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ANDORRA SOCIETAT LIMITADAD
(SL)
- ANDORRA SOCIETAT
ANONIMA
- ANDORRA SOCIETAT
COLECTIVA
- ANDORRA PARTNERSHIP
- ANDORRA SOLE PROPRIETORSHIP
- ANDORRA BRANCH
The
Corporations Act 1983 governs corporations formed
in Andorra. There are three types of company,
the Societat de Responsabilitat Limitada and
the Societat per Accions both having shareholders
with limited liability, and the Societat Colectiva,
whose partners have unlimited liability.
Companies
with commercial or profit-seeking goals must
be owned at least two-thirds by Andorran citizens;
this means, people born in Andorra, or Privileged
Residents - those with more than 20 years' residence
(in the case of Spanish and French nationals,
the period of continuous residence is reduced
to a minimum of 10 years). In practice, the
Andorran majority owner of a business (called
a 'titular' in Catalan) can be an Andorran individual
or professional adviser who is willing to cede
operational control of the business to the foreign
'owner', and sign a share transfer in blank,
in return for a fee (called 'prestanom' in Catalan).
In practical terms the titular is a nominee;
but not in legal terms. Although this system
is in everyday use in thousands of companies,
and even though formal contracts are entered
into between the parties, the inescapable legal
fact remains that the titular can wield considerable
power if he wants to. Presumably one is on fairly
firm ground with a established, professional
titular.
In
2007 the parliament unanimously approved a Law
on Business Accounting under which accounting
is obligatory for all companies, and any business
with turnover of EUR100,000 or more annually
will have to file accounts with the government.
A new Law on Companies was also passed, regulating
the behaviour of the companies in the Principality,
regardless of whether they are Limited Companies
or Plcs.
In
addition, discussions took place on proposed
changes to the law under which the limit on
foreign participation would be raised to 40%,
and non-Andorrans would be able to own 100%
of certain types of company, including: audio-visual
production and marketing, technological and
scientific research, production of medicines,
E-commerce, and broadcasting. Further sectors
may also be opened up. This process crystalised
into the Foreign Investment Law, which came
into effect on November 7, 2008, and allows
the opening up of 200 economic sectors to entrepreneurs
and businesses from other countries. As a result
of the new legislation, foreigners can now hold
100% - until now the limit was 33% - of the
capital of a business in any of the designated
sectors.
The
package of three laws is intended to increase
the international competitiveness of Andorra,
attract foreign investors into high value added
sectors and strengthen the legal framework for
business.
The
government anticipates the adoption of two additional
laws. One is intended to establish a tax rate
on the profits of companies of between 5 and
10%. The other will create a value-added tax
of around 4% that will replace all of the existing
indirect taxes.
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Andorra
Societat Limitadad (SL)
The Societat Limitadad (SL) is commonly used
for local trading and requires a minimum paid
up share capital of 6,000 euros, with a minimum
of two shareholders. In order to set up an SL,
the first step is to obtain approval of the
proposed name (some generic words are banned).
The name, once approved and registered, will
have local protection.
The
company's Memorandum and Articles ('estatuts'
and 'rao social') are then presented to the
Government ('Andorra Govern') in a petition
('suplica') for incorporation. This step is
straightforward when a holding company is being
created for local assets, but if local trading
or complex external financial situations are
involved, the Government may look closely, particularly
if the foreign party (who is being given 'rights'
by the titular) is a newcomer or non-resident.
Once
the Government's approval is given, the capital
can be deposited and a notary will formalise
the incorporation, along with the 'nominee'
paperwork.
If
there is to be actual trading or other tangible
activity in Andorra, the company will need to
apply via a 'suplica' to the Commercial Register
in the appropriate commune for a trading license,
or 'Registre de Comerc' permission. Finally,
the Commune has to approve the premises proposed
to be used, which requires further paperwork
. . .
Once
everything is in place, the Government becomes
involved once more (another suplica) to approve
the formal opening of the business.
It
can be imagined that this whole process will
take some months even if everything goes smoothly;
if not, it can take a year or more. However,
for a straightforwad holding company, it may
be only two or three months.
The
Government's annual fee (tax) for the registration
of an SL is 463 euros, and if a Registre de
Comerc is needed, a further 670 euros is due
annually. It can be imagined that professional
fees will add substantially to these costs due
to the formality and complexity of the process.
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Andorra
Societat Anonima (SA)
The
Societat Anonima (SA) is usually created for
larger types of company, or those with many
shareholders, and must have a minimum paid up
share capital of 30,000 euros.
The
formation procedures for an SA are the same
as for a Societat Limitada (see above) except
that Governmental checks will be more stringent;
and the annual fee (tax) for registration is
1,000 euros.
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Andorra Societat
Colectiva
The Societat Colectiva is a company whose capital
is shared between partners with unlimited responsibility.
Its formation procedures are similar to those
of the SA and SL.
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Andorra Partnership
There are no limited partnerships in Andorra.
Civil companies can be created by two or more
persons to incorporate a partnership with unlimited
liability by private contract or deed. In order
to trade, it will need a Registre de Comerc
permission from its local commune, at a cost
of 670 euros annually.
This
is a form that can be used by a foreigner wanting
to set up in business locally, say as a restaurant;
the usual rules about 67% local ownership will
apply, and the Andorran titular will need to
sign contracts giving the foreigner day-to-day
management rights, and control over finances.
It suffers from the obvious difficulty that
the unlimited liability of a partner under the
law cannot be signed away so easily.
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Andorra Sole
Proprietorship
A citizen or an individual who has exceeded
ten years residency is permitted to establish
a business as a sole trader, however he will
need a trading license from his local Registre
de Comerc, at an annual fee of 670 euros.
This
form also could be the basis of a foreign/Andorran
business relationship; the Andorran in this
case owning 100% of the business, but signing
away operating and cash-flow rights to the foreigner.
The difficulties are obvious; the advantage
is that the Government doesn't have to become
involved.
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Andorra Branch
Only insurance companies can established branch
offices in Andorra. See Offshore
Legal and Tax Regimes for further details.
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