UPDATE OF BASIC INFORMATION FOR COMMERCIAL COMPANIES IN NICARAGUA
In Nicaragua, commercial companies are required to keep their Basic Information updated in accordance with Law No. 1035, "Law of Reform to Law No. 698, General Law of Public Registries," and the Commercial Code. This process not only ensures legal compliance but also promotes transparency and the validity of business decisions. Below, we address the importance of this update, its legal implications, and how it should be carried out in accordance with current regulations.
Before proceeding, it is important to clarify that Basic Information for commercial companies includes the essential data that identifies the company and its legal structure. This information is mandatory and must be kept up to date for the company to operate legally in Nicaragua, avoiding fines or penalties for non-compliance.
Law No. 1035 strengthens the provisions of the Commercial Code regarding the obligation to periodically (Ordinary) and promptly (Extraordinary) update the Basic Information of commercial companies. This information includes:
- The composition of the Board of Directors.
- Share transfers.
- Amendments or modifications to the social contract (articles of incorporation).
- Other relevant data for the identification and operation of the company.
Board of Directors Update
One of the most critical aspects is the update of the Board of Directors, which must be registered immediately after any change. This body is responsible for the management and administration of the company, and its update ensures that the decisions made are legally valid. If changes to the Board of Directors are not registered in the corresponding Public Mercantile Registry, these decisions may lack legal validity, creating problems in relationships with third parties, including financial institutions and tax authorities.
Share Transfers and Amendments to the Social Contract
Share transfers must also be updated in the corresponding Public Mercantile Registry so that new shareholders can exercise their legal rights within the company. If these registrations are not made, new owners may find their ability to participate in corporate decisions and profit distribution limited.
Additionally, any modification to the social contract—such as changes in share capital, the company’s name, or its business purpose—must be registered in a timely manner. These amendments affect the structure and functioning of the company, and failure to update them could have negative consequences for commercial operations and relations with government entities.
Updating Basic Information is essential for conducting various procedures with banks, tax authorities, and municipalities. Financial institutions require updated Board of Directors' records and Powers of Attorney to approve loan requests, open bank accounts, or carry out other transactions. Without these records up to date, the company’s financial operations could be hindered.
In the tax field, the General Directorate of Revenue (DGI) also requires that the company’s information be updated for compliance with tax obligations and to obtain tax benefits or avoid penalties. Similarly, municipalities require this updated information to issue operating licenses, permits, and other procedures related to the company's operation.
How to Update the Basic Information of a Commercial Company
The process of updating a commercial company’s information in Nicaragua must follow the steps established by Law No. 1035 and the Commercial Code. Below are the steps to complete this process:
- Drafting of Minutes and Legal Documentation: Changes in the company, such as modifications to the Board of Directors or share transfers, must be reflected in legally constituted minutes. These minutes must be prepared and signed at a meeting duly convened according to the company’s bylaws.
- Notarial Protocolization: Once the minutes have been drafted, they must be notarized by a Public Notary, who will draw up a Public Deed with the aforementioned minutes. This public deed certifies the authenticity and legality of the documents to be submitted to the Public Mercantile Registry.
- Submission to the Public Mercantile Registry: The notarized documents (Public Deeds) must contain the minutes and the request for the update and be submitted to the Public Mercantile Registry for their respective registration. This process can take time, and it is crucial to ensure that all legal requirements are in order to avoid delays.
- Payment of Fees and Registration Rights: Depending on the type of update, the corresponding fees must be paid to the Public Registry. These costs vary according to the type of procedure being carried out.
- Publication in La Gaceta (optional in some cases): In certain cases, it is necessary to publish the amendments or modifications in La Gaceta, Nicaragua's Official Gazette, to ensure that the changes are publicly known and can be invoked before third parties.
- Update with Other Institutions: After registering the changes with the Public Mercantile Registry, it is also necessary to update the information with entities such as the General Directorate of Revenue (DGI), the banks where the company has accounts, and the corresponding municipal governments.
Failure to update the Basic Information can result in administrative sanctions, delays in performing essential business procedures, and the inability to carry out valid commercial actions before third parties. Decisions made by an outdated Board of Directors may be challenged, jeopardizing the company’s stability and legal security.
Updating the Basic Information of commercial companies is a fundamental requirement for the proper functioning of businesses in Nicaragua. Law No. 1035 and the Commercial Code require companies to keep all their records up to date, including the Board of Directors, share transfers, and amendments to the social contract, to avoid legal and operational problems. At Cala Attorneys & Counselors at Law, we provide comprehensive support throughout the update process, ensuring that your company complies with current regulations and can operate smoothly.
If your company requires assistance with corporate updates, our team is ready to offer you an effective and efficient legal solution.
Author: Luis M. Canales
CEO & Director