This content is from: Local Insights

Foreign companies affected by amendment to commercial law

Ricardo A Pellerano

The Dominican Executive Branch recently enacted Law No. 31-11, as an amendment to the General Law on Commercial Companies and Limited Liability Individual Enterprises, No. 479-08. Although this law is fairly new, an amendment was necessary in order to clarify important aspects related to its application.

Additionally, some changes needed to be made in terms of the treatment it gave to foreign companies, in order to decrease the oversight and control that local authorities had over such entities; amendments were made to some provisions concerning the vigilance officer, in charge of reviewing and reporting on the management of the company by the board of directors, on a yearly basis; and a new corporate structure, known as the simplified corporation, was created.

With respect to foreign companies, the General Law was modified to state that they will be governed by the laws of their country of origin, when it came to issues related to their corporate existence, capacity, social functioning and dissolution. Local laws will, however, apply to the foreign company's local operations and activities. Before this amendment, the General Law had given jurisdiction to local authorities to control the corporate structure of foreign companies and, to a certain extent, to intervene in corporate rules that were created under another set of regulations.

Where foreign companies had previously to register locally if they wished to execute any type of activity or transaction in the Dominican Republic, now the General Law will enable these entities to purchase local shares, participate in local companies, litigate and occasionally to perform locally, without having to register in the Mercantile Registry. Entities which regularly do business in the country, or carry out transactions on an ongoing basis, will need to be registered in the local Mercantile Registry.

This Registry works as a source of public information for third parties wishing to do business with commercial entities. It contains important information on all companies doing business in the country, such as corporate regulations and existence, corporate domicile, capital distribution, and details of the management team and other representatives.

Ricardo A Pellerano

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