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Link between the company and its legal representative may be a civil or labor matter

Link between the company and its legal representative may be a civil or labor matter

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The Superintendence of Corporations issued Official Letter No. 220-083011 on the link between the company and its legal representative subject, being a civil or labor matter.

1. Query raised

The Superintendency was consulted on the link of the legal representative with the Company and its legal basis to define its nature, doing it in Official Letter No. 220-062154, which states:

“(…) the legal representative of a company can be linked to the company through an employment contract, a mandate contract in the case of foreign companies, or a service contract, which are entered into for the necessary term. It can be civil or commercial, depending on the assignment (if it is derived from a commercial contract, it will be according to commercial law, while the provision of services inherent to liberal professions will be according to civil law).

Then, the general rule complies in corporations, it is the discretionary power of each company and, in particular, of the board of directors or the general assembly of shareholders, according to the provisions of its bylaws (Article 440 of the Code of Commerce) to determine the form and conditions as it will bind the legal representative, who in any case, will be governed by the rules that are applicable depending on the type of contract. This is also true in the case of a single person representing several companies forming part of a group, considering these companies as legal persons, and corporate bodies do not lose their independence or autonomy, nor the administrator is exempted from the individual responsibility that includes him/her. (…)”

The Superintendence of Corporations considers that absent rule determining the type of legal link between a company and its legal representative, the nature of such linkage depends on the specific needs and circumstances of each company. For such purpose, it is noted how the law only refers to the appointment power of the legal representative in the management or administrative bodies, depending on the case, without foreseeing the type of legal link between the said administrator and the company he represents.

3. Conclusion of nature

In this regard, several previous decisions have shared the arguments outlined by the Constitutional Court, including the link between a company and its legal representative, stating this may be civil, labor, or commercial.

Source: Superintendencia de Sociedades 24/08/21

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