SETTING UP YOUR BUSINESS IN NICARAGUA
Index
INCORPORATING A COMPANY IN NICARAGUA
The Commercial Code in Nicaragua defines the existence of 4 types of commercial companies under which business can be done:
- Company in collective name (Limited Liability Company)
- Corporations
- Limited partnership
- Limited partnership by shares
The last two have fallen out of use over time. Corporations are the most common business entities in operation. Limited Companies, which are more oriented to family businesses, are used less frequently.
THE BRANCHES of foreign companies that are incorporated and domiciled in Nicaragua are the other mercantile figures frequently used by foreign companies to do business in Nicaragua.
There are no one-person companies in Nicaragua. A minimum of two partners are required to form and incorporate a company.
ADVANTAGES AND DISADVANTAGES BETWEEN CORPORATIONS AND LIMITED COMPANIES
- From a tax point of view, both have the same treatment.
- For its constitution and incorporation, both must follow the same procedure.
- The same administrative regulations apply to both.
The operation and administration of a corporation is more flexible for the commercial operation than that of a Limited Liability Company, for this reason it is the most used commercial figure. Limited Liability Companies are more used by family or small and medium-scale businesses.
IN LIMITED COMPANIES
- The share capital is divided and represented by registered shares. Bearer shares are prohibited.
- The name or company name can be anything linked to its commercial activity or in the manner that commercially and image is convenient for the partners. The use of fantasy names is allowed.
- The shares that represent the social capital are registered securities that allow their easy mobility through simple endorsement, for the purposes of sale, assignment, transfer, circulation, negotiation, etc.
- Given the ease of circulation, they can serve as a PLEDGE GUARANTEE before a credit institution with a simple dynamism and without greater complexity, formalisms, and legal restrictions except what has been agreed in the statutes.
- They are capital companies, regardless of the person. When a partner sells its shares and withdraws, it is no longer responsible for the acts, obligations and responsibilities that arise after he endorses and withdraws.
The other partners will be liable. - Most of the decisions are made through a session of the Assembly of partners or of the Board of Directors, which for their validity are recorded in the Book of Minutes duly signed by the directors or partners, which simplifies the dynamism of business with respect to the decisions that need to be made. It does not require that the minutes be registered in the public registry except those referring to the election of the board of directors and changes of partners for the purposes of updating information and for the registration of final beneficiary. This is so because the public limited company is responsible for its obligations and the capital stock is responsible for these obligations. The partners do not respond with their personal assets, they respond up to the percentage of their participation in the social capital.
- The assignment and sale of shares is done through a simple endorsement in the certificate and delivery of the document to the buyer, and its entry in the share registry book.
WHILE LIMITED LIABILITY COMPANIES
- The social capital is represented in personal quotas of participation and interest. Share certificates are not issued therefore endorsements in transfers do not operate. When an assignment of participation is made, it must be done in a public deed and registered in the public registry.
- The name or company name must necessarily bear the surname or name of one or more partners; or the managing partners. The trade name must always be followed by the name "y Co. Ltda"
- As there are no shares, but "interest or participation quotas" they cannot be freely sold or assigned to third parties other than the founding partners. Their free movement is restricted. Even if a partner assigns his share of interest, he continues to be jointly and severally liable on behalf of the assignor and against third parties.
- Given the nature of limitation in circulation, its use to offer participation quotas as collateral is restricted, since limited companies are Intuite Personae "partnerships"; the assignee is not released from liability towards the assignors. or creditors.
- They are interest companies and in attention to the person more than the capital. When a partner withdraws, the partner who sells or assigns his share retains its status as a partner and will always respond to third parties for any responsibility or obligation incurred by the Company, even if it is no longer part of it due to having withdrawn.
- The decisions of the partners must be made through agreements that are signed in a public deed and must be registered in most cases in the Public Registry because Limited companies are companies that respond to the managing partners in addition to the legal person. For this reason, the public faith of the registry is of transcendental importance. Those who contract with a Limited company (users, consumers, creditors, clients, etc.) must know through the Public Registry the life, organization, and form of regulation of the limited company through the Public Registry. Partners are liable with their personal property / personal assets up to the amount of their contributions to the partnership.
- The Assignment and sale of contributions is made in a public deed that must be unanimously approved. In any case, the outgoing partner remains responsible for the acts carried out by the Company and its partners, even if outside of it.
BASIC ASPECTS: APPLICABLE TO CONSTITUTION AND INCORPORATION OF A CORPORATION IN NICARAGUA.
This process described here also applies to Limited Companies.
The Company is incorporated with the granting and signing of a public deed authorized by a Public Notary. A minimum of two shareholders are required.
Shareholders
The minimum number of partners to establish a public limited company is 2 people, who can be both natural persons and legal entities. The partners, natural or legal persons, may be foreigners who do not reside in the country. It is not a mandatory requirement to incorporate one or more Nicaraguan partner(s). For the preparation of the Public Deed of Constitution and Statutes, the partners must present the documentation and information on the relevant aspects of the company: corporate name, address, share capital, shareholding composition, corporate purpose, administrative bodies, their powers and operation, appointment and integration of the board of directors, among others.
Board of Directors
In Nicaragua, to be a director it is mandatory to be a shareholder. A minimum of two directors with the positions of president and secretary are required. There may be others that the general meeting approves. The directors can be natural persons or legal persons. The directors may be non-resident aliens. The company must designate a Legal Representative, who can be Nicaraguan or foreign. If a foreigner, it is mandatory that he is a legal resident in the country since he is the one who is legally responsible for the company. The exact address of the place where you will carry out your business operations must be indicated, which must necessarily be described in the deed of incorporation or in the merchant application registration. Documentation from abroad must be sent duly apostilled and with its translation into Spanish - in case it was originally issued in a different language - from the foreign company in the case of branches; and in the case of legal entity partners, to simultaneously complete the final beneficiary registration as a requirement to register the new company and/or the branch.
Procedure for incorporation:
Once the company is constituted by Public Deed, it must be registered in the Public Mercantile Registry of the department of its registered office. In Nicaragua there are 17 Public Registries of Real Estate and Commercial Property, with offices by department of the country. Once the deed of incorporation and bylaws have been registered, the company is registered as a MERCHANT and the company books (Minutes, Share Registration Book and accounting books) are registered. The appointment of the Legal Representative must also be registered before the Mercantile Registry through a general power of administration that is granted immediately after registering the company.
Estimated time
In Nicaragua there is no centralized business registry. Each department has its own commercial registry and the procedure must be carried out in the one that corresponds to the domicile of the company, according to the city/Municipality and Department to which it corresponds.
There is also no possibility of carrying out this Registration through an online platform, it must be in person.
For this reason, there is no standard time to complete the registration and incorporation process, it varies according to the agility and efficiency of each Mercantile Registry: While in the city of Managua, companies are registered within a period of no more than one week, in Departments such as León can take up to a month to complete the process. It is a term that really varies according to the registry that is used.
CONSTITUTION OF BRANCHES
According to Nicaraguan Legislation, to register a Branch of a Foreign Company, Resolution of the General Meeting of Shareholders of the main company (Parent Company) is legally required, through which its shareholders make the decision and agree to establish a branch in Nicaragua.
In addition to the Minutes with the Resolution, the parent company must provide the information of its shareholders; the corporate name of the branch, the capital stock with which it will operate, the commercial activity and line of business that it will carry out in Nicaragua; the tax domicile, the Legal Representative who will assume responsibility in Nicaragua, who must be a Nicaraguan citizen or a foreigner residing in the country.
Provide the documents from abroad of the parent company that shows its partners, directors, legal representative, incorporation data, address abroad. These documents must come in Spanish or their translation into Spanish and duly apostilled. It is required to be a document whose date of authentication does not exceed more than SIXTY days..
The branch is constituted by means of a public deed prepared by a Nicaraguan notary, in which the Minutes of the resolution of the parent company are inserted and presented before the Public Mercantile Registry of the Department of the selected registered office, for its due registration and registration.
From then on, the process and requirements to be met are the same as those described for the incorporation of other forms of commercial companies.
BASIC COMMON RECORDS AND PERMITS FOR THE COMPANY TO START OPERATIONS
Once the company is constituted, the next stage is obtaining operating permits. These records, registrations, permits, or licenses are the following:
- Registration and obtaining tax ID, Single Taxpayer Registration Card (RUC) before the General Directorate of Revenue (DGI).
- The municipal registration, in the municipality or municipalities in which the company will develop operations.
- Registration with the Nicaraguan Social Security Institute (INSS).
For these procedures it is a requirement to have a tax domicile and a Legal Representative. Supports and documents must be attached to show this information.
Without obtaining these records, the company cannot start commercial operations.
Estimated time
The estimated time to complete this process ranges from two to five weeks.
RECORDS, REGISTRATION, PERMITS OR LICENSES FOR ACTIVITIES IN REGULATED SECTORS
In addition to the common registries for all commercial companies, if the company's line of business corresponds to an activity in a regulated sector, the company must also obtain the permits from the Regulatory Body of the sector, prior to starting its commercial operations.
The most common regulated sectors and their regulatory institutions are:
- Ministry of Health: Everything related to the import, export or commercialization of pharmaceutical products, food, care products and household hygiene. It is required to obtain Sanitary Records, establishment license.
- Institute of Telecommunications and Postal Services (TELCOR): for licenses, permits and registrations, for the operation, provision, and commercialization of telecommunications services.
- Ministry of Energy and Mines:permits and licenses for power generation.
- Ministry of Energy and Mines: concessions and permits for the exploitation, commercialization and export of mines and quarries. And for other activities that are regulated by this ministry.
- Ministry of Transport and Infrastructure (MTI): logistics operating companies, transport companies of any kind (naval, air, land); construction companies.
- Superintendency of Banks (SIBOIF): All activities related to financial operations.
THE REGISTRY OF THE FINAL BENEFICIARY
In compliance with international agreements, for the prevention and against money laundering and financing of terrorism, Nicaragua has adopted legislation by means of which commercial companies, existing or to be established, must report to the "Registry of the Final Beneficiary" all the chain of shareholders, legal persons, upwards, until the last natural person shareholder is identified in the chain, who in the end has control of the local company.
Foreign companies that are part of the chain of ownership must present information on: Constitutive Act and Bylaws, Certificate of Registration in the Companies Registry of their country of origin; Certificate of shareholders of the partners in their country of origin.
Public companies listed on the stock exchange must declare: the issuer code of the commercial company; the domicile of the company, the country of incorporation or origin; name, jurisdiction, and identification code of the stock exchange where the company is registered.
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