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  • Jaime Deschamps

Corporations - Introduction III (Variable Capital Regime).

Updated: Apr 15, 2023

"Article 1... Any of the companies referred to in fractions I to V and VII of this article may be established as a variable capital company, in which case the provisions of Chapter VIII of this Law shall apply."

Companies regulated by the General Law of Commercial Companies may be established under a regime called Variable Capital. It should be noted that the Cooperative Society, as referred to in fraction VI, is not regulated by the General Law of Commercial Companies.In practice, most companies are established as variable capital companies (whether they are SA, SAPI or S de RL).

Being a variable capital company means that these companies can decrease and increase their capital with fewer formalities than if they were not.

As we will see, there are certain formalities required for the increase or decrease of capital, such as having to go before a notary to protocolize the act in the case of SA and SAPI at least (it should be noted that in increases, the notary charges a percentage on said increase).

The increases and decreases of capital for practical purposes mean that the company has new investments (which can be made by shareholders or by new investors) or in its case, that part of the investments will be withdrawn, this can happen because a shareholder is leaving the company or because it is financially beneficial to withdraw money through the decrease (this works when the income is not much higher than the company's capital).

At the time, we will deal with these issues in more detail, but initially the variable capital serves to avoid notarial costs, procedures such as the publication of notices and to be able to increase or decrease the capital with the approval of the majority of the votes instead of 75% (which is not always recommended but can always be corrected even if the society is of variable capital)

To be continued...

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