Even though the Bolivian Commercial Code provides six different types of corporation, the main types when choosing to incorporate a subsidiary are a Sociedad Anónima (similar to a corporation under American law) and a Sociedad de Responsabilidad Limitada (similar to a limited liability company under American law).

Unless the company will act in a special regulated sector there are typically no restrictions as to the type of company foreign investors can participate in. Typically, they choose between the two main corporate types described in 1.1 Types of Company, that is, a Sociedad Anónima (SA), or a Sociedad de Responsabilidad Limitada (SRL). The decision as to which corporate type to choose generally depends on what the investor intends to do with the company.

One of the factors to consider is the complexity (or simplicity) of the management of the company in Bolivia.

An SRL generally has a much simpler corporate structure given that it does not need a board of directors or a comptroller. The partners’ assembly (a minimum of two partners is necessary) typically designate managers and issue the powers of attorney with the faculties of such managers.

If foreign investors wish to incorporate a presence in Bolivia relatively quickly, a company can be incorporated with Bolivian nationals (a procedure which takes between two and three weeks) and then transfer the shares to the final foreign shareholders. In an SA, the transfer of shares and registration thereof in the company’s shareholders’ registration ledger (a minimum of three are necessary) is a very quick procedure which takes a matter of minutes. These two steps are the only registrations necessary to prove the ownership of the SA by foreign shareholders and does not require registration before the Bolivian Registry of Commerce. However, in an SRL the transfer of capital quotas must, in addition, be registered before the Bolivian Registry of Commerce and this may require some additional documents and time.

On the other hand, if foreign investors wish to participate as incorporating partners, they may incorporate an SA or SRL. The disadvantage of incorporating an SRL with foreign investors is that both foreign partners need to send several documents to Bolivia, duly notarised and apostilled, to be then notarised again in Bolivia, before the company can even begin the registration process.

Bolivian corporate regulation provides two classes of shares: ordinary and preferred.

Ordinary shares grant their owners one voting right per share in every ordinary or extraordinary shareholder meeting.

In contrast, preferred shares allow their owners a vote in extraordinary shareholders’ meetings, but not in ordinary shareholders’ meetings, without limiting their right to attend ordinary meetings.

In addition, preferred shares grant their owners the following benefits:

• when included in the company’s by-laws, the possibility to appoint one or more directors to the board;
• when included in the company’s by-laws, the possibility to appoint one or more comptrollers;
• according to the conditions provided in each by-law, preferred shares grant their owners the right to receive dividends before ordinary shareholders;
• according to the conditions provided in the by-laws, holders of preferred shares can receive higher dividends than holders of ordinary shares;
• if a company is dissolved, preferred shares can be reimbursed before ordinary shares; and
• in general, preferred shares grant their owners the same rights as minority shareholders’ with regards to filing oppositions to meetings’ resolutions.

Ordinary share’s rights are set out in the Bolivian Code of Commerce. The details about preferred rights on the other hand, are provided in each company’s by-laws.

Ordinary shareholders’ rights may not be varied in light of the fact that the Bolivian Code of Commerce provides the conditions applicable to these types of shares. Conversely, preferred shareholders’ rights may be varied in extraordinary shareholders’ meetings, provided the decision is adopted with two thirds of the voting shares present at the meeting. However, the only rights that may be varied for preferred shareholders are:

• their right to receive dividends before ordinary shareholders;
• the amount of their dividends over ordinary shareholders; and
• their possibility to appoint directors and comptrollers.

In Bolivia, the applicable corporate regulations, for non-regulated companies, do not provide a minimum share capital requirement.

However, since the Bolivian Commercial Code provides that an SA must be incorporated with a minimum of three shareholders, and that shares must be divided into equal shares of one hundred bolivianos each, it may be interpreted that, in order to incorporate an SA, the indirect minimum capital required is of BOB300. The same requirement is applicable to SRLs, where the minimum condition to incorporate is two partners, in which case, in order to incorporate an SRL, the indirect minimum capital requirement is of BOB200.

In Bolivia, in order to incorporate an SA, there has to be a minimum of three shareholders; and in order to incorporate an SRL, there has to be a minimum of two partners.

Both shareholders and partners can be individuals or companies, Bolivian nationals or foreigners. There are no residency requirements for either shareholders or partners of Bolivian companies.

Whereas shareholders’ agreements are permitted, they are not commonly used for private companies. Joint ventures and shareholders’ agreements are used for SAs with many shareholders, with many nationalities, in order to set out the conditions for easier management.

Shareholders’ agreements are only enforceable between the parties who signed them and are very seldom issued as public documents, given that one of its purposes is to keep the agreements between shareholders confidential.

The typical provisions included in shareholder agreements include:

• committed investments, guarantees and distribution of expected returns;
• right of first refusal when selling shares;
• drag-along and tag-along rights when shares are to be sold to third parties;
• designation of board members, appointment of the chair of the board and other positions within the management of the company;
• limitations to the powers of administrators or double signature requirements for certain operations;
• confidentiality; and
• dispute resolution is typically referred to arbitration.

AGMs

In Bolivia, both SAs and SRLs must summon and hold an annual general meeting (AGM) within three months after closing their tax term.

The summons to AGMs must be issued in the Electronic Gazette of the Registry of Commerce, at least seven days before the meeting, and at least provide the following:

• company’s name;
• the type of meeting taking place;
• the time and date when the meeting will take place;
• the agenda of the meeting; and
• the requirements that must be met to take part in it.

However, if all partners/shareholders are present (or duly represented) at the general meeting no summons is required.

The subjects that must be discussed in AGMs are specified in the Bolivian Commercial Code and are specific to AGMs, also called ordinary meetings. For SAs, these subjects are:

• (i) analysis and approval of the annual report and report of the comptrollers;
• (ii) analysis and approval of the balance sheet and the income statement, and all another matters related to the management of the company;
• (iii) the distribution of profits or, where appropriate, the treatment of losses;
• (iv) the appointment and removal of directors and comptrollers, and where appropriate, the decision about their remuneration; and
• (v) the responsibilities of the directors and comptrollers, if any.

Points (i) through (iii) must be discussed at least once a year, within the three-month deadline provided above. Points (iv) and (V) can be repeated throughout the year, whenever there is a need to remove or appoint new directors or comptrollers to the company, or decide on their responsibility.

The subjects of AGMs of SRLs are the same as points (i) through (iv) above.

Decisions in ordinary meetings are made with a majority of 50% plus one of the voting shares present at the meeting. As described in 1.3 Types or Classes of Shares and General Shareholders’ Rights, shareholders with preferred shares may not vote during ordinary meetings, but may attend with a right to take the floor.

Extraordinary Meetings

In addition to AGMs (or ordinary meetings), the Bolivian Commercial Code provides the possibility to hold extraordinary meetings, in which the shareholders or partners decide on the following topics:

• the modification of the by-laws.
• the issuance of new shares;
• the issuance of bonds or debentures;
• the increase in the company’s authorised capital and reduction or reimbursement of the capital;
• the early dissolution of the company, its extension, transformation or merger; appointment, removal and compensation of liquidators; and
• others that the law, the corporate deed or the by-laws may provide.

Extraordinary meetings for SRLs provide that they may decide on the following subjects:

• modifying the company incorporation deed;
• changing the purpose of the company;
• increasing or reducing the company’s share capital;
• admitting new partners;
• authorising the transfer of capital quotas; and
• dissolving the company.

Decisions in extraordinary meetings for both SAs and SRLs are made with two thirds of the voting shares present at the meeting, including the vote of preferred shares.

Summons for AGMs must be made through the Electronic Gazette of the Registry of Commerce, and must necessarily include the following:

• the company’s name;
• the type of meeting taking place;
• the time and date when the meeting will take place;
• the agenda of the meeting; and
• the requirements that must be met to take part in it.

If all partners/shareholders are present (or duly represented) at the extraordinary meetings no summons is required.

In and SA the board of directors must call an AGM.

However, in the event the board does not call the meeting, the following people can summon a general meeting in an SA:

• comptrollers;
• shareholders who represent at least 20% of the share capital, provided the by-laws do not provide for a smaller percentage; and
• shareholders with only one share, only if no AGM has been held for more than a term, or if that annual general meeting did not review the subjects reserved for annual general meetings.

In SRL’s, the general manager may typically call an AGM. However, provided it is set forth in the by-laws the following people can summon an AGM:

• other managers or administrators (as appointed by the by-laws);
• directors or administration council (in case the SRL has a board of directors, which is not mandatory); and
• if the summons is not called by the management, summons to general meetings can be called by partners who represent more than one fourth of the company’s social capital.

In order to summon an AGM, both shareholders and partners must follow the conditions described in 2.2 Notice of Shareholders’ Meetings.

As discussed in 2.2 Notice of Shareholders’ Meetings, summons to AGMs must be issued in the Electronic Gazette of the Registry of Commerce. Compliance with this requisite is sufficient for the notice requirement to be understood to have been legally completed. However, most company by-laws also include requirements for notice to every shareholder in an SA or partner in an SRL.

The summons must contain the meeting’s agenda, and provide, if applicable, the information that the shareholders or partners must know before the meeting.

In general, shareholders and partners have the right to review the company’s corporate and accounting ledgers at any time, with the additional right to request information from the board of directors or comptroller whenever they deem it necessary.

As a result of a specific Ministerial Resolution, as of 2020, shareholders’ meetings may be held virtually/remotely, provided every shareholder can properly hear and be heard by the rest of the attendees and is able to take the floor and vote.

AGMs (also called ordinary shareholders’ meetings in Bolivia) for SAs require a quorum of more than half the voting shares. In extraordinary meetings, quorum is formed with two thirds of the voting shares, unless the company’s by-laws provide a higher percentage.

If no quorum can be formed for the first summons to the meeting, the Bolivian Commercial Code provides the possibility of a second summons, in which case, ordinary shareholders’ meetings can be held with however many shareholders with a right to vote are present at the meeting. Extraordinary shareholders’ meetings can be held at a second summons, with at least one third of the voting shares present at the meeting.

Quorum for an ordinary partners’ meetings in Bolivia is formed with at least half of the company’s social capital present at the meeting, unless the company’s incorporation deed provides a higher percentage.

Quorum for an extraordinary partners’ meetings in SRLs, as in SAs, is formed with at least two thirds of the company’s social capital present at the meeting.

As discussed in 2.1 Types of Meeting, Notice and Calling a Meeting, resolutions from ordinary shareholder meetings and extraordinary shareholder meetings are considered differently.

As noted, in SA’s in particular, preferred shareholders can be restricted from voting in extraordinary shareholders’ meetings, provided such restrictions are included in the company’s by-laws. Nonetheless, these restrictions cannot be imposed on the following subjects:

• modification of the company’s duration;
• modification of the company’s purpose;
• approval of the merger or transformation of the company;
• authorisation of the issuance of bonds or debentures;
• approval of the modification of the company’s by-laws; and
• resolution on whether to increase or decrease the company’s social capital.

When they differ from the Bolivian Commercial Code, voting guidelines are provided in each company’s by-laws, and in SRLs, in the company’s incorporation deed.

The minimum requirement of votes for passing resolutions in SAs, for ordinary shareholders’ meetings is the absolute majority of voting shares present at the meeting (50% plus one). This majority does not recognise the presence of preferred shares, or shareholders who are also directors or comptrollers during the approval of the financial statements corresponding to their term in office, or in decisions related to their responsibility. In extraordinary shareholders’ meetings, at a minimum, resolutions can be passed with an absolute majority of the voting shares present at the meeting (two thirds).

In SRLs, resolutions in ordinary partners’ meetings can be obtained with more than half of the voting partners present at the meeting (50% plus one) and resolutions in extraordinary partners’ meetings can be obtained with two thirds of the social capital present at the meeting.

The Bolivian Commercial Code provides specific subjects which must obtain shareholder approval to be implemented.

In SAs, the following matters need shareholders’ approval during ordinary shareholders’ meetings:

• analysis and approval of the annual report and report of the comptrollers;
• analysis and approval of the balance sheet and the income statement, and all another matters related to the management of the company;
• the distribution of profits or, where appropriate, the treatment of losses;
• the appointment and removal of directors and comptrollers, and where appropriate, the decision about their remuneration; and
• the responsibilities of the directors and comptrollers, if any.

Decisions for ordinary shareholders’ meetings are made with the absolute majority of the voting shares present at the meeting, which, based on the quorum necessary for ordinary meetings, means 50% plus one of the voting shares.

In addition, the following matters need shareholders’ approval during extraordinary shareholders’ meetings:

• modification of the company’s by-laws;
• the issuance of new shares;
• the issuance of bonds or debentures;
• an increase in the company’s authorised capital, or the reduction or reimbursement of the company’s capital;
• the early dissolution of the company, its extension, transformation or merger;
• the appointment, removal and compensation of liquidators; and
• others that the law, the corporate deed or the by-laws specifically provide.

Decisions in extraordinary shareholders’ meetings are made with the majority of the voting shares present at the meeting, which, based on the quorum necessary for extraordinary meetings, means two thirds of the voting shares present at the meeting.

In SRLs, the following matters need the partners’ approval:

• discussing, approving, modifying or rejecting the general balance;
• approving and distributing profits;
• appointing and removing managers or administrators;
• establishing a board of directors and appointing its members;
• approving internal regulations;
• authorising any capital increase or reduction, as well as the transfer of capital shares and the admission of new partners.
• modification of the company’s incorporation deed;
• deciding on the dissolution of the company, as well as the withdrawal of partners; and
• any other included in the company’s incorporation deed.

Decisions to modify the company’s incorporation deed, change the purpose of the company, increase or reduce the share capital, admit new partners, authorise the transfer of capital shares and dissolve the company are made with two thirds of the voting capital present at the meeting. Every other decision is made with the absolute majority of the voting shares present at the meeting (50% plus one of the social capital).

Voting methods will vary on a case-by-case basis, being generally conducted by a show of hands. Shareholders’ may use proxy voting whenever the company’s by-laws specifically allow shareholders to be represented by third parties via proxy. In addition, the Bolivian Commercial Code specifically provides that votes may be carried out in secret if more than 10% of the voting shares present at the meeting so request it.

The electronic casting of votes could be applied to meetings held remotely, provided the votes that were cast electronically can be confirmed by the rest of the shareholders’ present at the meeting.

The meetings’ agenda must be presented to the shareholders or partners with the summons and cannot be modified during the meeting, under penalty of nullity. However, the Bolivian Commercial Code specifically provides two exceptions to this rule:

• People who had the right to summon the meeting (board of directors, comptrollers or minority shareholders) may include specific items in the meeting’s agenda.
• Whenever the meeting is held without a summons, with 100% of the company’s voting shares present at the meeting, shareholders or partners may propose and resolve on any matter they chose so long as it is permitted by the law, company’s by-laws or incorporation deed.

Shareholders who were not present at the meeting, or who showed their disagreement during a meeting are allowed to challenge resolutions passed during ordinary and extraordinary general meetings. In addition, directors, managers, comptrollers or any supervisory authority can challenge any decision made during general meetings. The criterion for challenging meetings is based on whether they go against the company’s by-laws, the Bolivian Commercial Code, or the public order.

In addition, summons to meetings can be challenged by the people listed above, provided such summons did not comply with the minimum requirements, or the requirements provided in the company’s by-laws.

Such challenges must be filed before the company, within 60 days of the general meeting where the decision was made, accompanying every document necessary to prove the claim, which must be treated summarily by the company.

Shareholder groups generally participate at shareholder meetings and may directly influence the company’s actions by appointing a board member to the extent they have at least a 20% participation.

Institutional investors in Bolivia typically participate in publicly held and listed companies in the Bolivian Stock Exchange. As a result, such listed companies, are required to adhere to additional reporting requirements whereby they must provide notice, not only through the Registry of Commerce but also through the portal of the Bolivian Stock Exchange and that of the Regulator, of any relevant issues that may affect the listed company. 

As a result institutional investors and/or shareholder groups may exert significant pressure on listed companies by presenting petitions not only to the company but also to the securities market regulator.

Under Bolivian law, the only shareholders that have the right to information relating to the matters being voted on and voting, are those registered as such in the company’s shareholders’ registration ledger.

The by-laws of an SRL may set forth matters that do not require a partner meeting to be adopted. In such cases, proposed resolutions must be circulated for the approval of the partners, who must respond in writing.

In an SA, a shareholder meeting is required to adopt shareholder resolutions.

Existing shareholders have the pre-emptive right to subscribe a proportional portion of shares so as to maintain their current percentage ownership in the issuance of new shares. To the extent any shareholders do not make use of their right to new issuance, the other existing shareholders may subscribe such shares (again proportionately with any other interested shareholders).

Companies are prohibited from acquiring their own shares.

In an SRL there is a statutory right of first refusal, such that if a partner decides to transfer their capital quotas, he or she must first offer them to the rest of the partners so that they may decide to acquire such capital quotas and proportionately increase their participation in the company. If the shares are not acquired by the existing partners, the seller will have a right to offer them to third parties within a term of 30 days.

The Bolivian Commercial Code indicates that no limitations may be imposed on the transfer of shares in an SA. Many by-laws and shareholder agreements, however, place conditions (such as a right of first refusal) on the transfer of shares.

Shareholders are entitled to grant a security interest over their shares. In this case, the owner of the shares will still have the right to vote in the company’s general meetings. To assist this voting method, creditors must deposit the corresponding shares in the company, or decide on other methods to protect their credit.

In SRLs partners must be registered before the Registry of Commerce.

Shareholders are required to disclose their interests in a company in Bolivia through nominative shares, which require the complete name and address of the shareholder transcribed onto the share certificate and in the company’s shareholders’ registration ledger. An SA, may however, issue bearer shares, if so-authorised in their by-laws. Although these shares will be confidential to the general public, recent regulation mandates that SA’s that have such bearer shares must inform the Supervision Authority of Companies about every bearer share that they have, the complete name of its bearers, as well as the transfer of these shares and their new owners.

For nominative shares, the Bolivian Commercial Code provides that the registration of a shareholders’ name in the company’s shareholders’ registration ledger is enough to prove ownership, which means that nominative shareholders do not need to notify their transfer of shares to the Supervision Authority.

Shares cannot be cancelled if their owners fail to comply with their payment. If shareholders do not completely pay for a share within a term of two years after having acquired them, they will be declared in arrears before the company, which will have the right to judicially demand payment or the sale of the shares.

Companies are prohibited from buying back their own shares.

The distribution of dividends can only be carried out when profit in the company is effective and liquid, resulting from an annual balance sheet prepared in accordance with the law and the company’s by-laws and after it has been approved by the partners or the shareholders.

Before dividends are distributed, companies must set aside at least 5% of the net profits of each term, to form a legal reserve, until reaching at least half of the company’s social capital (unless the company’s by-laws provide for a higher percentage).

The distribution of dividends is approved by the AGM in both SAs and SRLs, and the amount each shareholder or partner receives will depend on the percentage of shares or capital quotas they own in the company.

In SAs, if provided in the company’s by-laws, preferred shareholders may receive a higher percentage of dividends than ordinary shareholders.

The competent decision-making body in SAs for the appointment of directors is the ordinary shareholders’ meeting, based on the decision of the absolute majority of the voting shares present at the meeting.

Notwithstanding the above, the Bolivian Commercial Code provides an exception to the majority of voting shares appointing directors, since minority shareholders (owning less than 20% of the voting shares), have the specific right to appoint one third of the board of directors.

Directors must act with diligence, prudence, and loyalty, under penalty of being jointly and severally liable for damages resulting from their actions or omissions.

The specific actions for which they can be held liable are listed in the Bolivian Commercial Code:

• deficient performance of their duties, or acts that are not considered within the scope of the diligence, prudence, and loyalty required from directors;
• breach or violation of the laws, by-laws, regulations or resolutions of the board of directors;
• damages that were the result of intent, fraud, gross negligence or abuse of powers; and
• any distribution of profits in violation of the conditions necessary for such distribution.

Ordinary shareholders’ meetings have the authority to decide on directors’ liabilities, and they are the competent decision-making body within a company to file the corresponding liability actions against the responsible directors.

The decision-making body in charge of appointing auditors to companies is the ordinary shareholders’ meeting, which decides on the appointment of auditors through absolute majority of the voting shares present at the meeting.

Directors are in charge of the management of the company. As such, the board of directors is in charge of issuing the annual report of the company, which contains, among other requirements, the company’s yearly financial statements and any other relevant information that is necessary for the shareholders to have adequate knowledge of the corporate governance and administration of the company.

This annual report is presented by the president of the board of directors to the ordinary shareholders’ meeting on an annual basis, for their analysis and approval. Once approved, the annual report must be published in the Electronic Gazette of the Registry of Commerce.

Under Bolivian law, controlling companies are deemed to be majority shareholders equal to any other majority shareholder.

If a company becomes insolvent and, if the company’s dissolution balance sheet is enough to cover the company’s liabilities and losses during a dissolution, and money still remains as social capital, shareholders or partners have a right to receive a reimbursement for their shares, in a percentage equal to their ownership in the company.

The only exception to this rule is if a company’s by-laws specifically provide that preferred shares can receive a higher percentage than ordinary shares in the event of a dissolution.

Under Bolivian law, shareholders have several legal remedies against the company, depending on the breach of legal obligations on the part of the company.

Shareholders have the specific right to file “liability actions” against directors whose faults and liabilities have been proven and accepted by the company’s ordinary shareholders’ meeting.

Derivative actions are not applicable in Bolivia.

In Bolivia, shareholder activism is not very prevalent as the great majority of companies are closely held and very few publicly listed companies have a relevant number or percentage of smaller shareholders.

As a result shareholder activism has not been regulated, and as such, it is not generally applied to companies. However, because shareholders in Bolivia are all granted a right to take the floor and vote (with the exception of preferred shares, which have special treatment), shareholders generally make pursue their activism independently.

The “tools” for independent activism of shareholders in Bolivia can be seen in the following actions:

• thorough and constant review of the company’s accounting ledgers to verify that the company is being managed correctly;
• requests for information to the board of directors and proposal of topics to be discussed during general meetings; and
• claims or complaints brought before administrative authorities.

As discussed in 11.1 Legal and Regulatory Provisions, given the fact that very few companies are listed or have many small shareholders, the key aims of activist shareholders will vary on a case-by-case basis.

In recent years, given the appearance of international rules on environmental and transparent corporate governance, many ESG topics have been brought up by activist shareholders. These concerns, however, are typically brought up as claims or concerns before administrative bodies, rather than in AGMs.

As the great majority of companies in Bolivia are closely held and not publicly listed, activist shareholders have had very little success in acquiring shares in companies of interest in Bolivia. As a result, they typically try to indirectly acquire a stake through investments in parent companies or shareholder groups outside of Bolivia.

As stated above, ESG issues are top of the agenda of many activist shareholders. 

As stated in 11.1 Legal and Regulatory Provisions, very little shareholder activism has been seen in Bolivia. The authors understand that a growing trend is for activist groups to influence other stake-holders such as local communities and workers’ unions.

No particular groups or types of shareholders have been involved in shareholder activism as such.

There is no public information available regarding activist shareholders’ demands being met by companies in Bolivia.

The current prevention strategy is not to list or issue shares on the local Bolivian Stock Exchange and hold Bolivian companies as closed companies. Any issuance of shares, from large companies, is carried out one or two levels above the Bolivian target companies in foreign controlling shareholders listed on international markets. As such, any shareholder activism would occur at the level of the controlling or parent corporation.