Archivos de la categoría: Berke Report (en)

This new year arrived with it a new type of company, through the promulgation of Law No. 6480/2020: the Simplified Joint Stock Companies or “EAS” (according to its initials in Spanish). The novelty of EAS lay on the fact that they can be incorporated by one or more natural or legal persons. That is, ownership of the company by a single person is admitted. The only proviso in the law in this regard is that a single-person EAS cannot be a shareholder of another single-person EAS.

EAS are created through a unilateral contract or act stated in a public or private instrument with certification of signatures. The interesting facility presented for the incorporation process is the non-mandatory recordal of the company in the Public Registry Office, as documents must be entered only and exclusively through the SUACE, which will then refer the procedure to the Ministry of Finance.

Once the documents are registered before the corresponding division of the Ministry of Finance appointed for such purpose, the EAS acquires a legal personality different from that of its members. Until acquiring legal personality, each member of the EAS is jointly and unlimitedly responsible for the obligations taken on behalf of the company. After the personality is acquired, the partners are liable up to the limit of their contributions.

The Law does not require a minimum capital for the incorporation of EAS, divided in shares. Subscription and payment of the capital can be done in such conditions, proportions and terms as agreed by the members, although the payment period must not exceed 2 years after subscribing the capital. To this date, corporations (“SA”) do not have this obligation.

The EAS’ articles of incorporation are important since they define their organization. The governing body is the meeting of the members, to take decisions, regardless of whether it is formed by a single member.

Another peculiarity of the EAS is that the figure of a corporate trustee is not mandatory, meetings of members can be held without calls published in newspapers and it is not necessary to do it in advance. However, EAS must have corporate books similar to those used by SA.

It is important to mention that, although the Law whereby this type of company is created is currently in force; the Ministry of Finance must designate the agency in which the EAS will be registered, so such procedure is still pending in order to make their incorporation effective. Furthermore, these companies bring other innovations and particularities which will be described in more detail in the next newsletters.

Finally, with regard to the tax regime of the EAS, they will be under the same regime as any other person who is engaged in the same activity, without any distinction. However, the single-person EAS owned by a natural person could have a competitive advantage compared to other companies, losing fiscal neutrality, since they could pay the IRE by the SIMPLE Regime, as long as they invoice up to G. 2,000,000,000 per year. In that way, the single-person EAS owned by a natural person will enjoy tax benefits agreed to single-person companies but obtaining the additional benefit of limiting the liability to the value of the contributed capital.

Paraguay renews the confidence of international investors by successfully issuing and placing USD 450 million in 30-year sovereign bonds. The rate was 4.45% and there was an oversubscription of 8 times, demonstrating a higher performance than other countries in the region. In the issuance of the year 2018, the interest rate was 5.6%, which demonstrates an improvement in the positioning of Paraguay on its way to the degree of investment. Part of these funds will be used for infrastructure projects of the central government. On the other hand, in 2019 there were 2 international project bond issues (first in the history of Paraguay) totaling more than USD 1 billion and whose performance also demonstrated the high degree of interest in international markets for investing in Paraguay (bonds 144A / Reg S at 15 years, with three times oversubscription and rates of approximately 100 bps above the sovereign’s curve). BKM was the advisor under the exclusive local law of the sponsors in both international issues (Bioceanic and Routes 2 and 7). For more information on the issuance of sovereign bonds see below 2 recent news related to the subject:

The keys of Paraguay for the successful placement of sovereign bonds
Our country placed sovereign bonds abroad for the eighth time in its history, this time, for 450 million dollars at 30 years. The slowdown and recession of 2019 were not impediment, but there were five keys to making the operation a success.

https://bit.ly/2uYBo3W

High demand for investors allowed Paraguay to obtain its best interest rate for bonds
The publication notes that Paraguay took advantage of the low bond issuance of Latin American countries and took advantage of the demand of investors, added to the country’s upward trajectory in the region.

https://bit.ly/2NBxZyj

On December 9, our President signed Decree No. 2992/2019, regulating Law No. 2051/03 on Public Procurement, which aims to establish a unified system for public procurement procedures.

Although it does not introduce substantial modifications to the current current regime, it harmonizes 10 regulations that were dispersed in order to unify the existing regulations making it more practical and easy to apply, in addition to incorporating new regulations that improve the transparency of the system.

Three contracting modalities are incorporated i) Framework Agreement, ii) National Agreement and iii) Joint Purchases.

The first one is aimed at the selection of suppliers of goods, works, services and consultancies that, once selected, the products are included in an electronic catalog that will be published in the Public Information and Contracting System so that the Organizations, Entities and Municipalities can acquire them directly.

The National Agreement modality consists of an open call addressed to national suppliers of the goods or services to be acquired. Its purpose is that entities and organizations have several suppliers for the same benefit since the demand requires to be served by a large number of suppliers.

 The third modality of Joint Purchases is aimed at accumulating the purchase of two or more agencies, entities or municipalities when they require the contracting of the same good, work or service in order to obtain the benefits that common purchases represent.

Regarding the bidding procedures, the obligation to recognize the preference margins for local companies in international procedures is incorporated since, if not indicated in the bidding documents, it is understood that the minimum percentage of 1% is applied.

The obligation for the Convocant to proceed within 5 calendar days of having resolved the award to publish a copy of the evaluation report and the administrative awarding act is established. Likewise, the power of the bidder to request an informative hearing is established so that the Convocant explains to him the grounds that motivate his decision. These are new additions that make the improvement of transparency in the processes.

Among the exceptions to the tender, the assumption of “Termination Contract” is included in the case of breaches by the Contractor, providing for the possibility of awarding the balance pending execution to the next adjudicable offer.

In the event of default in payment by the Contracting Party within a period greater than 60 days, the Contractor has the right to request the suspension of the execution of the contract for reasons attributable to the Contracting Party.

For the filing of the protests against the specifications, two new requirements are added, in which the challenger must prove (i) that the commercial activity of his company corresponds to the item called and (ii) that he has previously consulted with the Convocante, the provision of the contesting document. Likewise, a more detailed procedure is regulated for the substantiation of protests.

Regarding the regime of the remedies for reconsideration, its interposition is extended against the decisions that resolve the agreements, maintaining its non-suspensive effect as a general principle.

Finally, it incorporates the regimes of the “System of Information of Suppliers of the State (SIPE)”, the “System of registration of payment to suppliers”, the “Procedure for the application of the Sanctions”, “Procedure for the Application of Sanctions” and “ Mechanisms for Dispute and Dispute Settlement ”. These regimes already existed in other regulations, and from now on they are incorporated into the same legal body, incorporating minimal modifications or aggregates.

The new regulatory decree will enter into force as of January 1, 2020 and the calls that are being processed, as well as the execution and execution of awarded contracts in progress will be governed by the legislation in force at the time of publication of the call to contract .

For more information contact Martín Carlevaro – martin.carlevaro@berke.com.py or Sofía Suárez sofia.suarez@berke.com.py.

The Trademark Office of the National Direction of Intellectual Property (DINAPI) issued a communication and publication in local newspapers stating that it will no longer be possible to use certain terms that are Denomination of Origin (DO), pursuant to the Agreement of Strategic Association MERCOSUR-European Union.

Some of the DO have been deemed generic, so it is possible to continue to use them, provided that the user is registered as a “Prior User”, which means that the term should have been used before in terms and conditions specified in the Communication, namely:

1. Parmesano: having used the term prior to November 2017 in Argentina, Paraguay or Uruguay.

2. Parmesao: having used the term prior to November 2017 in Brazil.

3. Reggianito: having used the term continously for at least 5 years prior to November 2017 in Paraguay or Uruguay.

4. Reggianito: having used the term prior to November 2017 in Argentina

5. Fontina: having used the term continously for at least 5 years prior to November 2017 in Argentina, Brazil, Paraguay or Uruguay.

6. Gruyere/Gruyere: having used the term continously for at least 5 years prior to November 2017 in Argentina, Brazil, Paraguay or Uruguay.

7. Gruyerito/Gruyer: having used the term continously for at least 5 years prior to November 2017 in Uruguay.

8. Queso Manchego (Manchego Cheese) (maede with cow milk): having used the term continously for at least 5 years prior to November 2017 in Uruguay.

9. Grappameil/Grapamiel: having used the term prior to November 2017 in Uruguay.

10. Grana: having used the term continously for at least 5 years prior to November 2017 in Brazil.

11. Gorgonzola: having used the term prior to November 2017 in Brazil.

12. Steinhager: having used the term prior to November 2017 in Brazil.

13. Ginebra: having used the term continously for at least 5 years prior to November 2017 in Argentina.

14. Genebra: having used the term continously for at least 5 years prior to November 2017 in Brazil.

Please feel free to contact us in case these DO affect your trademarks and are interested in being added to the list of Prior Users of the Denominations of Origin to continue using them.

Kindly bear in mind that this declaration must be prepared and filed before Friday July 3, 2020.

Please contact us at law@berke.com.py for any clarification

Our compliments to the Executive Power for the issuance of Decree No. 3708 on June 15, 2020, whereby the Bill that modified a number of articles of Law 5033/2013, which establishes the mandatory requirement for public officials to submit sworn statements. The Decree rejected said Bill that, among other provisions, attempted to decriminalize the submission of false and incomplete sworn statements by public officials, based on principles of transparency, publicity, and fight against corruption.

Therefore, Law No. 6355/2019, which regulates said constitutional article, remains in force. Within the framework of said law, we have obtained precautionary measures for several private sector clients to suspend the effects of the referred law, regarding submission of sworn statements.

Law No. 6.542/2020 was recently enacted to regulate Factoring, Exchange Invoice and Electronic System of Guaranteed Operations (SEOG). Said Law will be effective on December 17, 2020. Regulation and definition of certain topics by the Central Bank of Paraguay and the Ministry of Finance are pending, as identified below.

This newsletter addresses each of the topics that form the purpose of the law, namely: (1) factoring; (2) exchange invoice and (3) SEOG.

1. Factoring

• What is Factoring?

Law defines factoring as a legal transaction in which a person (the assignor) transfers totally or partially, for sale or administration, to a third party (factor or assignee), the receivables arising from commercial activities or provision of services in exchange of a valuable consideration. This valuable consideration may be, for instance, a proportional discount on the sums advanced by the factor, a commission or a percentage calculated on the amount of the assigned receivables.

This newsletter addresses each of the topics that form the purpose of the law, namely: (1) factoring; (2) exchange invoice and (3) SEOG.

• Operations

In a factoring contract, the factor may:

a) Grant funds in advance on account of the receivables, object of the assignment, to the assignor.

b) Be assigned with a credit supported by an obligation to pay certain amount within a specified period, with or without discount.

c) Manage a portfolio of receivables.

d) Send a notice to the debtor of the receivables, object of the contract, to inform about the assignment or discount of the receivables.

e) Collect the assigned receivables, in his own name, or in the name of the assignor.

f) Protect or manage the protection of the assignor against default of the debtor.

g) Carry out operations with the receivables, object of the factoring contract.

h) Provide the assignor with services additional to the provision of liquid resources, in exchange for a global valuable consideration or to be agreed for each additional service. These services may consist of commercial research and information, accounting services, market research, comprehensive advice and others of a similar nature.

2. Exchange Invoice

• Concept

Law introduces the exchange invoice as a title payable to order. This title will be used for selling products or services for a specified term (under credit-sales modality) which may later be the subject of a factoring operation.

The interesting and innovative part is the fact that Law delegates the regulation of electronic exchange invoices as a credit title to the Ministry of Finance, which will further facilitate business flow.

• Elements or Requirements

Exchange invoice must meet the following:

a) The name «exchange invoice» must be inserted in the heading text

b) Place and date of issuance.

c) Due date of the payment obligation expressed as a fixed day.

d) Description of the charges.

e) Amount due, expressed in numbers and letters, currency and breakdown into gross sales or services amount, applicable VAT and clearly indicating the total net amount payable.

f) Name or company name, and Taxpayer ID (RUC) of Identity Card Number of the issuer.

g) Name or company name, and Taxpayer ID (RUC) of Identity Card Number of the debtor or person in whose name it is issued

h) Debtor’s domicile and place of payment.

The regulatory decree may establish other additional requirements to those mentioned above.

• Issuance, copy and acceptance

In order to get the acceptance of the debtor, the issuer of an exchange invoice must present the original invoice. Acceptance must appear on the invoice by means of the word «I accept» and the signature of the debtor, if a natural person, or its representative, if a legal person.

Once the exchange invoice has been accepted by the debtor, this must return it to the issuer and keep a copy.

In case the issuer delivers the exchange invoice to the debtor and this does not express the acceptance or rejection in the following 10 days, then the invoice will be considered as accepted and the issuer may, at the expiration date stated therein, bring enforcement proceedings against the debtor. In such case, the receipt of the invoice signed by the debtor will be considered an enforceable document.

• Endorsement

Once the exchange invoice has been accepted, the original invoice may be assigned by means of an endorsement to the order, with express identification of the endorsee, clarification of signature, ID number, if a natural person, or RUC, if a legal person.

The Ministry of Finance must define and regulate the form of registration and endorsement of electronic invoices.

• Enforceability

In order to make an exchange invoice enforceable, debtor’s signature must be recognized before courts or certified by a notary public

3. SEOG

• Creation

Law creates the SEOG to operate as an electronic database in which forms will be registered in order to report on ordinary credit assignments not contained in receivables and made under a factoring contract.

It would work as a public registry for declarative rather than representative purposes

• SEOG Administrator

The Central Bank of Paraguay will oversee the administration of the SEOG and the organization of the database contained by the same.

To this end, the Central Bank of Paraguay must approve a regulation with all necessary provisions for the effective operation of the SEOG

4. Conclusion

This law arrives on such a very suitable moment in which many companies, especially MSMEs, are seriously affected in their finances by the health crisis caused by the COVID-19 pandemic. Its mission is to facilitate liquidity, boost the economy and contribute to financial inclusion.

For more information, do not hesitate to contact:

Manuel Arias: manuel.arias@berke.com.py

Federico Valinotti: federico.valinotti@berke.com.py

Paola Sapienza: paola.sapienza@berke.com.py

[Public-Private Association] 🎥 Our partner Martín Carlevaro, in charge from the infrastructure and PPP practice, is interviewed by Juan Pablo Fernández of 5días TV regarding the current situation of PPPs and their impact on public accounts

Through notice dated September 7, 2021, the Directorate General of Legal Persons and Structures and Final Beneficiaries (DGPEJBF) has announced that the first bimonthly communication, which listed the companies that are in good standing according to Decree No. 5895/2017, is set aside in view of Decree No. 5871/2021. This last Decree establishes a number of impairments, prohibitions and consequences for non-compliant companies, such as blocking of the RUC and prohibition to operate with entities that make up the financial system.

Said first communication was released by the DGPEJBF on August 26, 2021 and did not include companies that were incorporated with registered shares. For this reason, the mentioned Office will release a new communication on October 8, showing the list of companies in good standing. In view of this, the 5 business days period for the entities to apply sanctions will be counted as of that date.

At BKM | Berkemeyer we remain available to answer all your questions.

For more information please contact:

Bruno Lafarja bruno.lafarja@berke.com.py

Mauro Mascareño mauro.mascareno@berke.com.py

Recently, Decree No. 3988/2020 was issued to regulate Law No. 6480/2020 which created Simplified Joint Stock Companies (EAS). Said Decree establishes the process for opening EAS, registration and recordal procedures, and determining issues such as subscription and integration of capital stock.

The incorporation of this new legal figure in our legislation constitutes an additional option for investments in the country. The innovative aspects of this new tool include the possibility of having a single partner, short time for the establishment of the company, and a broad corporate purpose since it allows the creation of EAS to be engaged in any legal activity.

In this sense, we believe it is pertinent to mention that the procedure for opening an EAS can be carried out entirely via the web, through the SUACE portal and by filling out a single registration form. A pro forma bylaw can be used, or different bylaws, which must be approved. In both cases, speed in the opening process is guaranteed; setting a period of 3 business days in case the pro forma bylaws are used.

Additionally, notice on the approval of the file, and further start of the EAS, will be made via email to the user.

It is important to mention that, for the process of opening, closing, dissolving, liquidating and transforming an EAS, as well as any other modification that affects its structure, an electronic signature or digital signature may be used.

Regarding the limitations, it is important to bear in mind that the shares and other securities issued by the EAS may not be registered or traded at the Stocks and Products Exchange of Asuncion or at any other Stock Exchange entity.

Finally, we mention that Resolutions of the Ministry of Industry and Commerce and the Ministry of Finance that will establish the internal mechanisms to process the first EAS opening files are pending.

It will be a pleasure for the BKM team to assist you through the required legal advice.

For further information, please contact:

Carla Sosa: carla.sosa@berke.com.py

Leyla Apud: leyla.apud@berke.com.py

The Executive Branch, through Decree No. 3827/2020 dated 07/15/2020, exceptionally suspended the application of pecuniary sanctions and non- sanctioning measures for failing to meet the term established to exchange shares.

These regulations suspend the application of fines (pecuniary sanctions) and non-sanctioning measures established in Law 6399/2019, until 09/14/2020, taking into account the extraordinary conditions caused by the COVID-19 pandemic. Therefore, all those companies that carry out the exchange of shares as of 09/15/2020, will be subject to sanctions.

Likewise, obligation to suspend the economic rights of holders that do not exchange their bearer shares as of 09/15/2020 is established for Public Limited Companies, until they are actually exchanged fulfilling all formalities.

Finally, regarding meetings of shareholders, after 09/14/2020 meetings may be held only with registered shareholders.

For more information contact us at:

• mauro.mascareno@berke.com.py
• bruno.lafarja@berke.com.py

BKM|BERKEMEYER