Establishing a Company in Dominican Republic
In an effort to reform the corporate law in the Dominican Republic, a new law was enacted on 11 December 2008, the General Law on Business Associations and Limited Liability Proprietorships, number 479-08 (“Law 479-08 or the “Law”) as an urgent need for driving Dominican corporate practices within a global economy ever more open and competitive. Law 479-08 overturns and substitutes Title III of the Code of Commerce of the Dominican Republic, regarding companies, Articles 18 to 64, and introduces many modifications to Dominican corporate law.
As a general rule, a company is created when two (2) or more physical or artificial persons commit assets in order to carry out acts of commerce and/or to operate a commercial activity, participating in the earnings and losses. The approximately time to incorporate a new company in the Dominican Republic is 60 days maximum.
Law 479-08 establishes the following types of corporate vehicles through which a company can operate:
(a) General Partnerships (Sociedades en Nombre Colectivo);
(b) Simple Limited Partnerships (Sociedades en Comandita Simple);
(c) Limited Partnerships with Shares (Sociedades en Comandita por Acciones);
(d) Limited Liability Companies (Sociedades de Responsabilidad Limitada);
(e) Corporations (public or private) (Sociedades Anónimas);
(f) The Simplified Corporation (Sociedad Anonima Simplificada);
(g) Limited Liability Propiertorships (Empresas Individuales de Responsabilidad Limitada); and
(h) Accidental or Participation Company (Sociedad Accidental o en Participación)
Depending on the corporate vehicle the requirements for establishment will vary; However the essential procedure is the following:
a. Registry the company name.
b. Prepare and sign company documents.
c. Pay the organization/incorporation taxes
d. Record the company documents with the Business Registry (Chamber of Commerce and Production)
e. Filing for the Mercantile Registry Certificate.
f. Register the company at the Internal General Revenue Direction (Dirección General de Impuestos Internos)
Incorporating a Company in the Dominican Republic
On December 2008, the DR introduced a major overhaul in the legal framework regulating the incorporation of commercial entities, meeting a demand that for years was addressed by the private sector, with corporate structures following the old rules of the Commercial Code. Now, four corporate vehicles are available for businesses seeking to incorporate: the corporation (“sociedad anónima”); the partnership (“sociedad colectiva”); the limited partnership (“sociedad en comandita”); and the limited liability company (LLC) (“sociedad de responsabilidad limitada”). Corporations are primarily considered for larger enterprises and investments, and they are classified as either private or public, depending on how they are funded and whether they are administered directly by shareholders or through stock or bond public offerings.
Foreign and national investors can also incorporate a business through an informal joint venture (“sociedad en participación”), which does not need to be registered. This type of entity does not need to be affirmed in writing, and its existence can be proven through testimony or other means.
National and foreign companies have the same rights and obligations as locally formed entities, with certain exceptions, but both need to be registered in the Commercial Registry and in the National Registry of Taxpayers.
Limited liability companies (LLC’s) are a hybrid between a partnership and a corporation. They resemble partnerships in that they are based on the personal cooperation of members rather than on mere capital investment, and because of the fact that their shares are not freely transferable and do not constitute negotiable securities.
Another option is the sole owner limited liability enterprise (EIRL, by its Spanish initials). These entities belong to a single individual, but are separated from any personal assets. The capital contribution is determined by the owner, according to the value of the assets contributed to the company. EIRL’s may appoint a manager. The ownership of an EIRL can be transferred, and there is no need for a comptroller to report on its finances or its asset management.
As an active member of the International Labor Organization (ILO), the DR enjoys modern labor legislation, including protection against all forms of discrimination and policies that encourage a collaborative approach to labor relations between workers and entrepreneurs. The Labor Code, in effect since 1992, regulates private and certain public employment, incorporating very streamlined procedures for both administrative and judicial resolution of conflicts.
The law presumes, until otherwise proven, that all personal work relationships are governed by a labor contract that does not need to be contained in a signed document. The existence of a labor contract—or its modifications—can be proven by whatever means are available.
The Code provides for a maximum 44-hour workweek. Each worker is entitled to a consecutive 36-hour rest period that can be negotiated with the employer according to the specific needs of the business. The salary must be paid in cash, whether by the hour, by the day, by the week, every 15-day period, or monthly. In no case shall salaries be paid for periods longer than one month.
So-called fringe benefits include Social Security, Christmas Salary, vacations and profit-sharing. These usually represent between 20 and 34 percent of annual salary. After one year of continuous employment, a worker earns the right to a 14-day vacation period, increased to 16 days after 5 years of uninterrupted employment.
Labor contracts can be terminated by either party without invoking any cause, subject to certain indemnities; but it can also be terminated by either party with cause (dismissal), without the need to indemnify, provided either the employer or employee can provide proof of fault. Such contracts can also be terminated through mutual consent.