General Law of Commercial Companies and Individual Limited Liability Enterprises No. 479-08

General Law of Commercial Companies and Individual Limited Liability Enterprises, No. 479-08.

THE NATIONAL CONGRESS

In the Name of the Republic

Law No. 479-08

CONSIDERING FIRST: That the norms that substantially organize and govern the life of Dominican commercial companies date from the beginning of the 19th century, with few modifications having been made since then;

CONSIDERING SECOND: That in the context of an increasingly open, global, and competitive economy, it is an inescapable imperative to update our corporate legislation based on current regulatory trends worldwide;

CONSIDERING THIRD: That within the framework of current corporate legislation, the main corporate processes, especially those supporting business concentrations, are devoid of regulation consistent with international normative standards;

CONSIDERING FOURTH: That it is equally imperative to incorporate into our legislation and corporate practices new corporate figures and business schemes as suitable instruments for the organization and operation of businesses and strategic wealth planning;

CONSIDERING FIFTH: That the country has an operational and institutionally organized securities market, but lacks a law that adequately regulates the companies listed on that market, given that it is commercial companies that generate the financial products that underpin it; and

CONSIDERING SIXTH: That the corporate provisions contained in the Commercial Code and complementary laws must be entirely replaced by a new legal instrument that responds to the present and future requirements of the nation, consistent with the agreements, conventions, and treaties signed and ratified by the Dominican Republic.

HAVING SEEN:

• The Constitution of the Dominican Republic dated July 25, 2002;

• Title Three of the Commercial Code of the Dominican Republic dated April 16, 1884, relating to companies, comprising Articles 18 through 64, as modified by Laws 262 of February 21, 1919; 1041 of November 21, 1935; 1145 of August 21, 1936; 813 of February 19, 1945; and 127 of April 9, 1980;

• The Penal Code of the Dominican Republic dated August 20, 1884; and

• The Civil Code of the Dominican Republic dated April 17, 1884.

HAS ENACTED THE FOLLOWING LAW:

TITLE I
ON COMMERCIAL COMPANIES

CHAPTER I
GENERAL PROVISIONS ON COMMERCIAL COMPANIES

Section I
On the existence of commercial companies

Article 1. Commercial companies shall be governed by the provisions of this law, the agreements of the parties, commercial usages, and common law.

Article 2. There shall be a commercial company when two or more natural or legal persons obligate themselves to contribute assets with the aim of carrying out commercial acts or exploiting an organized commercial activity, in order to participate in profits and bear the losses generated.

Article 3. (Modified by Law 31-11, dated February 11, 2011) The following types of companies shall be recognized:

a) General partnerships (sociedades en nombre colectivo); b) Limited partnerships (sociedades en comandita simple); c) Limited partnerships by shares (sociedades en comandita por acciones); d) Limited liability companies (sociedades de responsabilidad limitada); e) Anonymous companies (sociedades anónimas); f) Simplified anonymous companies (SAS) (sociedades anónimas simplificadas)

Paragraph I.- The law shall also recognize the accidental or partnership company, which shall not have legal personality.

Paragraph II.- This law shall also regulate the individual limited liability enterprise.

Paragraph III.- Simplified anonymous companies (SAS) may be constituted by the act of will of two or more persons.

Paragraph IV.- Financial intermediation entities constituted as anonymous companies shall be governed by the provisions of the Monetary and Financial Law, the Regulations issued for their development by the Monetary Board, and the Instructions issued by the Central Bank and the Superintendency of Banks within their respective competencies. The provisions of this law shall only apply to them insofar as they are not expressly provided for in the aforementioned laws.

Article 4. All companies constituted in any of the forms recognized in Article 3 of this law shall be deemed commercial. However, the accidental or partnership company shall only be commercial based on its object.

Article 5. (Modified by Law 31-11, dated February 11, 2011) Commercial companies shall enjoy full legal personality from their registration in the Commercial Registry, with the exception of accidental or partnership companies.

Article 6. Natural or legal persons who assume obligations on behalf of or for the benefit of a company in formation, before it acquires legal personality, shall be jointly and severally liable for such acts, unless the company, at the time it is regularly constituted and registered, or subsequently, assumes such obligations. In the latter case, such obligations shall have full binding effect on the company and shall be deemed to have existed from the moment they were originally agreed upon.

Article 7. Natural or legal persons who carry out, in part or in whole, the management of the constitution of a commercial company shall have the right to obtain the restitution of the values they had invested for such purposes, under the title of management of another's affairs, subject to the rules of common law. However, those who enter into contracts or incur obligations in the name of the company and for the purposes of its constitution must expressly state that they are acting on behalf of the company in formation.

Article 8. (Modified by Law 31-11, dated February 11, 2011) Natural or legal persons who assume obligations on behalf of or for the benefit of a company in formation, before it acquires legal personality, shall be jointly and severally liable for such acts, unless the company, at the time it is regularly constituted, or subsequently, assumes such obligations. In the latter case, such obligations shall have full binding effect on the company and shall be deemed to have existed from the moment they were originally agreed upon.

Paragraph.- Commercial companies duly constituted abroad shall have their domicile at the principal establishment they possess or the office of the representative in each jurisdiction of the Republic. Commercial companies constituted abroad must register their domicile in the inscription they make in the Commercial Registry of the jurisdiction of said domicile.

Article 9. Third parties may rely on the statutory domicile, but it shall not be opposable by the company if its real domicile is located elsewhere.

Article 10. Commercial companies constituted in the Dominican Republic in accordance with national laws shall have Dominican nationality, even if it has not been expressly included in the articles of association.

Article 11. (Modified by Law 31-11, dated February 11, 2011) Commercial companies duly constituted abroad shall be recognized by full right in the country, upon proof of their legal existence by the corresponding authority, in accordance with the formalities established by the law of the place of their constitution. Foreign companies, regarding their existence, capacity, operation, and dissolution, shall be governed by the law of the place of their constitution. However, these companies, in their operation and local activities, shall be subject to Dominican laws.

Paragraph I.- (Modified by Law 31-11, dated February 11, 2011) These companies shall be obliged to register in the Commercial Registry whenever they establish a branch or permanent establishment in the Dominican Republic, for the purpose of habitually exercising the acts included in their corporate object or when they carry out commercial acts habitually in the Dominican Republic. Likewise, companies constituted abroad must register in the National Registry of Taxpayers of the General Directorate of Internal Taxes, if the results of such activities generate tax obligations in the national territory and such registration is required by current tax laws and regulations.

Paragraph II.- (Modified by Law 31-11, dated February 11, 2011) Foreign companies shall not be subject to registration in the Commercial Registry for the exercise of isolated or occasional acts, being in litigation, or investment in shares or partnership quotas.

Paragraph III.- (Added by Law 31-11, dated February 11, 2011) Foreign companies shall have the same rights and obligations as national companies, with the sole exceptions that may be established by laws. Consequently, foreign companies shall not be obliged to provide judicial bail in case they act as plaintiffs before the courts of the Republic or before any administrative instance.

Paragraph IV.- (Added by Law 31-11, dated February 11, 2011) Foreign companies that resort to public savings for the formation or increase of their authorized social capital, or list their shares on the stock exchange, or incur borrowings through the public issuance of debentures, or use mass media or advertising for the placement or negotiation of any type of instrument in the securities market, shall be subject to the legal, accounting, financial, and operational requirements established by the Superintendency of Securities for public subscription anonymous companies.

Section II
On the unenforceability of legal personality

Article 12. The legal personality of the company may be disregarded when it is used in fraud of the law, to violate public order, or with fraud and to the detriment of the rights of partners, shareholders, or third parties. For the purpose of pursuing the unenforceability of legal personality, credible proof of the effective use of the commercial company as a means to achieve the expressed purposes must be provided.

Paragraph I.- The unenforceability of legal personality may be pursued according to the rules of commercial procedure, and may be brought accessorially before the repressive jurisdiction if it is of interest and inherent to the nature of the case.

Paragraph II.- The declaration of unenforceability shall not entail the nullity of the company; it shall produce effects only with respect to the concrete case for which it has been declared.

Paragraph III.- For these purposes, the court seized shall determine to whom or to whom it corresponds, according to law, the assets or specific goods, rights, and obligations of the company.

Paragraph IV.- In no case shall the unenforceability of legal personality affect third parties acting in good faith.

Paragraph V.- The foregoing shall apply without prejudice to the personal responsibilities of the participants in the facts, according to the degree of their intervention and knowledge thereof.

Section III
On the partnership agreement and constitution formalities

Article 13. Commercial companies, with the exception of accidental or partnership companies, shall exist, be formed, and be proven by public or private deed duly registered in the Commercial Registry.

Paragraph I.- (Modified by Law 31-11, dated February 11, 2011) Anonymous companies, simplified anonymous companies, and limited liability companies, regardless of the number of their partners, may be formed by documents under private signature made in duplicate original.

Paragraph II.- Testimonial proof shall not be admitted against or for more than what is contained in the company documents, nor regarding what is alleged to have been said before the granting of the document, at the time of granting it, or after granting it, even if it concerns a sum less than that established by common law provisions.

Article 14. (Modified by Law 31-11, dated February 11, 2011) The partnership agreements or articles of association of any commercial company, whether instrumented in public or private form, must contain:

a) The names, other general details, and legal identity documents of those who execute them, if they are natural persons, or the corporate name, domicile, and Commercial Registry and National Registry of Taxpayers numbers, as well as the general details of their representatives or agents, if it is a legal person; b) The corporate name or trade name; c) The adopted corporate type; d) The planned corporate domicile; e) The object; f) The duration of the company; g) The amount of social capital and how it will be divided, as well as the requirements fulfilled or to be fulfilled regarding it for the constitution of the company, including the proportion that must be subscribed and paid; h) The method of issuing shares, their nominal value; the different categories of shares, if any, with the stipulations of their different rights; the particular conditions of their transfer, as well as restrictive clauses to their free negotiation, in those companies that proceed accordingly; i) Contributions in kind, their descriptions, their valuations, and the indication of the legal or natural persons making them, unless this information is collected in another document in accordance with the specific rules of each corporate type; j) Industrial contributions, in those commercial companies where their admission is appropriate, unless this information is collected in another document in accordance with the specific rules of each corporate type; k) Particular advantages and their beneficiaries, as well as accessory services, if any; l) The composition, functioning, and powers of the company's administration and supervision bodies; as well as the official(s) representing it before third parties; m) The manner in which deliberative bodies will be constituted, discuss, and adopt their resolutions; n) The closing date of the fiscal year; and,

The method of distributing profits and losses, the constitution of legal or discretionary reserves; the causes of dissolution and the liquidation process.

Article 15. (Modified by Law 31-11, dated February 11, 2011) Within the month following the signing of the constitutive act or the celebration of the company assembly and the individual limited liability enterprise, as applicable, the request for registration in the Commercial Registry must be formulated.

Article 16. (Modified by Law 31-11, dated February 11, 2011) Both for the company and for the individual limited liability enterprise, the registration, deposit, and inscription of the constitutive documents thereof shall be carried out at the corresponding Chamber of Commerce and Production to the corporate domicile indicated in the partnership agreement or articles of association and in accordance with the procedure established by the law regulating the Commercial Registry.

Paragraph I.- (Modified by Law 31-11, dated February 11, 2011) All statutory modifications, changes in social capital, merger, spin-off, transformation processes, as well as the dissolution and liquidation of companies, and, in general, all those acts, minutes, deeds, and documents of corporate life whose inscription is required by the Commercial Registry Law, shall also be subject to the formalities of deposit and inscription in the Commercial Registry.

Paragraph II.- (Modified by Law 31-11, dated February 11, 2011) In the case of anonymous companies entering the securities market, acts emanating from the Superintendency of Securities that authorize or approve the content of the documents and the constitutive formalities of said companies must additionally be deposited and inscribed in the Commercial Registry, in accordance with the provisions of this law.

Article 17. (Modified by Law 31-11, dated February 11, 2011) The Commercial Registry may reject the registration of companies or individual limited liability enterprises, or the inscription of their acts that do not comply with the formalities required by this law. However, if any of the stipulations indicated in Article 14 of this law has been omitted in the partnership agreement or articles of association, or if any mention has been expressed incompletely, the Commercial Registry may grant a deadline to the applicant to deposit additional corrective writings signed by the same partners, before and after the corresponding deposit of inscription in the Commercial Registry. Such additional corrective writings may also be deposited at the initiative of the same partners. They shall be understood to be incorporated into the act of constitution of the company. Failure to comply with the deadline granted for the deposit of the additional writing with the Commercial Registry shall cause the rejection of the request.

Paragraph I.- (Modified by Law 31-11, dated February 11, 2011) If the omissions referred to in the preceding article persist after the registration of the company or the individual limited liability enterprise in the Commercial Registry, any person with a legitimate interest may sue before the judge of referments for the regularization of the partnership agreement or articles of association, who may pronounce condemnations in astreinte against the responsible persons.

Paragraph II.- (Modified by Law 31-11, dated February 11, 2011) The judicial action indicated above shall prescribe in two (2) years from the registration of the company, and it shall be established both for the omitted or irregularly fulfilled constitutive formalities and for subsequent statutory modifications. In the latter case, the aforementioned two (2) year prescription shall run from the deposit and inscription of the modifying documents in the Commercial Registry.

Paragraph III.- (Modified by Law 31-11, dated February 11, 2011) The ordinance of the judge of referments intervening may order that the partnership agreement or articles of association or their modifications be rectified or completed in accordance with the rules in force at the time of their drafting or that the omitted or irregularly performed constitutive formalities be made or redone.

Article 18.- (Modified by Law 31-11, dated February 11, 2011) The founders of the company, as well as the administrators or managers, shall be responsible for the damage caused by the omissions or irregularities referred to in the preceding article.

Paragraph.- (Modified by Law 31-11, dated February 11, 2011) The action for responsibility against the aforementioned persons shall prescribe in two (2) years, counted, as the case may be, from the registration of the company or the inscription of the modifying documentation in the Commercial Registry.

Section IV
On partners and their contributions

Article 19.- (Modified by Law 31-11, dated February 11, 2011) Spouses may only integrate among themselves anonymous companies, simplified anonymous companies, and limited liability companies.

Paragraph.- (Modified by Law 31-11, dated February 11, 2011) When one of the spouses acquires by any title the status of partner of the other in companies of types other than those indicated in the preceding paragraph, the company shall be obliged to transform within a period of three (3) months or either of the spouses must cede their share to another partner or to a third party within the same period.

Article 20. The person who lends their name to appear as a partner of a company shall not be deemed as such in front of the true partners, whether or not they have a share in the profits of the same; however, with respect to third parties, they shall be considered with the obligations and responsibilities of a partner, without prejudice to the action that this apparent partner might file against the true partners in order to be indemnified.

Article 21. (Modified by Law 31-11, dated February 11, 2011) Each partner shall be a debtor to the company for what they had promised to contribute. The partner who fails to comply with the contribution under the agreed conditions shall incur default upon the mere expiration of the deadline and shall be obliged to compensate for damages and losses. If no deadline is fixed, the contribution shall become due upon the notice of default made by the persons responsible in the name of the company through notification by a bailiff.

Paragraph I.- (Modified by Law 31-11, dated February 11, 2011) When the contribution is not made in the agreed manner and time, the company may, at its discretion:

a) Exclude the partner who has failed to comply; b) Reduce their contribution to the part or proportion they have actually delivered or are willing to deliver, unless this reduction implies a decrease in social capital below the minimum amounts established by this law for certain types of company; c) Declare the rights of the delinquent partner forfeited, prior to notice of default to execute the obligation, within a period of fifteen (15) days through notification by a bailiff; in this case, the partnership agreement or articles of association may provide for the loss, by full right, of the partially delivered contributions or the sums paid, or d) Sue for forced execution of the obligation to deliver or pay the promised contribution.

Paragraph II.- (Modified by Law 31-11, dated February 11, 2011) In all cases, the partner who has failed to comply must pay the company default interest.

a) They must be specified in their content, duration, modality, remuneration, and sanctions in case of non-compliance; b) They must be clearly differentiated from contributions; c) They cannot be in cash; and, d) They can only be modified with the consent of the obligated parties.

Article 22. Only assets or patrimonial rights susceptible to economic valuation may be the object of contribution. However, in the partnership agreement or in the articles of association, accessory services distinct from capital contributions may be established for all or some of the partners without being able to integrate the capital of the company. If they do not result from the partnership agreement or articles of association, accessory services shall be considered obligations of third parties. The validity of these services shall be subject to the following conditions:

a) They must be specified in their content, duration, modality, remuneration, and sanctions in case of non-compliance; b) They must be clearly differentiated from contributions; c) They cannot be in cash; and,

d) They can only be modified with the consent of the obligated parties.