Annual General Meetings in Ecuador

Annual General Meetings in Ecuador are a legal requirement for companies operating in the country. Held within the first quarter of each year, these meetings allow shareholders to approve financial statements, assess directors’ performance, and ensure ongoing compliance with the Companies Law. This guide helps legal, tax, and compliance professionals navigate the procedural, governance, and filing aspects of AGMs with clarity and precision.

When and how must the AGM be held?

Under the Companies Law, Ecuadorian companies are required to hold their AGM within the first three months of the year. This statutory deadline ensures that shareholders review and approve financial statements, the administrators’ report, and the overall performance of the legal representative.

Meetings can take place physically at the company’s registered office or via telematic means. However, companies must ensure quorum, shareholder participation, and voting procedures are verifiably maintained and meetings are properly recorded. Failure to meet these conditions renders the meeting null and void.

In companies with a sole shareholder, especially where that person is also the legal representative, there’s no obligation to hold an AGM. However, these companies must still prepare year-end financial statements and maintain proper corporate records.

What must be discussed and approved at the AGM?

The AGM must address several key points as specified by law, including:

1. Approval of accounts and financial statements
2. Review of directors’ and auditors’ reports
3. Determination of remuneration, if not already established
4. Distribution of corporate profits
5. Disposal of essential assets, and
6. Any other item listed in the meeting notice

Notably, even if not included in the agenda, shareholders may also deliberate on the suspension or removal of directors and management body members.

How are shareholders notified?

Shareholders must receive AGM notifications via email at least five days before the meeting. Longer notice periods specified in the bylaws must also be honoured. For broader transparency, notices must also be published in widely circulated newspapers. Companies must ensure at least eight days pass between publication and the meeting, unless bylaws indicate otherwise.

Shareholders who choose not to attend must formally waive their rights by sending a signed communication (physical or digital) to the company’s legal representative. Proxy appointments are permitted, provided they adhere to company bylaws. Directors and commissioners are restricted from serving as proxies.

What happens if the AGM is postponed or not held?

The law does not specify procedures for postponing an AGM, leaving this to the bylaws and general governance principles. If rescheduling is necessary, companies should pass a board resolution and issue a new notice, in line with the standard publication and notification rules.

Neglecting to hold an AGM for five consecutive years constitutes a serious violation. This breach can lead the Superintendence of Companies to initiate dissolution procedures. Further, the Superintendent may impose fines of up to twelve times the minimum wage and suspend unlawful resolutions upon shareholder reques

Operationally, skipping an AGM can obstruct dividend approvals, financial filings, and director appointments, seriously disrupting the company’s legal standing and corporate governance.

What are the filing obligations after the AGM?

Once the AGM is held and financial statements are approved, companies must submit the complete set of documents to the tax authority. This includes:

• AGM minutes confirming approvals
• Annual balance sheet and income statement
• Directors’ and auditors’ reports
• Updated shareholder and administrator list

Financial statements must be finalised within three months of the fiscal year-end and made accessible to shareholders at least five days before the AGM. Statutory auditors must receive all reports ahead of time and respond within 15 days.

For companies with foreign shareholders, updated shareholder data must be submitted annually. Non-compliance risks barring foreign shareholders from voting or AGM attendance and could result in their eventual exclusion.

When do AGM resolutions take effect?

Resolutions approving financial statements or declaring dividends take immediate effect once approved. However, decisions like director changes or bylaw amendments only become legally effective after registration with the Superintendence of Companies and the Mercantile Registry.

Certain changes must also be published in newspapers, depending on the nature of the resolution. Registration delays may hinder the enforceability of corporate actions, so prompt submission is key.

How are minutes and dividend payments handled?

AGM minutes must be signed by the chairperson and secretary, finalised within 15 days of the meeting, and either recorded in a designated minute book or compiled as part of a meeting file.

Regarding dividends, distributions must be based on actual profits or reserves. Payments typically occur within 90 days of the AGM, with shareholders having a five-year limitation period to claim any unpaid dividends.

What’s next?

Managing an Annual General Meeting in Ecuador requires detailed planning and full legal awareness. For more insights into processes in other jurisdictions, explore our article What Companies Must Know About the AGM in Croatia.

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