By Decree No. 1113, the President of Ecuador established the Regulations to the Organic Enterprise and Innovation Law. The Regulations include:
National Enterprise Register
- The National Enterprise Register (RNE) will be created and updated online.
- The platform will be connected with the Ecuadorian Social Security Institute, the Tax Authority and any other deemed necessary.
- The RNE will issue the National Enterprise Register Certificate, which will be valid for one year, and, from the fourth year of the ventures´ operations, it will be valid for the remaining time the company is considered a venture. After this period, a venture update must be applied for, as applicable.
- For purposes of operation length, the term of a venture by individuals will be calculated from the start of the activity as stated in their Taxpayer Identification (RUC).
Promotion of a Culture of Entrepreneurship and Education
- Academic projects and activities with a focus on soft skills and change-ready mindset, emotional intelligence, leadership, etc. will be encouraged. Highschool education will include financial education and a focus on innovation through practical exercises to solve social issues.
- Higher education institutions will promote making a business model or plan in all degree programs.
- Higher education institutions may build networks to design and execute society-related projects which aim to develop enterprise.
Alternative Sources of Financing and Guarantees
- All information on financial services and public investment funds which are in effect or created to encourage and develop enterprise must be published in the National Enterprise Guide.
- The State may create venture capital funds with contributions of public funds to finance the different stages of the enterprise process.
- The allocation of funds will require a project feasibility analysis to be issued by the entity making the investment.
- Companies specializing in the valuation of intangible assets will be considered as such if this activity is part of their corporate purpose. The qualification and registration procedure for these companies will be regulated by the Superintendency of Banks, the Superintendency of the Popular and Solidarity Economy and the Superintendency of Companies, Securities and Insurance.
Crowdfunding
- Crowdfunding platforms in the categories of donation, reward, pre-purchase, stock investment and/or reimbursable financing, have the following obligations:
- Inform that the offer published on their platforms and accepted through electronic means perfects an electronic contract;
- Obtain the express authorization of the promoter to open a savings bank account on their behalf, exclusively for the transfer of the funds which are to be delivered to the promoter, under the terms established in the published project. This authorization will also contain the power of the company owning the platform to return the funds to the investors if the terms for such purpose are established in the project. The promoter will not be an authorized signer on that account or be able to make use of the funds during the fundraising stage of the project;
- Inform that neither the State nor government entities will be able to take responsibility or guarantee that investors’ resources will be used in the operations conducted with the promoters;
- Publicly display the identity of the investors in the platform, granting the option for the investor not to publicly disclose their identity;
- Protect personal data and information. The collection, filing, processing, distribution or dissemination of this data or information will require the authorization of the data subject or legal mandate or order from the competent authority.
- Each platform will establish the terms and conditions for providing the service of searching for financing for enterprise and/or innovation projects. These will include the process for collection, custody, transfer and/or reversion of funds; advertising costs and banking costs arising from the provision of the service; and the ID information of the participants that will be transferred to the contracting parties.
- The acceptance of the terms and conditions will establish:
- A contract between the crowdfunding platform and the promoter, in which the latter authorizes: (i) the pre-opening of a bank account in the name of the promoter exclusively for the published project, as well as the power to return the amounts collected if the conditions established for the delivery of the collected funds to the promoter are not met; and, (ii) the automatic bank debit in favor of the company owning the crowdfunding platform for the advertising and promotional services provided, only once the funds are made available to the promoter;
- A contract between promoters and investors upon accepting the terms of the offer.
- Crowdfunding platforms will mandatorily send information each quarter to the National Enterprise Register about the entrepreneurs and enterprise and/or innovation projects who benefit.
- Legal entities organized under public law may only act as crowdfunding investors through the injection of seed capital to enterprise and/or innovation projects which have met the collection target thanks to investors organized under private law.
- The fund collection process must comply with the following:
- All fundraising for crowdfunding projects will be done through institutions of the national financial system.
- Investors must transfer the funds they decide to contribute only to the account that has been opened for each project.
- Under no circumstances may crowdfunding platforms themselves or through related parties receive the funds transferred by investors for an enterprise and/or innovation project published on their platform.
- The bank must notify investors and promoters of the reception of funds.
- Contributed funds must be kept by the financial institution until crowdsourcing platforms order their release in favor of the promoter or their reimbursement in favor of the investor. Interest generated as a result of the custody of these funds will be in favor of the promoter.
- Once compliance with the condition is verified, crowdsourcing platforms will verify and order the bank to release the funds in favor of the promoter.
- Unless otherwise agreed, if the goal or condition is not met within the timeframe determined by the promoter in its offer on the platform, the condition will be deemed as not met and the contract will be terminated, with the platform ordering the reimbursement of the funds in favor of investors.
- Service fees, the conditions for their debit and the dispute resolution mechanism must be presented clearly and unequivocally in the relevant section of the terms and conditions of use in the corresponding crowdfunding platform, as well as in the contract for the provision of services between the promoter and the crowdfunding platform.
Restructuring of ventures
- The application for restructuring of ventures must include, among others:
- Clear identification of the company requesting the restructuring of the venture, a reasoned explanation of the motives that led the debtor company to make this request and the terms of a settlement proposal for its creditors.
- A list of all its creditors, the amount of the obligation, nature and due date. In addition, it must specify the names of the joint and several co-debtors and guarantors.
- A list of all financial lawsuits and proceedings, whether judicial or administrative, which are brought by or against the debtor company, indicating the authority which has jurisdiction over them, as well as the precautionary or court enforcement measures taken against them.
- The resolution to admit the venture for restructuring will contain, among others:
- The summons to all creditors through the publication, for one time only, of the extract of the resolution to admit the venture for restructuring on the website of the competent superintendency, and the term they have to present their claims;
- The way in which the debtor company will inform the creditors about the admission of the application to the initial restructuring stage and the term they have to present their claims;
- The prohibition, during the restructuring process, to set up guarantees in favor of third parties, business trusts, to dispose of real estate, personal property or intangible assets when the sale of which does not constitute its ordinary course of business;
- The list of creditors identified at the time of the application and their percentage of the liabilities subject to be restructured;
- The total amount of liabilities as of the date of admission of the restructuring process.
- Creditors who are employees of the venture being restructured must appoint a joint counsel of record for the negotiation phase. In the absence of an express joint counsel, the worker with the most seniority in the venture undergoing restructuring will act as such.
- Labor obligations have priority over other obligations, but priority among labor obligations must be stated in the restructuring agreement.
- The restructuring agreement will include, as a minimum, the restructuring term and the contractual, commercial, or corporate modifications agreed on by the parties.
- The document confirming the inability to reach a restructuring agreement is the beginning of the dissolution of a venture and must be signed by the applicant entrepreneur and at least two creditors.
- Obligations to public entities that cannot be performed during the dissolution of the applicant venture will be extinguished upon the termination of the legal personality of the venture. This limitation shall not apply if, as a result of a tax audit, it is determined that the directors or shareholders have acted in bad faith, in which case the directors’ joint and several liability will apply.
- If at the end of the dissolution process there are unpaid amounts to creditors organized under private law, the remaining debt will be extinguished when the cancellation of the legal personality is registered, without prejudice to the fact that such remaining debt may be considered as a deductible expense if the creditor complies with the conditions for such consideration.
Insolvency supervisors
- Insolvency supervisors must act as facilitators of the restructuring process, aiming to reconcile the common interests of all parties involved and ensure compliance with applicable legal regulations.
- The monthly fee for the services of the supervisor will be fixed by mutual agreement with the debtor company. If no agreement is reached, the Superintendency of Companies, Securities and Insurance will be in charge of determining it.
Presentment of claims
- The parties in the restructuring request, as well as those who, having appeared after the the Superintendency summons, present evidence of being creditors, will participate as creditors.
- The following claims will be considered as subordinated claims, which will be deferred after the secured and unsecured claims:
- Claims by partners or shareholders with over 50% of the shares in the debtor company or who had held them for up to one year prior to when the restructuring process began;
- Claims from the company’s legal representative, or, in general, from whoever is or has been part of the administration of the debtor up to one year prior to the process application;
- Claims from the spouse, legally recognized partner or family member up to the fourth degree of consanguinity or second degree of affinity of the debtor’s legal representative, the person who acts in their place or any partner or shareholder who holds more than 50% of the share; and,
- Claims from a legal entity in which the legal representative, their spouse, legally recognized partner or relatives within the fourth degree of consanguinity or second degree of affinity have relevant interests in terms of investments or have administrative decision-making powers.
- Creditors whose claims do not appear in the restructuring application and who do not present the documents justifying their claims within the terms granted for that purpose, may not participate in the negotiation stage or be considered in the debtor reorganization agreement, and may only exercise their actions against the debtor company once the debtor reorganization has been completed or when the bankruptcy proceedings have been declared terminated in accordance with these Regulations.
- Sureties or guarantors of the debtor company who, before or during the restructuring process, have paid the secured obligations, in full or in part, will be recognized as creditors of the debtor company in the negotiation phase, in proportion to the value paid for their claim.
Labor, tax and social security claims
- All workers and former workers and all public institutions and public sector entities that are creditors shall participate and be considered, ipso jure, to be included in the restructuring process to enforce their rights and claims, even if they are not referred to in the application or have not appeared to register their claim during the initial phase.
- The rights of the workers legally or judicially recognized prior to the application for restructuring will be paid with the privilege established by law, before executing any debtor reorganization agreement.
- A representative for the workers could participate, for the percentage of the labor debt, as one more creditor in the negotiation phase.
- If the supervisor’s report shows non-performed labor obligations, the corresponding provisions must be made.
- Public sector creditors, including public financial institutions, may also apply for bankruptcy proceedings, attend, deliberate and vote at meetings and make decisions under the terms of this section, subject, in all cases, to the debtor reorganization decision as an unsecured creditor.
- Regarding tax creditors, the provisions of the Tax Code will apply.
- For the purposes of making a debtor reorganization agreement viable, public institutions may grant payment facilities.
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