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Differences Between Company Types - International Law Office

International Law Office

Company & Commercial - Nicaragua

Differences Between Company Types

April 11 2005

Nicaraguan commercial legislation recognizes four types of company:

  • general partnerships;

  • limited partnerships;

  • corporations; and

  • joint stock associations.

Among these, the most common are corporations, followed by general partnerships, which usually limit the liability of partners and are therefore considered as limited liability companies. Limited partnerships and joint stock associations are rarely used.

In corporations and limited liability partnerships the liabilities of the partners depend on their contributions. However, corporations are stock capital companies where the identification of the shareholders is generally irrelevant. This differs from limited liability companies, where the identification of the partners is an essential element. Further differences between the types of company relate to their organization and administration, and include the following:

  • Denomination - the names of limited liability companies must include the name of the partners, or at least some of them, and the words 'and company'. It cannot include the name of a person who is not a partner. However, shareholders may decide on the names of corporations.

  • Stock capital - the contributions of partners in a limited liability company are made through capital, according to the company's charter. The partners have the right to a percentage of the company's assets, depending on their contribution. However, each partner has the right to one vote, regardless of the amount contributed. In the case of corporations, the stock capital is divided into shares, which are paid by the shareholders in whatever proportion they agree upon. All shares grant equal rights to the shareholders, except in the case of preferential shares. The number of votes of a shareholder is proportional to the number of shares it holds.

  • Management - in limited liability companies, all partners are in charge of the management of the company, except where one or more managers have been appointed in the company's charter. Although the existence of a board of directors is not necessary, this can be created through the company charter. The administrative organ of a corporation is the board of directors, which must comprise shareholders.

  • Assignment of interests - the shares of corporations are freely transferable, unless the articles of incorporation establish a right of first option in favour of the other shareholders. Assignment is made through endorsement. By contrast, assignment of interests in limited liability companies must be authorized by all partners and is made through public deed.

  • Duration - limited liability companies may be dissolved where one of the partners dies or resigns, or due to another factor which affects the company's characteristic of being a company of persons. In corporations, changes to shareholders are irrelevant and duration can be up to 99 years.

For further information on this topic please contact Rodrigo Taboada Rodriguez at Taboada & Asociados by telephone (+505 2 683 839) or by fax (+505 2 668 088) or by email (rtaboada@taboadayasociados.com). The Taboada & Asociados website can be accessed at www.taboadayasociados.com.

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