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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.
However,
discussions have taken 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.
It
has also been proposed that companies with turnover
in excess of Euros 5m annually will be subject
to compulsory audit.
In
early 2008, it emerged that the government was
progressing proposals for legislation that will
allow foreigners to control companies in certain
business sectors. Government spokesman, Juli
Minove announced that the legislation would
be introduced shortly, and would allow foreign
capital to control new local enterprises in
sectors that are not currently served by existing
Andorran businesses.
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 one of
the designated sectors.
The
Foreign Investment Law completes the legislative
package which also contains two laws that have
already been adopted: The Law of Companies and
The Law of Business Accounting. This package
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
new Company Law regulates the behaviour of the
companies in the Principality, regardless of
whether they are Limited Companies or Plcs.
A new Accounting Law establishes accounting
requirements for Andorran companies and the
associated responsibilities.
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.
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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