Directors’ Duties in Paraguay

>> Board Requirements in Paraguay

Appointment of directors

In general, directors are appointed by resolution of the ordinary shareholders’ meeting, if they were not appointed at the time the entity was incorporated.

If the shareholder’s meeting has discretion to determine the number of directors, the bylaws shall specify the minimum and maximum number of directors.

Directors need not be shareholders. They can be reelected and their appointment is revocable, but a director who was elected at the time of the incorporation will be entitled to an indemnification if it is removed without just cause.

The following persons cannot be appointed as directors:

  1. those who lack capacity
  2. t hose who work in competing companies with opposing interests
  3. those who became insolvent, either negligently, fraudulently or casually; people who are judicially disqualified to occupy public positions; those who were condemned for crimes against the patrimony and the public faith; and those who were condemned for crimes related to the incorporation, management and liquidation of business entities;
  4. t hose that due to their position cannot engage in trade, and public servants whose position is related to the entity purpose.

The appointment of a director is for one year, unless otherwise established in the bylaws.

The director’s resignation should be submitted before the board of directors, which may accept it if it does not affect the regular operation of the entity. Otherwise the director will have to remain in his position until the next ordinary shareholders’ meeting.

If the bylaws do not establish that elections shall be held to fill a director position, the substitute director shall be appointed by the corporate syndic, and he will occupy the position until the next ordinary shareholders’ meeting.

In terms of residence and nationality, a foreign citizen can be appointed director of a local company provided that he/she obtains a permanent or temporary residency permit prior to initiating his/her directorship activities in Paraguay. This is due to the fact that our Migrations Law provides that foreign citizens cannot conduct lucrative or remunerated activities in Paraguay without obtaining a prior residency permit, and acting as director of a company is presumed to be lucrative or remunerated.

Board Meetings & Operating Rules

The board of directors’ decisions will be adopted by majority vote. Postal vote is not admitted.

The bylaws shall establish the operating rules of the board of directors.

Conflicts

A director that has an interest in certain business -either by himself or by a third party, that is in conflict with the interests of the entity, shall give notice to the other directors and the corporate syndic and refrain from participating in any decision regarding such business. In case the director fails to act as indicated above, he will be liable for any loss of the entity that arises from such business.

The director can only enter into contracts with the entity that are related to the entity’s purpose, under the same conditions under which the entity enters into contracts with third parties. The director must inform the other directors and the corporate syndic about the business, and must refrain from participating in any decision related to it. Any contract that is entered into in violation of this provision is voidable.


Latest version updated 4th April 2018

Country Breakdown

6.725

Million

Population

Gs

Paraguayan guaraní

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