Libro I · Título I Capítulo II. De las sociedades mercantiles. Disposiciones generales

A commercial company incorporated in accordance with the provisions of this Code and registered in the Mercantile Registry shall have its own legal personality, distinct from that of the partners individually considered.

For the incorporation of companies, the person or persons appearing as founding partners must do so in their own right or in representation of another and, in the latter case, must prove such capacity in the legal form. It is prohibited to appear as a business manager.

Commercial companies shall be governed by the stipulations of the articles of incorporation and by the provisions of this Code.

Partners are prohibited from making any reserved agreement against the content of the articles of incorporation or from opposing any evidence against it.

The incorporation of the company and all its amendments, including extensions, increase or reduction of capital, change of firm name or denomination, merger, dissolution or any other amendments or expansions, shall be recorded in a public deed. The withdrawal or admission of partners in non-share companies shall also be formalized in a public deed.

Except in share companies, the amendment of the deed of incorporation shall require the unanimous vote of the partners. However, it may be agreed that the articles of incorporation may be amended by a resolution taken by the majority determined by those articles themselves, but in this case the minority shall have the right to withdraw from the company.

The certified copy of the deed of incorporation, and that of the amendment and its modifications, must be filed with the Mercantile Registry within the month following the date of the deed.

The person who contracts in the name of the company before it may act as a legal person shall be considered as a business manager of the company and shall be personally liable for the effects of the contract entered into.

Spouses may form a commercial company with each other and with third parties.

Foreign nationals and foreign companies, even if they are not domiciled in Guatemala, may participate as partners or shareholders in companies of any form, except as provided in this Code or in special laws.

The guardian and the custodian may not form a company with their wards while the minority of age or the incapacity has not ended and the accounts of the guardianship are approved and the guarantees cancelled.

Persons declared bankrupt may not form a company until they have been rehabilitated.

Minors and persons under disability may form a company only through their representatives, with prior judicial authorization for proven benefit.

The liability of minors or persons under disability shall be limited to the amount of their respective contribution.

The legal representatives of minors, persons under disability or absent persons may acquire for their wards shares of public limited companies or limited partnerships by shares, provided they are fully paid and the requirements established by law for the investment of their funds are met.

The term of the company begins on the date of its registration in the Mercantile Registry. Commercial companies may be incorporated for an indefinite term.

The extension of the company must be formalized before the end of its term of duration.

However, such extension may be formalized after the term has expired, in which case the personal creditors of the partners whose claim appears in an instrument meeting the requirements of an enforceable title shall enjoy a term of thirty days, counted from the last publication, to protest the extension. The creditors of the company shall have the same right.

The effect of the protest shall be, for the former, that they may exercise their rights over the debtor's partnership interest and, for the latter, that they may exercise their actions in the form determined for irregular companies.

The extemporaneous extension requires the unanimous consent of the partners in non-share companies and, in share companies, a majority of at least eighty percent of the paid-in capital of the company. Dissenting shareholders shall have the right to withdraw from the company by so communicating in writing within the fifteen days following the date on which the corresponding resolution was taken.

Once the term of the company has expired, any partner may request its liquidation, provided the request is made before the call to the meeting at which the extemporaneous extension is to be resolved is issued.

Registration of a company in the Mercantile Registry grants it the right to the exclusive use of its firm name or of its denomination, which must be clearly distinguishable from any other and may not be adopted by a company with the same or similar object while the first remains registered.

Property that does not consist of money, contributed by the partners, passes to the ownership of the company without need of delivery and shall be itemized and appraised in the deed of incorporation or in the inventory previously accepted by the partners, which must be recorded in a public deed.

If through negligence (culpa) or intent (dolo) an appraisal higher than the true value is set, the partners shall be jointly and severally liable in favor of third parties and of the company for the excess of the value assigned and for the damages and losses that result, and shall likewise be obliged to replace the shortfall.

Movable or immovable property, patents of invention, pre-feasibility and feasibility studies, preparation costs for the creation of the company, as well as the appraisal of the promotion of the same, are admissible as contributions, provided they are expressly accepted in their appraisal, as established in the first paragraph.

The mere responsibility of a partner is not valid as a contribution. The partners are bound to warrant what they contribute to the company.

When the contribution of a partner consists of receivables, the one making it shall be liable not only for their existence and legitimacy, but also for the solvency of the debtor at the time of the contribution. When shares of a share company are contributed, the value of the contribution shall be the market value, without exceeding their book value.

It is prohibited to agree against the tenor of this article.

The partners must make their contributions at the time and in the form stipulated in the deed of incorporation. Delay or refusal in delivery, whatever the cause, authorizes the partners to exclude the defaulting partner from the company or to proceed executively against him.

The partner, including the industrial partner, is personally liable for the damages and losses he causes to the company by non-performance or delay.

In companies, the corporate obligations are secured with all the assets of the company and only the partners respond with their own assets in the cases especially provided in this Code.

The new partner of a company is liable, according to the form of the company, for all the corporate obligations contracted before his admission, even when the firm name or the denomination of the company is amended.

Any agreement to the contrary shall have no effect as regards third parties.

The risk of certain and determined, non-fungible things that are contributed to the company so that only their use, fruits or products are common corresponds to the partner as owner.

If the things contributed are fungible or cannot be kept without deteriorating, or were contributed to be sold, the risk corresponds to the company. The risk of things appraised at the time of contribution shall also correspond to the company, in the absence of a special agreement, and in this case the claim shall be limited to the price at which they were appraised.

If there is a loss of capital of a company, it must be restored or reduced at least by the amount of the losses before any distribution or allocation of profits is made.

In the distribution of profits or losses the following rules shall be observed, unless otherwise agreed:

1ºThe distribution among the capital partners shall be made proportionally to the capital each has contributed to the company.

2ºIf the contract stipulated the share of the profits without mentioning the losses, the distribution of the latter shall be made in the same proportion as that of the former and vice versa, so that the expression of the one serves for the other.

3ºThe participation of the industrial partner in the profits shall be determined by averaging the capital of all the contributions. If there is only one capital partner, the share of the industrial partner shall be equal to that of the other partner.

4ºIf there are several industrial partners, the preceding rule shall apply and the result shall be divided in equal parts among them.

5ºThe industrial partner or partners shall not bear the losses except in the part exceeding the capital.

6ºThe partner who combines the double capacity of capital partner and industrial partner shall participate in the profits or in the losses in each of the capacities corresponding to him, according to the foregoing rules.

The clauses of the articles of incorporation stipulating that one of the partners shall not participate in the profits are null and are deemed not included; but preferences among the partners for the payment of their capital in case of liquidation or of payment of profits or dividends may validly be agreed.

The stipulation that exempts a capital partner from participating in the losses shall have no effect against third parties.

The distribution of profits that have not really been obtained in accordance with the general balance sheet of the fiscal year is prohibited.

Apart from the profits of the fiscal year just past, the accumulated profits of previous fiscal years may also be distributed.

The administrators who authorize payments in contravention of the foregoing and the partners who have received them shall be jointly and severally liable for their restitution to the company, which may be demanded by the company itself, by its creditors and by the other partners.

From the net profits of each fiscal year of every company, at least five percent (5%) shall be set aside annually to form the legal reserve.

The legal reserve may not be distributed in any form among the partners until the liquidation of the company. However, it may be capitalized when it exceeds fifteen percent (15%) of the capital at the close of the immediately preceding fiscal year, without prejudice to continuing to capitalize the annual five percent (5%) referred to in the preceding article.

Any agreement or provision contrary to this article shall be null and, as regards the amounts coming from the legal reserve that are improperly distributed, the provisions of article 35 shall apply.

The following are rights of the partners, in addition to those set forth in other provisions of this Code:

1ºTo examine, by themselves or through the delegates they designate, the accounting and documents of the company, as well as to learn of the economic and financial policy of the same at the time fixed by the contract and, at least, within the fifteen days preceding the date on which the annual general meeting or annual general assembly is to be held.

This right may not be waived.

In share companies, this right shall be exercised in accordance with article 145 of this Code.

2ºTo promote judicially before the judge of First Instance where the company has its domicile the call to the annual general meeting or annual general assembly of the company, if the time at which it must be held according to the contract has passed or more than one year has elapsed since the last general meeting or assembly, and the administrators have not made it. The judge shall resolve the matter in an incidental proceeding, with a hearing of the administrators.

3ºTo demand from the company the reimbursement of the expenses incurred in the performance of their obligations toward it.

4ºTo object to the form of distribution of the profits or losses, within the three months following the general meeting or general assembly at which it was agreed. However, the partner who approved it with his vote or who has begun to comply with it shall lack that right.

5ºTo acquire for the same price the capital share of the co-partner authorized to transfer it. The term to make use of such right shall be thirty days counted from the date on which the authorization was granted. This right is not applicable to the shareholders of share companies.

6ºThe others determined by the articles of incorporation.

The partners are prohibited from:

1ºUsing the assets or the firm name or denomination of the company for business unrelated to the company.

2ºIf they have the status of industrial partners, carrying on the industry they contribute to the company, except for the benefit of the latter, or devoting themselves to negotiations that distract them from their obligations toward the company, unless they obtain the consent of the other partners or there is an express agreement to the contrary.

3ºBeing a partner of similar or competing enterprises, or undertaking them on their own account or on account of third parties, except with the unanimous consent of the other partners. This prohibition is not applicable to the shareholders of share companies.

4ºTransferring or encumbering their capital contribution in the company without the prior and unanimous consent of the other partners, except in the case of share companies.

Partners who violate any of the prohibitions contained in the preceding article may be excluded from the company.

In the matters that must be resolved by the partners and that, in accordance with the company contract or by provision of this law, do not require a special majority, the vote of the majority shall decide.

The majority shall be that established in the contract and, in the absence of stipulation, one half plus one of the partners, or one half plus one of the shares with the right to vote in share companies.

The separate creditors of a partner may not, while the company lasts, enforce their rights except on the profits whose distribution has been agreed and on the share corresponding to him upon liquidation of the company. They may, however, attach this portion and, in share companies, attach and have the shares of the debtor sold.

The company may not be extended except by satisfying the attaching creditor, even by means of the liquidation of the interest of the debtor partner.

Except in the case of share companies, new partners may not be admitted without the unanimous consent of the others.

It may be agreed that upon the death of any of the partners the company shall continue with their heirs. This aspect does not oblige the latter to enter the company, but it does oblige the other partners to receive them.

The administration of the company shall be in charge of one or several administrators or managers, who may or may not be partners and shall have judicial representation.

The administrators may not devote themselves, on their own account or on account of another, to the same line of business that constitutes the object of the company, except by agreement to the contrary.

The appointment and removal of the administrative body of all commercial companies, or of managers in the case of non-share companies, shall be made by resolution of the partners. This must be registered in the Mercantile Registry by filing a notarial record documenting the relevant item of the minutes of the corresponding Assembly.

In non-share companies, when the administrator is a partner and his non-removability has been agreed in the contract, he may be removed judicially only for intent, negligence, incapacity or non-performance of his obligations.

The administrators or managers have, by the fact of their appointment, all the powers to represent the company judicially, in accordance with the provisions of the Law of the Judicial Branch.

They shall also have those required to carry out the acts and enter into the contracts that are within the ordinary course of business of the company, according to its nature and object, those derived from it and those related to it, including the issuance of negotiable instruments. However, such powers may be limited in the articles of incorporation.

For business different from that course, they shall require special powers detailed in the articles of incorporation, in minutes or in a mandate.

Unless the articles of incorporation authorize it, the administrator may not delegate in another the administration or the representation, nor appoint a substitute, without the prior unanimous consent of the partners.

He may confer special powers and revoke them if he is empowered to do so.

When there are two administrators and the articles of incorporation do not specify the powers and attributions of each, they shall proceed jointly and the opposition of one of them shall prevent the carrying out of the acts or contracts planned by the other. If the joint administrators are three or more, the vote of the majority shall decide in case of disagreement.

Even if the administration is joint, one of the administrators alone may proceed under his responsibility if failure to do so would result in serious or irreparable damage to the company. The act or contract executed under these conditions shall produce its effects as regards third parties in good faith, and the administrator who entered into it shall be liable to the company for the losses caused to it.

Only the administrators or the authorized agent are entitled to the use of the firm name or denomination of the company.

The administrator is unlimitedly liable for the damages and losses he causes to the company through intent or negligence. If there are several administrators and they proceed jointly, their liability shall be joint and several.

Any stipulation tending to exempt the administrators from this liability or to limit it is null. The administrators who have recorded their dissenting vote are exempt from liability.

Commercial companies shall keep a book or record of the minutes of the general meetings of partners or general assemblies of shareholders, as the case may be.

When there are several administrators, it is mandatory to keep a minute book in which the decisions they take with reference to the business of the company are recorded.

In the cases in which the administrator does not have powers for a given business, the partners shall decide.

The administrators are obliged to render accounts to the partners, at least annually, of the financial and accounting situation of the company, including a report of their activities, the corresponding general balance sheet and the profit and loss statement, as well as a detail of their remuneration and other benefits of any kind.

Failure to comply with this obligation shall be grounds for their removal, independently of the liabilities they may have incurred.

If all the partners are administrators, they are reciprocally obliged to render accounts of the administration and of its results at any time.

The partner who, assuming the representation of the company, carries out acts or enters into transactions in its name, or the administrator who authorizes them exceeding his powers, do not bind the company, unless such acts or contracts are ratified by the partners or the company has taken advantage of the transaction.

As regards negotiable instruments, the provisions of article 406 of this Code shall apply.

Every partner has the right to withdraw from the company when, despite his contrary vote, the appointment of administrator falls on a person outside the company. This provision is not applicable to share companies.