a new policy agenda for latin american company law: reshaping the closely-held entity landscape...
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A NEW POLICY AGENDA FOR LATIN AMERICAN COMPANY LAW:Reshaping the Closely-Held Entity Landscape
FRANCISCO REYES VILLAMIZARDecember 7, 2011
Comparative Corporate Governance Distinguished Lecture Series
Wake Forest UniversitySchool of Law
CONTENTS
1. Corporate Governance Reforms in Last Decade
2. Reasons for change in Policy Agenda
3. Model Act on Simplified Stock Corporations
4. The Colombian SAS (2008)5. Empirical Evidence on SAS6. General Features of SAS7. Conclusions
CONTENTS
1. Corporate Governance Reforms in Last Decade
2. Reasons for change in Policy Agenda
3. Model Act on Simplified Stock Corporations
4. The Colombian SAS (2008)5. Empirical Evidence on SAS6. General Features of SAS7. Conclusions
Source: Global Investor Opinion Survey: Key findings, Mckinsey and Company, July 200 [Online] www.mckinsey.com/globalinvestoropinionsurvey2002.pdf
Benefits of Corporate Governance according to surveys
CORPORATE GOVERNANCE REFORMS
Ownership Concentration in Latin America
ECONOMATICA and 20 F ADR Filings quoted by Lefort and Walker, The Effect of Corporate Governance Practices on Company Market Valuation and Payout Policy in Chile, Pontificia Universidad Católica de Chile, at 4, March 2005 http://www.iadb.org/res/publications/pubfiles/pubR-515.pdf.at 53.
CONCENTRATED VERSUS DISPERSED OWNERSHIP
EVOLUTION OF LISTED FIRMS IN LAT. AM.
CONTENTS
1. Corporate Governance Reforms in Last Decade
2. Reasons for change in Policy Agenda
3. Model Act on Simplified Stock Corporations
4. The Colombian SAS (2008)5. Empirical Evidence on SAS6. General Features of SAS7. Conclusions
USEFULNESS OF COMPANY LAW OVERHAUL
• Obsolescence of Company Law in the region
• High “Transaction Costs”
• Importance of FDI
• Lack of a multi-purpose versatile business entity
• Excessive emphasis on the development of securities laws
▫ México – Commercial Code (1.889) Law of Business Associations -
LSM (1934)
▫ Brazil – Law of Corporations (6.404 of 1976)
▫ Argentina – Law of Business Associations (19.550 – 1972)
RESISTANCE TO LEGISLATIVE CHANGE
1. Limited Liability
2. Flexible internal structure
3. Reduction of formalities for incorporation
4. Transparent tax structure
5. Broad contractual freedom
USEFULNESS OF HYBRID FORMSUSEFULNESS OF HYBRID FORMS
CONTENTS
1. Corporate Governance Reforms in Last Decade
2. Reasons for change in Policy Agenda
3. Model Act on Simplified Stock Corporations
4. The Colombian SAS (2008)5. Empirical Evidence on SAS6. General Features of SAS7. Conclusions
1. OAS Legal Committee (April 2011)
2. Proposal of a separate statute introducing a new type of company
3. Model Act contains substantive and procedural provisions
4. Ex ante mandatory rules are generally reduced or replaced by ex post standards
MODEL ACT ON SIMPLIFIED STOCK MODEL ACT ON SIMPLIFIED STOCK CORPORATIONSCORPORATIONS
SASINSPIRING MODELS
•Simplified Stock Corporation (Colombia)
•Limited Liability Partnership, LLC, Closely held corp. (USA)
•Société par Actions Simplifiée (France)
CONTENTS
1. Corporate Governance Reforms in Last Decade
2. Reasons for change in Policy Agenda
3. Model Act on Simplified Stock Corporations
4. The Colombian SAS (2008)5. Empirical Evidence on SAS6. General Features of SAS7. Conclusions
COLOMBIAN SAS
Law 1258 of 2008
Introduced a new hybrid business form with all the features of a modern corporation law statute
CONTENTS
1. Corporate Governance Reforms in Last Decade
2. Reasons for change in Policy Agenda
3. Model Act on Simplified Stock Corporations
4. The Colombian SAS (2008)5. Empirical Evidence on SAS6. General Features of SAS7. Conclusions
Data for 2008-2011
Year Number SAS
% New Business
2008 (Dec) 160 7.4%
2009 17,740 50.5%
2010 37,371 77.9%
2011 (through Oct) 45,505 90.7%
Newspaper editorialFebruary 3rd, 2011
“The SAS is a legalRevolution…”.
CONTENTS
1. Corporate Governance Reforms in Last Decade
2. Reasons for change in Policy Agenda
3. Model Act on Simplified Stock Corporations
4. The Colombian SAS (2008)5. Empirical Evidence on SAS6. General Features of SAS7. Conclusions
E-INCORPORATION(in one hour)
E-INCORPORATION STEPS1.Tax ID
2. Minutes
3. Payment
4. Digital signature issuance
5. Signing Document
6. Registration
E-INCORPORATION – TAX ID
E-INCORPORATION – NAME CHECK
E-INCORPORATION – MODEL BYLAWS
GENERAL FEATURES OF SAS
1. Single-member or Multi-member Entity2. Simplification of Incorporation Process3. Commercial Nature4. Full-fledged Limited Liability5. Broad Contractual Freedom6. Flexible Capital Structure7. Ex-Post Standards 8. Specialized Conflict Resolution Mechanisms9. Unlimited Life Span and Unrestricted Purpose Clause10. Freedom to Define Organic Structure11. Flexible Rules on Capitalization12. Modern Rules on Transferability of Shares13. New Corporate Restructuring Mechanisms14. Simplified Rules for Dissolution and Liquidation
CONTENTS
1. Corporate Governance Reforms in Last Decade
2. Reasons for change in Policy Agenda
3. Model Act on Simplified Stock Corporations
4. The Colombian SAS (2008)5. Empirical Evidence on SAS6. General Features of SAS7. Conclusions
CONCLUSIONS•Advantages:▫Reduction of
informality▫Access to credit
by SMEs▫Relevance for
groups of companies
▫Foster innovation, economic growth
•Implementation presupposes:▫Breaking up path
dependence▫Support from
pressure groups▫“efficient minded”
lawmakers▫Overcome legal
elites / traditions
