1. Introduction

On July 15, 2021, Uruguay enacted the Law on Benefit Corporations and Trusts of Collective Interest (the “Law”), whose central purpose is to regulate the incorporation and operation of benefit corporations and trusts (referred to, as applicable, as “BIC companies” or “BIC trusts”). This legislative innovation allows for the creation of companies with long-term social and environmental objectives, contributing to the environment in which they operate through purposes that go beyond their own profit motive.

In this report we analyze the incorporation and regulation of BIC companies and trusts.

2. Definition

Article 1 of the Law defines BIC companies, establishing that any commercial company that has validly adopted one of the corporate types provided for under the Commercial Companies Law No. 16,060 and the Entrepreneurship Law No. 19,820 (which regulates the Simplified Stock Company, or SAS) may qualify, provided that its corporate purpose includes a commitment to generate a positive social and environmental impact on the community in which it operates.

Trusts created under Law No. 17,703 may also adopt this regime, provided they have met the legal requirements for their proper incorporation and include in the trust mandate the generation of a positive social and environmental impact.

3. Name

A company or trust that adopts this regime must include in its name the expression “Benefit and Collective Interest Corporation,” or its abbreviation, “BIC.”

This mandatory change in the company’s or trust’s name will allow the public to identify, at first glance, the social and environmental commitment undertaken by the company.

4. Adoption of the BIC Regime

Commercial companies and trusts incorporated prior to the enactment of this Law may adopt the BIC regime. To do so, they must include in their bylaws or corporate agreement the purpose of generating a positive social and environmental impact through their business activity. It should be noted that, for such inclusion to be valid, the companies must first satisfy the legal requirements necessary to amend their respective bylaws or corporate agreement.

In turn, the Law requires that the bylaws or corporate agreement include a requirement of a special majority of 75% of partners or shareholders with voting rights in order to validly approve any amendment to the corporate purpose.

5. Right of Withdrawal

As mentioned above, commercial companies incorporated prior to the enactment of this Law must amend their corporate purpose in order to adopt the BIC regime. To this end, partners or shareholders who voted against the amendment, cast a blank vote, abstained from voting, or were absent at the time this corporate decision was made, will have the right to exercise their right of withdrawal in accordance with Laws No. 16,060 and 19,820.

6. Management of the BIC Company

The Law regulates aspects relating to the management of BIC companies, establishing that directors and trustees must take into account the social, environmental, and economic purposes assumed by the company in carrying out their duties.

Accordingly, directors and trustees will be required to consider the effects that their actions or omissions may have on the partners or beneficiaries of the trust, current employees and the workforce in general, the communities in which the company operates, the local and global environment, and the long-term expectations of the partners and the company, or of the beneficiaries and the trust, as applicable.

Partners and trust beneficiaries may demand compliance with these obligations.

7. Oversight and Transparency

In order to ensure effective compliance with the social and environmental purpose assumed by the BIC company or trust, the Law requires directors and trustees to prepare an annual report detailing the actions carried out for that purpose. This annual report must be publicly accessible, included in the annual report to shareholders, and submitted to the agency or authority designated by regulation within six months of the close of each fiscal year.

8. Disqualification

A BIC company or trust that fails to comply with the obligations set forth in this Law will lose its BIC qualification. Disqualification may be initiated ex officio, when the competent authority (as determined by regulation) finds noncompliance, or upon request of any partner or third party who petitions the competent court for a declaration of noncompliance, and the court so declares. The disqualified company will be subject to the consequences established by regulation.

The purpose of this publication is to provide general information and not specific legal advice to be used without first conducting a consultation to evaluate your particular situation. We remain at your disposal should you wish to engage our assistance.