The Executive Branch recently enacted Law No. 6399/ 2019 that modifies law No. 5895. The new law was enacted in response to the 40 recommendations given by the International Financial Action Task Force (known by its acronym FATF).
 
Law No. 5895 enacted in 2017 introduced the obligation for joint stock corporations incorporated under Paraguayan Law (the “Companies”) to convert bearer shares to nominative shares.
 
The new law complements Law 5585 in connection with deadline for compliance and sanctions in case of potential breaches.
 
Below we summarize key features of the Law:
 
a) The period for compliance was extended. 
 
Companies have time until December 10, 2019 to begin the procedure for amending the bylaws and removing any reference to bearer shares.

b) Sanctions to shareholders that do not exchange shares:
  • Economic rights such holders may be suspended and eventually, removed.
  • Bearer certificates will no longer be valid.

c) Sanctions to Companies:

  • Companies that do not convert their entire stock package, will be required to reduce the authorized capital up to the value of the nominative shares, excluding the value of the bearer shares that were not exchanged. This process must start before June 10, 2021.
  • If the Company does not start the procedure for the exchange of shares or capital reduction before December 10, 2021, it will be required to be dissolved and liquidated. 
  • They may not operate in the financial system and will be suspended by the Paraguayan Tax Authority (Sub-secretaría de Estado de Tributación). 
The local corporate surveillance entity (“Abogacía del Tesoro”) is expected to further regulate the Law.
 
For more information, please contact us: [email protected]