The need to expand or contract a business can make a company need to set foot in Peru, without being fully operational. In such cases, the company (or the owners) may be interested in appointing a legal representative in Peru to be the "face" of their company in the national territory.
The tasks of such a representative could be many and varied. In the case of expanding a business to access a new market, the legal representative will be in charge of obtaining the Single Taxpayer Registry (RUC), formulating the opening balance sheet, opening the corresponding accounting and corporate books, obtaining permits and licenses, among other acts and/or contracts that will depend on each particular business.
On the other hand, in the case of contracting or closing a business, the legal representative could be in charge of the orderly liquidation of the entity incorporated in the country or simply be the face before certain authorities (for example, the tax) for a determined period. .
Whatever the case, due attention to the work of the legal representative is essential for the proper future functioning of the company or to achieve an orderly exit from our market without surprises. It is a trust assignment.
Faced with this need, the shareholders (or the corresponding body) will wonder who is the best person to assume such a task, how to designate it and when to do it. Through these lines we expose some factors to consider in making this decision.
Who?
If the business does not have a presence in the country or is about to be dissolved, it is possible that it does not have permanent officials in our territory or at least that it does not plan to keep them on the payroll for a long period of time. Then the relevant decision-making body will be faced with the difficult question: who should I appoint?
Appointing an outside company lawyer as attorney-in-fact seems like an obvious solution to a factual problem. After all, they also know the business and are familiar with their client's concerns. This has been the usual market practice for some time now. However, in recent times there has been a growing reluctance of external lawyers to assume representation positions such as those mentioned.
And they are right. Lawyers need to consider that assuming the position of legal representative of a client carries certain risks for them and their law firms. Some of them are:
- The risks inherent to the figure of the legal representative of a company. For example, in the case of the General Manager or the Liquidator, articles 190, 191 and 414 of the General Corporations Law, Law 26887, regulate the responsibility of the General Manager and the Liquidator, and also make them jointly and severally liable with the board of directors. the company. Although lawyers know these rules very well, it is possible that in many cases they do not adequately quantify the risk they assume. Additionally, the professional liability insurance carried by some law firms may not cover or explicitly exclude the risks associated with these appointments.
- As of Legislative Decrees 1106 and 1249 and, more recently, Resolution SBS 02351-2023, [KO1] [ML2] Lawyers are obligated to inform the Financial Intelligence Unit (FIU) of suspicious operations of which they are aware. Information protected by professional secrecy is exempted from this obligation. However, by being appointed legal representative, the lawyer would not only be acting as a company or business lawyer, but would also "be" the face of the business or company (it is, strictly speaking, a hierarchical body of the company). . It could be argued in such a situation that the information to which he has access could no longer be protected by professional secrecy.
In view of the foregoing, external legal advisors, by acting as legal representatives of a client, could be assuming the responsibilities and risks associated with the obligation to inform the FIU about suspicious operations under the regulations for the Prevention of Asset Laundering and Financing of Terrorism (PLAFT).
- Risks associated with questioning the quality and objectivity of their advice as a result of the conflict of interest inherent in the figure of an external lawyer with that of a body of the company or business (one person cannot – and should not – be everything at the same time ).
In addition to the aforementioned risks, the role of legal representative usually brings with it a series of administrative responsibilities that are not inherent to the external lawyer and, moreover, in many cases, are not lucrative; for example, provide a fiscal and/or commercial domicile to your client.
For these and other reasons, it is increasingly common for a company's external lawyers to refuse to act as their legal representatives.
How can a professional legal representative help? A professional legal representative is someone who, having extensive knowledge and experience in the business world, can work hand in hand with a company's outside legal counsel and act as its legal representative. This kind of alliance is advantageous for both the client and the lawyer, since it mitigates the aforementioned risks for the lawyer and the law firm, but at the same time it results in someone who -by working hand in hand with external advisors- can have the information necessary to optimally fulfill the task entrusted to it.
How?
The appropriate mechanism for the appointment of the legal representative will depend on the timing of such appointment and the type of representative in question.
In the case of a foreign company that is interested in appointing a legal representative in the pre-operational stage of a subsidiary, the appointment could be made in the same act of incorporation of the company. In said act, the representative will be granted the necessary and convenient powers to set up a company, such as registering the company in the RUC, opening the company books, formulating the opening balance sheet, etc. If the business in Peru is going to take the form of a branch or representative office, the appointment and powers must be recorded in the minutes of the corresponding body, usually the Board of Directors or the Shareholders' Meeting, where the creation of the company is decided. subsidiary and/or representative office.
When a company is in the process of withdrawing from the market and requires the appointment of a liquidator, such appointment must be recorded in the minutes of the body that decides the dissolution and liquidation of the company, branch or representative office.
In all the aforementioned cases, if the appointment and powers are granted abroad, they must be validated in the country of origin and in Peru, or apostilled so that they can be registered in the Registry of Legal Entities.
When?
The appointment and powers of the legal representative can be given in the same act in which the constitution of the local entity is decided or in which its dissolution and liquidation is decided. However, if the appointment of the legal representative and the granting of powers were not made at that time, it is also possible to do so later. It is enough that the appropriate hierarchical body makes the decision and the required procedures are carried out so that the appointment and powers are registered in the Registry of Legal Entities.
How can we help
AlterEgo provides professional legal representation services in Peru. Its partners are professionals with extensive knowledge and experience in the business world, having worked for many years in prestigious law firms and auditing firms. AlterEgo has the interest and willingness to work alongside the external advisors of companies to provide a solution to the representation needs of their clients and relieve these advisors of the risks they assume when taking on such assignments and the administrative burden that these represent. .
Why AlterEgo?
For a company that requires a legal representative, AlterEgo is the best option, since they are serious professionals, prepared to assume such an assignment and who are permanently available to carry out the acts and/or sign the contracts that are required at all times. .
For external advisors, AlterEgo represents the ideal strategic ally, since it can relieve them of the risks involved in acting as a client's legal representative, it is willing to work hand in hand with them to achieve the best results, it will relieve them of an administrative burden unprofitable and, furthermore, by not providing legal advisory services, you will not compete with them for their clients. To learn more about AlterEgo and the business solutions we offer, click on the following link.
Author: Monica Llosa | August 28, 2023
