BUSINESSORGANIZATIONThe <strong>in</strong>vestor <strong>in</strong>terested to participate <strong>in</strong> <strong>the</strong> Dom<strong>in</strong>ican market will wish toorganize its <strong>bus<strong>in</strong>ess</strong> or channel its <strong>in</strong>vestment <strong>in</strong> a way that adapts to <strong>the</strong> natureof his <strong>bus<strong>in</strong>ess</strong> activities or <strong>the</strong> <strong>in</strong>ternational strategy chosen to carry <strong>the</strong>m out.Dom<strong>in</strong>ican laws allow him to choose freely among <strong>the</strong> different forms of <strong>bus<strong>in</strong>ess</strong>organization, <strong>the</strong>re be<strong>in</strong>g no restrictions <strong>in</strong> this regard.1THECORPORATEVEHICLEThe most common form of <strong>bus<strong>in</strong>ess</strong> association <strong>in</strong> <strong>the</strong> country is <strong>the</strong> LimitedLiability Company or corporation (compañia por acciones), but <strong>the</strong> CommercialCode also provides for <strong>the</strong> creation of <strong>the</strong> follow<strong>in</strong>g types of associations:Civil partnership (sociedad civil),which is used for pursu<strong>in</strong>g non-commercialactivities.Commercial partnership (sociedad en nombre colectivo), whose members<strong>do</strong> not enjoy limited liability, even after transferr<strong>in</strong>g <strong>the</strong>ir <strong>in</strong>terests for <strong>the</strong>debts aris<strong>in</strong>g before <strong>the</strong>ir departure from <strong>the</strong> association.Limited commercial partnership (sociedad en comandita), <strong>in</strong> which partnerswho <strong>do</strong> not participate <strong>in</strong> <strong>the</strong> daily management of <strong>the</strong> association enjoylimited liability.Limited stock partnership (sociedad en comandita por acciones), which is alimited commercial partnership whose capital is divided <strong>in</strong>to shares.Company of participation (sociedad en participacion), which allows itsmembers to act as a s<strong>in</strong>gle body but has no legal existence as regards to thirdparties.86
<strong>Pellerano</strong> & <strong>Herrera</strong>Attorneys at lawCOMPARATIVE ADVANTAGES OF CORPORATIONSLike all o<strong>the</strong>r forms of <strong>bus<strong>in</strong>ess</strong> association, corporations have a legal personalitydifferent from that of its members. However, unlike o<strong>the</strong>r societies, its membersenjoy a limited liability, which is almost absolute <strong>in</strong> <strong>the</strong> Dom<strong>in</strong>ican <strong>Republic</strong>.Unlike o<strong>the</strong>r legal systems, which allow for <strong>the</strong> possibility of pierc<strong>in</strong>g <strong>the</strong> corporateveil <strong>in</strong> certa<strong>in</strong> cases,Dom<strong>in</strong>ican law only allows reach<strong>in</strong>g <strong>the</strong> shareholders <strong>in</strong><strong>the</strong> event of fraud or misrepresentation, and even <strong>in</strong> this case it might be difficultto make shareholders personally liable s<strong>in</strong>ce evidence rules for <strong>the</strong> proof of fraudare very strict. No dist<strong>in</strong>ction is made between contract and tort creditors, andno particular treatment is given to deal<strong>in</strong>gs between parents and subsidiaries.Under-capitalization is not penalized, <strong>the</strong>re be<strong>in</strong>g no clear capitalization rules tobeg<strong>in</strong> with.In addition, o<strong>the</strong>r forms of <strong>bus<strong>in</strong>ess</strong> association (<strong>in</strong>clud<strong>in</strong>g non profit organizations)receive <strong>the</strong> same tax treatment than corporations.This means that tax cannotbe avoided by choos<strong>in</strong>g a particular <strong>bus<strong>in</strong>ess</strong> structure,s<strong>in</strong>ce any type of association,even those which are not granted legal personality, will be treated as aseparate entity for tax purposes.Fur<strong>the</strong>rmore, <strong>in</strong>corporation costs are m<strong>in</strong>imal, <strong>the</strong>re are no annual capitalizationduties and capital rules are very flexible.In view of all this, it can be concluded that <strong>bus<strong>in</strong>ess</strong> associations o<strong>the</strong>r than corporationsprovide no real advantages that may offset <strong>the</strong> disadvantage of notenjoy<strong>in</strong>g limited liability.87INCORPORATION PROCESSThe Commercial Code requires a m<strong>in</strong>imum number of seven shareholders for <strong>the</strong><strong>in</strong>corporation of a company, but <strong>the</strong> additional shareholders who participate tofulfill <strong>the</strong> legal requirement may have a symbolic participation of one share <strong>in</strong> <strong>the</strong>company's capital.The found<strong>in</strong>g members sign <strong>the</strong> articles of <strong>in</strong>corporation (Estatutos Sociales),prepare <strong>the</strong> list of shareholders (Lista de Suscriptores), and declare before aPublic Notary that <strong>the</strong> shares have been purchased and paid by <strong>the</strong> shareholders.After <strong>the</strong> General Incorporation Meet<strong>in</strong>g has approved all <strong>the</strong>se <strong>do</strong>cuments, <strong>the</strong>company is formally <strong>in</strong>corporated.When all or part of <strong>the</strong> shares are paid through <strong>in</strong>-k<strong>in</strong>d contributions two GeneralIncorporation Meet<strong>in</strong>gs are required. In <strong>the</strong> first meet<strong>in</strong>g an officer (Comisario) isappo<strong>in</strong>ted to value <strong>the</strong> contributed assets.This officer <strong>the</strong>n makes a report to <strong>the</strong>second meet<strong>in</strong>g,to be held at least five days after <strong>the</strong> report is made available to <strong>the</strong>shareholders, which approves <strong>the</strong> report and declares <strong>the</strong> company <strong>in</strong>corporated.F<strong>in</strong>ally, it should be noted that Law 03-02 on Commercial Registry abrogated <strong>the</strong>old registration and publicity formalities,such as fil<strong>in</strong>g copies of all <strong>in</strong>corporation<strong>do</strong>cuments with <strong>the</strong> courts and publish<strong>in</strong>g a notice of <strong>the</strong> <strong>in</strong>corporation <strong>in</strong> anational newspaper. With this statute, <strong>in</strong>corporation <strong>do</strong>cuments must be filedwith <strong>the</strong> Chamber of Commerce and Production of <strong>the</strong> legal seat of <strong>the</strong> compa-
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