Simplified Joint-Stock Companies in El Salvador: flexibility in their constitution and the scope of lifting the corporate veil

Abstract

The development of foreign corporate regimes, from Europe to the United States of America, provided fertile ground for the Organization of American States to draft a model law with a structure for Simplified Joint Stock Companies, which was adopted by its Member States. In El Salvador, the Legislative Assembly enacted the Simplified Joint Stock Companies Act, representing a corporate regime with a new form of association, with a minimum capital requirement and other specific characteristics. In this regard, SAS companies generate uncertainty as to whether they can be used for financial crimes, and this is where the theory of lifting the corporate veil comes into play. The sole purpose of corporate veil piercing is to hold the partners, the natural persons who constitute a company, liable for all these infringements and illegal acts so that they are liable with their personal assets. However, there is no express legal provision regulating the theory of corporate veil piercing, and the closest thing to its development is found in a provision on SAS companies in the Commercial Code. With the implementation of this new type of company, there are favorable arguments, such as their flexibility and transparency, and unfavorable arguments, such as the existing risk of undercapitalization. SAS companies are also subject to state supervision and controls in order to prevent and control aspects that could be exploited to commit illegal acts.