Legal Representation Know – How for Chile

Legal Representation Know – How for Chile

No Lead or Introductory Paragraph needed, let´s just cut right to it: All foreign companies looking to operate and do business in Chile need to have a legal representative, regardless of whether they choose to buy a Shelf Company, open a Branch, or incorporate a Subsidiary.

We have seen over the years how some local back-office providers come up with bizarre and inadequate ways to provide this service: From appointing foreigners based outside of Chile who then delegate locally, to appointing local employees who lack the know – how, seniority, and experience to properly act as the face of the company before Clients, Providers, and Public Institutions.

An externally hired representative not only needs to be a local individual, but also someone who truly understands that their actions and signatures carry weight and consequences for Clients. Furthermore, because of Chile's banking system, bank account tokens and access are granted by default to local legal representatives, so it is imperative to choose them wisely.

Diligent clients should not accept an appointee based in another country, nor a junior accountant with limited experience in the subject, as the position, by its nature, demands a Senior qualified individual who can perform and inspire trust. SO PLEASE ASK BEFOREHAND.

At South Gate, we are often asked whether someone from the Parent Company located abroad can act as the local legal representative. The answer is tricky, as legally speaking, the representative of the new subsidiary, for example, can be a foreign national; this is perfectly fine; however, from a practical point of view, it is not recommended.

One has to distinguish the way a foreign client is entering the Market:

• Branch Openings: The appointment of a Local Legal Representative (Agent) with broad powers will significantly simplify the Foreign Company´s prospecting and business plans and enable it to conduct activities in the country. This is simply because the agent needs to manage the branch on a day-by-day basis, interacting with local third parties and Institutions. (Financial Statements need to be published every year, for example) Furthermore, if the branch wants to open bank accounts, only a local agent can get the job done, as banking compliance and red tape are notoriously high for foreign-owned companies, and banks won´t open accounts when the local face isn't actually local. The obtaining of a Commercial License is another good transversal example, as it requires physical visits to the relevant City Hall.

  
  

• Subsidiary Incorporations: The process is very similar; only a Local experience Representative will ensure swift incorporation and that local bank accounts are opened. On this topic, it is important to note that banks will not necessarily open an account for any local legal representative, such as a junior lawyer or accountant with a poor financial record; the requirement will only be met by someone the bank trusts and considers a solid financial individual.

  
  

• Shelf Company Purchases: In this scenario, the bank account already exists and is active. (Other Back-Office Providers will offer shelf companies without active bank accounts, which is a little help, as most delays in the incorporation process occur precisely during this stage) The issue can then be reduced to signatures and day-to-day operations, as most third parties will not agree to the extra waiting times and costs of having the foreign legal representatives' signatures apostilled every time. Whilst it is true that some third parties, employees, and other stakeholders may accept electronic digital signatures, others will not, so when you consider that, plus the fact that a foreign legal representative won't be able to wet-sign Public Deeds at the local Public Notary, it becomes evident that a local representative has the upper hand and is much more recommended.

Key considerations:

• By “local,” we do not necessarily mean a Chilean residence, as the appointee may also be a foreign national with a local residence/Tax ID number.

  
  

• At South Gate, we recommend appointing a Local Legal Representative AND a foreign Legal Representative from the Parent Company, both with legal powers to act independently. This structure provides an optimal solution that combines flexibility for day-to-day operations and oversight from Headquarters.

  
  

• Clients could also impose limitations on the Local Legal Representative, such as caps on banking authorizations or joint signatures.

International clients looking to expand and/or optimize their operations in Chile will find at South Gate an experienced local lawyer with flawless financial history who will ensure a swift and responsible provision of this critical service. Legal Representation for Chile