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[null,"Prepared By:","Contributors:"]
[null,"Pérez Bustamante & Ponce"]
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["Social Enterprise Law Surveys"]
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["Report Generated: 5/2/2025"]
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["View your report results on next tab"]

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["Question","Ecuador"]
["I. Enterprise Form"]
["What jurisdiction(s) do you practice in?","Ecuador\n"]
["What are the most commonly used types of for-profit corporate organizational forms in your jurisdiction (e.g., corporation, limited liability company, benefit corporation, social purpose corporation, etc.) used by Enterprises operating a trade or business (rather than for investment or holding company purposes)? Please briefly describe these forms. a. Of these, which are the most common for-profit organizational forms used by Enterprises seeking financing from investors and that will have multiple owners? b. Other than organizational forms specifically designed for Social Enterprises (and discussed below under Question 4), which, if any, are the most common for-profit organizational forms used by Social Enterprises?"," The most common for-profit organizational forms used in Ecuador are i) the stock corporation or sociedad anónima ( SA ); ii) the limited liability company or compañía de responsabilidad limitada ( LLC ); and the iii) simplified stock corporation or sociedad por acciones simplificada ( SAS ). \n\n Stock Corporations : SAs are the corporate vehicles most frequently used in Ecuador. Its shareholders are liable up to the limit of their contributions only and the capital stock is divided into common, registered and indivisible shares creating a legal person entirely distinct from its shareholders. Shares are freely transferable. SAs are usually governed by its shareholders meeting, which is the body of control and government. Depending on their internal structure, it is possible to include boards of directors and other administrative and controlling bodies for its administration. \n\n Limited Liability Companies : LLCs are very similar to SAs, including their incorporation proceedings. LLCs, however, have the following important particularities: \n\n \n\t The maximum number of partners is fifteen, unlike a stock corporation which does not have a limit. \n\t For the transfer of shares, all partners must agree and approve it at a shareholders meeting. This decision must be formalized through a public deed and subsequently registered before the Mercantile Registry where the company has its domicile. \n \n\n Simplified Stock Corporations : SAS were introduced in the Ecuadorian legal system in 2020. This new type of entity gives greater flexibility regarding regulation and costs than the traditional types of companies. The incorporation of SAS is increasing, and we expect them to be the new default type of corporate organizational form due to their flexibility. \n\n Notarial and registry expenses are avoided in all corporate acts (e.g. incorporation costs, capital increases, bylaw’s amendments, etc.). Given that SAS are only subject to the supervision of the Ecuadorian Superintendence of Companies, their corporate acts may be contained in a private document (unlike the other type of companies that need to formalize these corporate acts before a notary public) and without the need to register them in the Mercantile Registry. \n\n SAS, amongst others, have the following particularities: \n\n \n\t As SAs and LLCs, shareholders are liable up to the limit of their contributions \n\t SAS can be incorporated with only one shareholder, unlike SAs and LLCs, which need at least two shareholders. \n\t SAS can be incorporated by means of a private document executed in Ecuador with no need of a public notary. \n\t The incorporation document does not need to be registered with the Mercantile Registry. SAS will be incorporated once they are registered before the Ecuadorian Superintendence of Companies. \n \n\n Benefit Corporation Category : In addition, LLCs, SA, and SAS may adopt the category of “ Benefit and Collective Interest ” corporation (“Sociedad de Beneficio e Interés Colectivo” or BIC). This is not a different type of entity, but a category that may be opted in. \n\n The BIC category is designed for LLCs, SAs, or SAS whose equity holders seek to build a unique, focused, and specifically chosen mission into their organizational documents, where the company’s management will have obligations to pursue that mission in parallel to their obligation to maximize enterprise value. \n\n   \n\n a. Enterprises that seek financing from investors and will have multiple owners tend to form SAs, less frequently LLCs, and lately SAS´ popularity is increasing due to their flexibility. \n\n b. SAs, LLCs, and SAS are the most common for-profit organizational forms used by Social Enterprises. \n"]
["Do any of your jurisdiction’s traditional organizational forms require or permit the board or managers to consider, balance or prioritize interests other than shareholder value in decision making? What other interests, if any, are they required to or allowed to consider (e.g., interests of employees, customers, the environment, etc.)?","Yes, LLCs, SA, and SAS may adopt the category of Benefit and Collective Interest corporation (or BIC). This is not a different type of entity, but a category that may be opted in. The BIC category is designed for LLCs, SAs, or SAS whose equity holders seek to build a unique, focused, and specifically chosen mission into their organizational documents, where the company’s management will have obligations to pursue that mission in parallel to their obligation to maximize enterprise value. \n"]
["Does your jurisdiction have organizational forms specifically designed for Social Enterprises? If so: a. What type(s) of organizational forms are they? b. How do they materially differ from the most closely analogous traditional organizational form? c. What are the main benefits for founders and funders of such organizational forms? d. Are there any restrictions on the use of these organizational forms (such as profit-caps, stakeholder involvement and impact reporting)? If there are, what are they? e. Are there any material differences in timing or costs for forming a Social Enterprise versus a traditional Enterprise? f. How prevalent and well known are Social Enterprise forms?"," Yes, the SAs, LLCs and SAS that have adopted the BIC category. Please see question No. 1 above. \n\n When adopting the status of a BIC, a company is obliged to create a positive material impact on society and the environment. New or existing companies that wish to adopt this status must incorporate into their bylaws the general obligation to create a positive social or environmental impact and submit it for registration in the Mercantile Registry. \n\n The measures adopted to achieve the general or specific objectives must be detailed in management impact reports. The administrators of a BIC may consider, among others, the following aspects: \n\n \n\t The interests of the company and its shareholders; \n\t The consequences, in the long term, of any decision related to the operational progress of the company they represent; \n\t The maintenance and protection of the reputation and good name of the company; \n\t The need to treat, fairly and equitably, all partners or shareholders; \n\t The expansion in the diversity of the administrative and supervisory composition of the company. \n \n\n Regarding the expansion of the fiduciary duties of administrators, managers and directors of a BIC, these must consider the effects of their actions or omissions regarding: \n\n \n\t The partners or shareholders of the BIC; \n\t The workers of the company, its subsidiaries and its suppliers; \n\t The clients and consumers of the company; \n\t The community; \n\t The local and global environment; \n\t The performance of the company in the short and long term; \n\t The company's ability to fulfill its corporate purpose. \n \n\n The expansion of the fiduciary duties of administrators, managers and directors does not imply the creation of an obligation enforceable by third parties who do not participate in the capital stock of the BIC. \n\n Adopting the BIC category is purely optional. SAS corporations and the BIC category were introduced in 2020. The incorporation of SAS is considerably faster than SAs and LLCs, as it is done electronically and with no need of formalities before a notary public or the local Mercantile Registry. Adopting a BIC status might require the amendment of bylaws or the name of the company, which usually takes a couple of weeks. \n"]
["Are Social Enterprises permitted to be formed and operated as Nonprofits? If so: a. Are Nonprofits that are Social Enterprises treated differently under the law as compared to Nonprofits that are not Social Enterprises, whether from a corporate, tax or other perspective? b. Are there any material benefits of, and/or restrictions on, using a Nonprofit form for Social Enterprises that does not apply to Nonprofits that are not Social Enterprises? c. Is there any type of “hybrid” Nonprofit form that requires less reporting and/or allows for faster formation? If so, please describe the drawbacks of utilizing this form (i.e. fewer tax benefits). d. How prevalent is the use of Nonprofits for Social Enterprises?","In Ecuador the following are considered private non-profit organizations: i) Corporations, which need a minimum of five members and have as purpose the promotion and common good of their members, the public good in general or of a community in particular; ii) Foundations, which may be established by one or more founders, to promote the common good of society, including activities to promote, develop and encourage said purpose in different fields, such as social, cultural, educational, environmental, sports, as well as activities related to philanthropy and public charity; and, iii) Other forms of national or foreign social organization, such as communes, water boards, irrigation boards, agricultural centers, chambers of agriculture, and others.\nIn general terms, formation process for Nonprofits differ from those of for-profit Enterprises and usually take more time. Ecuadorian Nonprofits have been frequently and traditionally used to establish entities with specific social or environmental objectives. For-profit Social Enterprises are new in the Ecuadorian legal framework, but we expect these entities to become more frequently used in the future. Please see the Benefit Corporation category above.\nSocial Enterprises that do organize as Nonprofits enjoy the same tax benefits as other Nonprofits and have the same burdens and restrictions, All Nonprofits benefit from an income tax exemption as long as the assets and income are used for the Nonprofit’s specific objectives and only in the part that is directly invested in them.\n"]
["Does your jurisdiction allow for worker-owned Enterprises, such as cooperatives? If so, please describe any material benefits of, and/or restrictions on, using such forms.","Ecuador does not have a particular entity for worker-owned Enterprises, but workers may own equity in the discussed entities above. Also, a company that adopts a BIC status may expressly take into consideration the interests of its workers.\n"]
["Are there unique reporting requirements for Social Enterprises? If there are, please describe them. Please also discuss what government bodies Social Enterprises are required to report to.","Yes. SAs, LLC, and SAS that have adopted a BIC status, in addition to the traditional reporting requirements, must issue a management impact report.\nThe legal representative of the society of benefit and collective interest must prepare, annually, a report on the impact of the management of the respective society, in which he will report on the activities adopted to create a positive and verifiable material impact on the society and the environment. The report must be issued on the basis of one, several or all of the items in the areas of impact foreseen in the company’s organizational documents, in the event that the benefit and collective interest society has decided to adopt them.\nIf a specific social or environmental purpose has been voluntarily included in the corporate purpose of the BIC, the management impact report must detail the measures implemented to achieve that purpose.\nThe administration of the company, for the preparation of its management reports, may choose independent standards, whether national or international, which, in its opinion, are the most appropriate to inform the highest corporate body about progress in the development of the activities of benefit and collective interest that have been expressly indicated by the BIC.\nThe management impact report must be available to the partners or shareholders of the BIC, together with the financial report for the corresponding fiscal year, at least eight days before the General Meeting, which will approve it.\nThe report must also have a certification issued by an independent entity specialized in the areas in which it is intended to achieve a positive social and environmental impact.\nReporting for Nonprofit Social Enterprises:\nDepending on the purpose of the Nonprofit, the competent Ministry will oversee and regulate the procedures related to the granting of legal status, registration of directives, reform of statutes, and in general all activities related to the operation and control of these organizations.\nNonprofits are required to deliver documentation and information generated as a result of the operation of the social organization, and they must render accounts to their members through their directors, at least once a year, or at the formal request of a third or more of the members.\nThere are also different special requirements for Nonprofits. For instance, foundations and non-governmental organizations registered with the Technical Secretariat for International Cooperation (SETECI) may be subject to special reports or anti money laundering reports, if different thresholds are met.\n"]
["In your jurisdiction, has case law and jurisprudence evolved to address Social Enterprises? If there is meaningful jurisprudence around Social Enterprises, please provide some brief examples.","Since the Enterprise forms such as the SAS corporation and the BIC category are new, there is no case law on point.\n"]
["Does your jurisdiction have any ESG requirements for Enterprises generally? If it does, please describe.","Not mandatory ones, but please see the optional regulations for the new BIC category described above. The Superintendence of Companies has also issued regulations on corporate governance, which mirror these requirements.    \n"]
["Does your jurisdiction have any ESG requirements specifically for Social Enterprises? If it does, please describe.","Please see the optional regulations for the new BIC category described above.  The BIC category requires that the entity have a material positive impact on society and the environment. SAs, LLCs and SAS may choose their mission, which tend to align with certain ESG factors. \n"]
["Does your jurisdiction have any ESG requirements for investors? If it does, please describe.","No.\n"]
["II. Funding"]
["Are any major investor classes (e.g., pension funds, mutual funds, etc.) required to look at ESG issues when making investment decisions in your jurisdiction? a. If they are, please describe the requirements. b. If they are not, are they permitted to consider such factors? c. What other relevant factors do investors tend to consider (aside from profit motive).","No major investor classes are required to look at ESG issues.\nNotwithstanding, major investors such as investment funds may include ESG issues as their purpose and in their internal investment guidelines. As such, provided that they invest in those products which are permitted by Ecuador’s Securities’ regulations, then they could make investments that pursue ESG issues.\n"]
["What kinds of philanthropic funding do Social Enterprises in your jurisdiction commonly receive (e.g., grants, charitable investment, traditional investment)?","Social Enterprises receive grants, charitable investments, and traditional investments.\nNGO’s and non-profits such as foundations, usually receive grants and charitable investments. Many companies from the private sector support local non-profits via donations, be it in-kind or monetary donations.\nCertain for-profit enterprises, such as B-Corps or Bic-Corps usually receive traditional investments from people looking to make impact investments.\n"]
["How prevalent, if at all, are new for-profit impact investments in your jurisdiction (e.g. traditional instruments with impact terms, new investment instruments, aggregation with philanthropic capital, community based funding, etc.)?","Ecuador recently has legally recognized for-profit investment corporations. This are what are known B-Corps and BIC-Corps. These types of companies look to have a positive impact either on society or on the environment while looking for a corporate benefit.\nWith the introduction of these types of companies, for-profit impact investments have grown and are expected to keep increasing.\n"]
["What are the types of government funding and support available to Social Enterprises, if any, available in your jurisdiction (e.g., grants, investments, bonds, and guarantees)? a. How difficult is it for Social Enterprises to obtain government funding? b. Is any government funding limited to Enterprises incorporated using Social Enterprise forms?","There is no special government funding specifically available to Social Enterprises as such. Depending on the Enterprise form and industry, government grants, loans, bonds, and guarantees may be available. For example, there could be certain grants for SEGs in the education sector.\nNotwithstanding, it is not easy to access government funding, and doing so submits the SEG to compliance of certain obligations and scrutiny arising from public funds.\n"]
["Are there any companies that are formed as a Social Enterprise listed on your jurisdiction’s leading securities exchange(s)?","No.\n"]
["To what extent are publicly traded Enterprises required to disclose ESG related factors in annual reports/public filings in your jurisdiction.","They are not required to disclose ESG factors, though some choose to do so for marketing reasons. There are not many publicly traded Enterprises in Ecuador.\n"]
["How prevalent, if at all, are impact bonds in your jurisdiction?","These are not prevalent in Ecuador. \n"]
["In your jurisdiction, are there any restrictions on foreign investments or donations that are unique to Social Enterprises (whether incorporated as for profit entities or as Nonprofits)?","No.\n"]
["Is “crowdfunding” legal in your jurisdiction? Are there rules under applicable securities laws that make it easier for smaller businesses or Social Enterprises to take money from investors that are not sophisticated/accredited/qualified under applicable statutes?","Crowdfunding was recently regulated in Ecuador and therefore it is legal in our jurisdiction. \nCrowdfunding provides smaller businesses or Social Enterprises access to non-institutional investors’ funds, which can be donations, investments for equity, debt or investments for rewards, or early access to products.\n"]
["III. Tax"]
["Are there any tax exemptions that are uniquely available for Social Enterprises? a. Please describe any tax exemptions that are available and whether they are partial or full. b. Are they dependent on the Social Enterprise utilized using a specific organizational form (e.g., for profit vs. Nonprofit form)? c. Please describe any other key requirements of the available tax exemptions (e.g., restrictions on sources or uses of funds, restrictions on commercial activities, etc.).","There are tax exemptions available for Nonprofits generally, but there are no tax exemptions that are uniquely available for Social Enterprises structured using a for-profit organizational form.\nNonprofits (whether or not Social Enterprises) have two key tax exemption provisions, one being that they do not have to pay income tax themselves, and the other being that donors may take deductions on their reported income.\nAs stated above, only the assets and income that are directly invested towards the Nonprofit’s objectives will benefit from the tax income exemption.  \n"]
["Are individuals or other organizations able to provide tax deductible donations to for-profit Social Enterprises? If they are, please describe any restrictions applicable to tax deductible donations?","No.\n"]
["Are there any other tax benefits uniquely available for Social Enterprises? (e.g. deferrals, favorable tax rates, business deductions, etc.)","No.\n"]
["Does your jurisdiction provide for reciprocal recognition of tax-exempt status that has been granted under the law of any other jurisdictions?","No.\n"]
["IV. Governmental Infrastructure"]
["Does your jurisdiction have Regulatory Sandboxes or similar policy frameworks for Social Enterprises? If it does, please describe.","Not at the moment.\n"]
["What government operational support, resources, training or services, are available for small businesses or Social Enterprises?","In 2020, the Organic Law of Entrepreneurship and Innovation established that the Monetary and Financial Policy and Regulation Board (an organ part of the Executive Function and responsible for the formulation of public policies and the regulation and supervision of monetary, credit, exchange, financial insurance and securities) may establish financial instruments for the formation of seed capital, venture capital and angel capital funds, for the financing of ventures, innovation and technological development. Importantly, the Law also provides that entities of the financial sector will establish the credit program of the public financial sector on an annual basis, mainly oriented in innovation, entrepreneurship and technological development that strengthens the entrepreneurial ecosystem.\nRecently, the Ecuadorian Ministry of Production, Foreign Trade, Investments and Fisheries, leading the Venture Capital Trust, announced the \"Fondo Emprede: Ecuador Productivo” fund, in which US$10'050,000 have been allocated to support start-ups, their growth, and innovation projects in different fields.\n"]
["Are there different compliance requirements for different types of Social Enterprises than for traditional Enterprises? Please provide examples if there are.","Yes. SAs, LLC, and SAS that have adopted a BIC status, in addition to the traditional reporting requirements, must issue a management impact report. Please see question No. 7 in Section I above.\n"]
["Is there a dedicated government agency or department that oversees Social Enterprises? If there is, please describe its mandate and effectiveness.","Nonprofit and for-profit Enterprises are overseen by different governmental entities. For instance, Nonprofits are overseen by the relevant Ministry, depending on the purpose of the nonprofit (e.g. education, environment, culture, etc.). For-profit entities, such as SAs, LLCs, and SAS, are overseen by the Superintendence of Companies and the Mercantile Registry. \nAlso, in 2020, the Organic Law of Entrepreneurship and Innovation created the National Council for Entrepreneurship and Innovation (CONEIN), as a permanent strategic body to promote and encourage entrepreneurship, innovation and systemic competitiveness of the country, through inter-institutional coordination, public-private alliance and academia. The Law also created the Consultative Council of Entrepreneurship and Innovation, a body that will act as an adviser and supporter of the CONEIN, to monitor public policies that affect entrepreneurship, innovation and competitiveness.\n"]
["Is there a different bankruptcy system available for Social Enterprises?","Yes, there is a new special restructuring proceeding for startups, introduced in 2020 by the Organic Law of Entrepreneurship and Innovation.\n"]
["VI. Miscellaneous"]
["What are the average time and filing fees to form an Enterprise in your jurisdiction?","Depending on the current processing times and whether the documents are filed online, in person, or by mail, it can take approximately a couple of weeks to form a legal entity in Ecuador. Depending on the type of entity formed, notary public fees and mercantile registries fees may apply, which in turn will vary depending on the capital of the Enterprise.\n"]
["What government or third-party certifications or accreditations, if any, are available for Social Enterprises that allow for access to benefits e.g. funding, beneficial tax status, etc.? Please provide examples and briefly describe them as well as the standards there are to maintain them."," B Corporation Certification : This certification is the most prominent, and is provided by B Lab, which is an independent Nonprofit Enterprise. To become a “B corporation” an Enterprise must: \n\n \n\t take and pass the B Impact Assessment; \n\t adopt the B Corporation legal framework, which requires that Enterprises incorporate certain provisions in their charter and governance documents; \n\t sign a term sheet agreement with B Lab; and \n\t pay certain fees. \n \n\n To maintain the certification, B Corporations must pay annual fees and comply with ongoing reporting and compliance requirements. \n\n Product, Safety and Environmental Certifications : There are a wide variety of certifications available to Social Enterprises depending on the industry and purposes of the organization. \n"]
["Please describe whether, in your opinion, startups and other entrepreneurial Enterprises generally can easily form and flourish in your jurisdiction.","The recent legal and regulatory changes in Ecuador aim to achieve this goal. Startups can easily be incorporated, and transactional costs have been reduced significantly. In the next months, several secondary regulations shall be issued.\n"]
["Please describe whether, in your opinion, Social Enterprises, in particular, can easily form and flourish in your jurisdiction.","Social Enterprises can form relatively easily if they want to organize as a for-profit Enterprise. Nonprofits must go through a lengthier incorporation process.\n"]
["Please describe whether in your opinion there are any laws that are obstructive to the formation of Social Enterprises (i.e. that actively disfavor or penalize, or otherwise discourage their formation) in your jurisdiction (for example, are Social Enterprises subject to legislation prohibiting inclusion of Social Enterprises in government contract procurement)?","The recent changes in the Ecuadorian legal framework aim to facilitate the formation of Social Enterprises, particularly of SAS and adopting a BIC status. Directors and officers must use their powers in the best interests of the company and shareholders and while they are not prevented from considering other interests, adopting a BIC status allow them to do so.\n"]
["In your jurisdiction, are there any major fraud concerns or defects due to corruption or fraud that should be addressed? If there are, please briefly discuss the concerns or defects.","Yes, in public procurement proceedings particularly.\n"]
["What changes to the law do you think would be most beneficial to enabling Social Enterprises to flourish in your jurisdiction?"," \n\t Providing tax benefits, such as tax exemptions or simplified tax compliance procedures, to Social Enterprises utilizing for-profit Enterprise forms. \n\t Local regulators should allow Regulatory Sandboxes to allow small-scale and live testing of innovations in a controlled environment under the regulator’s supervision. \n\t Crowdfunding was recently regulated by the Organic Law of Entrepreneurship and Innovation. The subsequent regulations that will follow need to make crowdfunding easy, cheap and accessible to broaden public investment in Social Enterprises. \n\t In more general terms, digitalization and reducing the regulatory burden of entrepreneurs, while maintaining effective oversight, is still an ongoing objective that the local authorities should have in mind for the upcoming regulations and further legal initiatives in these fields. \n \n"]
["What changes to the law do you think would be most beneficial to enhancing the social and environmental responsibility of Enterprises generally (whether or not Social Enterprises)?","Implementing a uniform set of standards for ESG policies would make it easier for investors and consumers to compare and evaluate which enterprises are proceeding accordingly. The optional ESG requirements for the new BIC category described above and the regulations on corporate governance are a good first step. Yet any change in the law would be limited if there is no proper accountability. Hence, any future change in the law should consider both accountability but also the benefits that implementing ESG practices could bring to an Enterprise.\n"]
["Is there anything else you would like to add or guidance you would like to provide? Are there any questions we should have asked but did not?","No.\n"]