Deadline Extension for the Transformation and Adecuation of Dominican Companies

Law 73-10 regarding the deadline extension for Dominican company transformations and adecuations has recently been approved. This law was approved in reference to Law No.479-08 on Companies and Individual Enterprises with Limited Liability in the Dominican Republic, promulgated on December 11, 2008 announcing the new regulations and requirements for newly incorporated Dominican companies and the adecuation of old ones. This law substitutes the 20th century regulation that was in place up until 2008 which had become outdated and did not correspond to the reality of current times and how commercial activities were managed in the Dominican Republic. Among the constraints of such law were: a) limited variety of companies to choose from, b) the minimum requirement of seven shareholders for all companies was an inconvenient for foreigners who were interested in doing business in our country, and c) the lack of control of companies that declared a determined amount as their authorized capital, however, in reality did not own such amount.

 

Law 479-08 amends these gaps and provides new types of companies catered to all needs, which will vary depending on the use the same will be given or based on its characteristics regarding partnership matters, confidentiality, etc. The two most important concepts in this law are: adecuation and transformation. Adecuating a company means to maintain the same corporate vehicle, however, making minor changes as to the name, social capital, stock distribution, etc. based on the new law requirements. Apart from these minor changes the only significant change in this process is the role of the Commissioner of Accounts who now serves as a certified public accountant who is now charging elevated fees for this service when in the past legislation the role had less importance.

 

A transformation, on the other hand, consists in changing to a different corporate vehicle, for example changing from an LLP to a Public or Privately Owned Share Company, without losing its rights and obligations. In the case of transformations, the inconvenience has been that this change requires the company to have its total assets equal or be greater than the social capital of the company. We know that in most cases the majority of the existing companies have very few assets or the declared social capital of the company is not real, both situations which have created uncertainty.

 

The deadline to either adecuate or transform all Dominican companies as established by Law 479-08 was of 180 days, until June 19, 2009. However, when this deadline was announced we immediately questioned ourselves, will this be enough time to allow all commercial companies in the country to adapt to the new law? This question resulted in the drafting of a proposal addressed to the Dominican Senate to amend Articles 515, 521 and 523 of the Law 479-08 in order to extend the initial deadline of 180 days to a new deadline of 24 months, until December 2010. With the approval of Law 73-10 of June 9, 2010 the deadline extension was granted.

 

This extension has relieved company owners that have not been able to adecuate or transform theirs in order to make the necessary adjustments so they can operate smoothly without having to pay any late fees or taxes. Now, will our society comply with this new deadline? Or will there be another extension for 2011? These questions can only be answered as time passes. What is certain is the duty of every citizen, public institution and

government to seek and facilitate the processes to ensure this deadline is final and try to move forward in the modernization and development of Dominican corporate legislation.