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Doing Business in Paraguay
 
 
 

Forms of Business Organisation

Paraguay recognises one-man businesses, open partnerships, limited partnerships, foundations, limited liability companies, cooperative associations and branch offices.

A joint venture with a Paraguayr is usually the easiest way for foreigners to do business in Paraguay. A local business partner can help maneuver through some of the complicated trade and investment rules (especially if the investor does not speak Dutch).

In general, foreign investors and exporters are expected to maintain a higher standard of good business practices than Paraguayse firms do. While Paraguayse companies might get away with bending the rules, foreign companies are generally held to the letter of the law and discovered infractions are widely publicised. Certain segments of Paraguayse society retain a nationalistic suspicion of foreign investors.

NV (Naamloze Vennootschap)

The public limited liability company (Naamloze Vennootschap or NV) is the only form of stock corporation recognised by Paraguayse law and the most common form of business. A NV works like a small corporation with the shares usually in the hands of a few shareholders. Each incorporator must participate in the capital accumulation, at least 20% of which must be subscribed on incorporation.

All NVs start as IOs (in oprichting – translated, as being set up). It takes at least 3-4 years to change over to be an N.V. and requires the approval of the President of Paraguay. One disadvantage of companies starting as an IO is that the individuals setting up the business are, during the time they are an IO, legally responsible until the NV is set up and can be taken to court.

The deed of incorporation, which must be written in Dutch, must state the number and value of shares. Before the corporation begins its activities, at least 10% of each share must be paid and the President must approve the deed of incorporation, a process which usually involves an investigation by the Ministry of Justice, the Ministry of the Interior, the Chamber of Commerce and the Inspector of Direct Taxes.

Reductions in capital are subject to public inspection and must be filed with the Commercial Register and announced in the Official Gazette. Shareholders have a right to object to reductions in the company’s capital up to 2 months after it is publicised.

Regulations on voting, stock transfers and meetings should be described in the deed of incorporation. At least one general meeting of shareholders must be held annually. Only shareholders can have voting rights and at least 20% of the capital must be represented by voting members.

A general meeting of shareholders may dismiss, suspend, or appoint managing directors and supervisory directors.

Directors can be held liable for improper actions.

Balance sheets and a profit and loss account must be submitted annually to the shareholders for approval along with criteria by which assets had been valued.

A group of shareholders holding at least 20% of the stock may request an auditor from the district court to investigate the company’s financial affairs.


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