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Guatemala

Published on Wednesday 6th December 2017

    • Guatemala

      Guatemalan legislation foresees a legal instrument that specifically regulates everything concerning the corporate, mercantile and internal affairs subject of a corporation. This legal body is in the Commercial Code (Decree 2-70), which lists the important stipulations, principles and characteristics of each society allowed by Guatemalan legislation for incorporation. Therefore, the Commercial Code is, in principle, the basis for regulations referring to the internal affairs of a corporation.

      Furthermore, the Civil and Mercantile Process Code regulates judicial procedures in case of a contingency between shareholders or the lack of abidance with some of the stipulations agreed among them or the violation of their rights.

      Although these legal bodies exist, the shareholders may agree on the internal affairs of the corporation, through the by-laws or articles of incorporation, if and when stipulations found in the same do not contravene any express prohibition as established in legislation that the same contain dispositions that alter public order or create some type of damage to third parties.

      Lastly, are the shareholders' agreements to which the shareholders must adhere.

      Furthermore, it is important to emphasise that if the shareholders have not regulated a specific situation, what is already established in Guatemalan legislation shall be the rule.

      Last verified on Wednesday 15th November 2017

    • Guatemala

      The Commercial Code determines that there are five ways to constitute a company, as follows: (i) the collective company, (ii) the commandite company, (iii) the limited liability company, and (iv) the stock company corporation. Notwithstanding the foregoing, the most common companies in Guatemala are the corporation and the limited liability company.

      These companies can be public or private and are subject to public regulation and to the corporate governance regulation.

      Last verified on Wednesday 15th November 2017

    • Guatemala

      In Guatemala, there are several public registries in which an entity must be duly registered. Among these are the General Mercantile Registry of Property, the Superintendency of Tax Administration and the Registry of Intellectual Property. Nevertheless, this can vary depending on the social object with which the entity is incorporated, because if it is necessary to have prior special authorisation there will be more authorities involved, which will ensure abidance with corporate obligations.

      Furthermore, the Stock Market Registry, which is a branch of the Ministry of Economy, has the aim of controlling the legal rights and registry of activities performed and contracts signed by those participating in stock markets. With this control, the increase of national savings is sought, as well as obtaining resources to finance the economic development of the nation and the strengthening of capital markets with the correlated benefit of consolidating the economic and social stability of the country.

      Last verified on Wednesday 15th November 2017

    • Guatemala

      The General Mercantile Registry of the Republic is the agency in which public documents of an entity are registered and it has the authority of rejecting the registration of a company in case the documents presented do not abide with the required legal stipulations. Or in case there is, for example, an entity that has a name that is similar or the same of an existing one, and may cause some type of confusion to the public.

      The Intellectual Property Registry also has the authority to reject any commercial name that is similar or equal to that of some other pre-existing entity.

      The Superintendency of Tax Administration oversees the payment of taxes of an entity and everything that refers to the fiscal domicile and registration of its commercial name.

      The Stock Market Registry may require of its members or issuers whose equity, commodities or contracts are quoted in any one of the said markets, the reports and documents, as well as to adequately verify, by competent persons, the accuracy and veracity of the same.

      Furthermore, in cases where no sanction for a felony is merited, the transgressor may be summoned to correct the irregularity within the fixed time, suspend the inscriptions of the equity that may have been issued and have corresponding fines imposed.

      Last verified on Wednesday 15th November 2017

    • Guatemala

      Yes, shareholders have the ability and the right to sue corporations for breach of corporate governance.

      No, the only person allowed to act on behalf of the company is the legal representative, the general manager or the proxy with the necessary and sufficient authorisation to appear in its name.

      Yes, class action suits are permitted.

      Yes, arbitration is permitted, if and when shareholders have so agreed.

      Last verified on Wednesday 15th November 2017

    • Guatemala

      In addition to the directors or members of the board of directors, there are other persons who are subject to corporate governance rules. For example, any person who has some type of representation of the entity, be it through a mandate or an appointment, as are general managers, general proxy managers or special proxies, among others.

      These persons have a direct responsibility for the acts or contracts in which they have performed, in cases when such an act is considered a felony.

      External counsel and external auditors have other types of responsibilities, which are of a civil character, for cases when the counsel has consequences of some type of damage that directly affects the entity.

      Last verified on Wednesday 15th November 2017

    • Guatemala

      No, provided the entity's constitution documents abide by Guatemalan legislation, the entity has a legal object and does not require any type of previous authorisation to be incorporated.

      Corporate governance does not play a role.

      Public documents are such that are susceptible to registration before any Guatemalan authority, as well as the by-laws, appointments, powers of attorney or any change in the incorporation charter of an entity.

      Notwithstanding the foregoing, there are documents that are not susceptible to registration such as the ordinary shareholders’ assemblies, minutes of the administration council and the book of shareholders’ registry.

      Last verified on Wednesday 15th November 2017

    • Guatemala

      The number of members of the board of directors shall depend on the manner of administration agreed upon by the shareholders. In Guatemala, there are two modes of administration: a unique administrator and an administration council.

      In the case of a unique administrator, only one person oversees the company and, in the case of an administration council, there is a minimum of two members.

      Independent directors are authorised in Guatemalan legislation, provided they have an appointment duly registered with Guatemalan authorities and they perform pursuant with delegations established in the appointment.

      Last verified on Wednesday 15th November 2017

    • Guatemala

      The external audit committee is discretional and can be created and its object, scope limitations, rights and obligations within the corporate agreement, defined.

      In cases when it is established that it must report to the shareholders, it must do so.

      The law establishes that accountants, auditors or deputies must be assigned by the annual ordinary assembly that conducts the election of administrators, and their functions shall depend exclusively upon the assembly to whom they must render reports.

      Last verified on Wednesday 15th November 2017

    • Guatemala

      Pursuant with the law, there is no requirement for corporate governance that demands having nomination or compensation committees. In case the need arises to create one, the law does not limit its creation, which must be performed at the time of defining regulations that shall govern the corporation and within the founding social agreement or its amendment or modification.

      Last verified on Wednesday 15th November 2017

    • Guatemala

      There is no legislation on this subject; nevertheless, it can be established in the corporate agreement of the company that these specific audit, nominating or compensation committees file a report to the board of directors or to the shareholders of the corporation.

      What legislation does establish is that the general shareholders’ meeting must be supplied with reports of financial statements, the balance sheet, and a report from the administration, at least once per year, within the four months following the end of the fiscal year (1 January to 31 December).

      Last verified on Wednesday 15th November 2017

    • Guatemala

      There are publication requirements for each one of the stock exchange operations, a public bid, a registered company or a stock exchange quotation.

      Specifically on the issue of bonds or securities and the negotiation of commodities and contracts that may have been registered or authorised, as well as security issues and on other operations that may be carried out; including the qualification of risk and its updates, obtained through an issuer or by the issue of securities in any one of the risk qualifying corporations, registered to operate in the country or by international risk qualifying firms, recognised by the US Securities and Exchange Commission (SEC). 

      Last verified on Wednesday 15th November 2017

    • Guatemala

      In our legislation, companies regulated by the Stock and Securities Exchange Registry have the structure of a corporation, but with certain special characteristics, namely, that they have a variable capital and are known as investment companies.

      In the case of mercantile companies, annual financial statements with a report of an external auditor within the 30 days following the annual ordinary general shareholders' meeting, or counted from the date the same should have been held pursuant to the specific date established in the charter or, if there is none, from the date the general time period indicated in the Commercial Code. Any issuer that is not a mercantile society must submit the said financial statements within the 90 days following the close-out of its fiscal year.

      The general balance, the profit and loss statement and the cash flow report corresponding to each one of the first three quarters, duly certified by the accountant and signed by the legal representative of the issuing entity.

      Last verified on Wednesday 15th November 2017

    • Guatemala

      Pursuant with what is established in the Securities and Commodities Registry (RMVM), with a monitoring and supervisory function, each company must have available whatever information is necessary.

      Public entities have the legal obligation to inform the RMVM in a true, sufficient and opportune manner, all the essential facts or information on themselves and the company when they happen or when they are summoned to do so. 

      Last verified on Wednesday 15th November 2017

    • Guatemala

      The general shareholders’ assembly will meet at least once a year, within the four months following the close-out of the social period and, also, at any time it be summoned. In addition to those matters included in the agenda, it must deal with the following matters: (i) discuss, approve or disapprove the profit and loss statement, the general balance and the report from the administration, and, in its case, the report from the auditing committee, if any, and then take the measures that it deems opportune; (ii) appoint and remove the administrators, the auditing committee, if any, and determine their respective compensation; (iii) study and resolve about the project of profit distribution that administrators must submit to their consideration; and (iv) study and resolve the matters specifically established in the charter.

      Extraordinary assemblies are those that convene to deal with any one of the following matters:

      • all amendments of the social charter, including capital increases or reductions or an extension of the effective time; 
      • the creation of shares of stock with limited or preferential vote and the issue of obligations or debentures when these ae not foreseen in the social charter; 
      • the acquisition of shares of stock of the same company and their disposition;
      • the increase or decrease of the nominal value of shares of stock; 
      • all the others required by law or the social charter; and 
      • any other matter for which it is summoned, even though it may be under the competence of ordinary assemblies. 

      These assemblies may meet at any time.

      Delegating through a proxy vote is not forbidden in our legislation.

      Directors may be elected at any time or during the annual shareholders’ assembly.

      The election process is through the General Assembly. Each company has the authority to elect them pursuant with their own voting system, at the discretion of the company. In the election for administrators of the company, shareholders with the right to vote shall have as many votes as the number of their shares of stock multiplied by that of the administrators to be chosen and may issue all their votes in favour of only one candidate or distribute them between two or more of them.

      It is not mandatory to reveal information about shares of stock or the by-laws of the company. Unless there is a party request, it is information private to the company.

      Last verified on Wednesday 15th November 2017

    • Guatemala

      Legislation does not establish how often they must meet, but as a minimum once per year and/or temporality can be established in the shareholders’ agreement.

      The administration council has the authority to direct company matters.

      Administrators may or not be shareholders. They shall be elected by the general assembly and their appointment may not be made for a period longer than three years, although their re-election is allowed. Administrators will continue performing their functions although their term of office has concluded, while their successors have not taken office. The appointment as an administrator may be revoked by the general assembly at any time.

      The unique administrator or the administration council, in its case, shall have legal representation of the company, in litigation or outside of it, as well as use of the corporate name, unless otherwise decided in the social charter. The administration council may grant powers of attorney in the name of the company, but the unique administrator may do so only if authorised by the social charter or the general assembly.

      The social charter shall determine the manner the president of the administration council is designated and, if not stipulated in same, the administrator first appointed shall be the president and, in his or her failure, the following appointed by the order of their designation. The president of the administration council shall b e the executive organ of the company and shall represent it in all matters and business resolved, except otherwise agreed. Notwithstanding the aforesaid, the administration council may appoint from within its ranks a delegate for the execution of specific acts.

      Minutes issued by the administration council are private, as are the shares of stock registry.

      Last verified on Wednesday 15th November 2017

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