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Commerce Code Requirements for General Meetings - International Law Office

International Law Office

Company & Commercial - El Salvador

Commerce Code Requirements for General Meetings

April 24 2006


The Commerce Code requires that all corporations and partnerships hold at least one ordinary general meeting by May 31 of every year. The purpose of this meeting is to inform the shareholders or partners of the financial status of the corporation or company over the preceding tax year,(1) so that they can decide on corrective measures (if necessary) and make the necessary provisions for the following year. The agenda of the general meeting must include:

  • the election of a new administration or dismissal of some of the members of the ongoing administration, if necessary;

  • the approval or rejection of the administrators' annual report, balance sheet and profit and loss statements;

  • an analysis of the external financial auditor's report;

  • the appointment of an external financial auditor for the following tax year and the approval of the auditor's annual fees;

  • a resolution on the distribution of the previous year's profits or losses; and

  • the appointment of a fiscal auditor if, during the previous tax year:

    • the company's capital exceeded $1,142,857;

    • the company's income exceeded $571,428;

    • the company became the surviving entity after a merger; or

    • the company began an ongoing process of liquidation.

The appointment of a fiscal auditor and the resolution on the profits or losses are particulary important. The appointment of a fiscal auditor is mandatory and must be notified to the Ministry of the Treasury by May 31 at the latest; failure to fulfil this obligation carries a financial penalty equal to 0.5% of the company's equity, but no less than $633. The profit and loss resolution is significant because no dividends may be paid until the meeting approves the respective profits.

The quorum for the meeting (at first call) is over 50% of the voting shares; resolutions must be approved by a majority of those attending.


For further information on this topic please contact Lilian Zelaya at Arias & Muñoz by telephone (+503 2257 0900) or by fax (+503 2257 0901) or by email (lzelaya@ariaslaw.com).


Endnotes

(1) Salvadoran law requires that tax years run from January 1 to December 31 without exception.



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