do business in the Dominican Republic - Pellerano & Herrera

Pellerano & HerreraAttorneys at lawCOMPARATIVE ADVANTAGES OF CORPORATIONSLike all other forms of business association, corporations have a legal personalitydifferent from that of its members. However, unlike other societies, its membersenjoy a limited liability, which is almost absolute in the Dominican Republic.Unlike other legal systems, which allow for the possibility of piercing the corporateveil in certain cases,Dominican law only allows reaching the shareholders inthe event of fraud or misrepresentation, and even in this case it might be difficultto make shareholders personally liable since evidence rules for the proof of fraudare very strict. No distinction is made between contract and tort creditors, andno particular treatment is given to dealings between parents and subsidiaries.Under-capitalization is not penalized, there being no clear capitalization rules tobegin with.In addition, other forms of business association (including non profit organizations)receive the same tax treatment than corporations.This means that tax cannotbe avoided by choosing a particular business structure,since any type of association,even those which are not granted legal personality, will be treated as aseparate entity for tax purposes.Furthermore, incorporation costs are minimal, there are no annual capitalizationduties and capital rules are very flexible.In view of all this, it can be concluded that business associations other than corporationsprovide no real advantages that may offset the disadvantage of notenjoying limited liability.87INCORPORATION PROCESSThe Commercial Code requires a minimum number of seven shareholders for theincorporation of a company, but the additional shareholders who participate tofulfill the legal requirement may have a symbolic participation of one share in thecompany's capital.The founding members sign the articles of incorporation (Estatutos Sociales),prepare the list of shareholders (Lista de Suscriptores), and declare before aPublic Notary that the shares have been purchased and paid by the shareholders.After the General Incorporation Meeting has approved all these documents, thecompany is formally incorporated.When all or part of the shares are paid through in-kind contributions two GeneralIncorporation Meetings are required. In the first meeting an officer (Comisario) isappointed to value the contributed assets.This officer then makes a report to thesecond meeting,to be held at least five days after the report is made available to theshareholders, which approves the report and declares the company incorporated.Finally, it should be noted that Law 03-02 on Commercial Registry abrogated theold registration and publicity formalities,such as filing copies of all incorporationdocuments with the courts and publishing a notice of the incorporation in anational newspaper. With this statute, incorporation documents must be filedwith the Chamber of Commerce and Production of the legal seat of the compa-