros Públicos, SUNARP).

Legal liability for the company

The legal representatives have the power to run the business along with the responsibilities that personally bind them to the company. The law that binds legal representatives is Law 222. It states that not only the company, but also the legal representative himself are liable for decisions taken by the legal representative.

Legal liability for the representative

  • According to the Legislative Decree 1422 from 2008, the legal representative is jointly liable (Responsables Solidarios) for any issue regarding financial statements if he has collaborated with the design or approval of tax planning.
  • Legislative Decree 1372 establishes the obligation of legal entities to provide information on their beneficiaries to guarantee transparency .

Recommendations

Regulations regarding legal representation continue to evolve in Peru. To assure due diligence is performed accurately, it is strongly recommended to get assistance from local experts who can find a reliable legal representative on your behalf if you have no trusted person who meets the requirements. Again, it’s very important to reach an agreement which properly restricts the power of the legal representative, while still giving enough power to do the job.

 

Appointing a legal representative for your business in South America is an important task and involves a great deal of trust with whomever you choose to appoint. In almost every situation, it is essential to have a representative in-country to perform necessary tasks for the business. For some businesses, this means finding and appointing a third party. If necessary, Ongresso can act as your legal representative or find a suitable candidate to perform the role. Reach out to us at contact@ongresso.com for more information about expanding to new markets in the region.

Sven Schnydrig

Sven Schnydrig

Ongresso Marketing Team

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