Amendments to the instructions for granting metallic minerals mining concessions
The Mining Ministry has amended the instructions for granting metallic minerals mining concessions which, among other things, set forth procedures for granting mining concessions and the documents that the interested parties had to submit for that purpose. The major changes are:Article 6 which mentions that demonstration of the applicants’ creditworthiness has been changed. Different forms for demonstrating creditworthiness are determined, and even a formula is included for that purpose. Before reserving an area of interest, the applicant must provide a “graphic” display of the area in the platform to be generated by the Mining Ministry for this purpose. The amendment states that a mining project including more than five contiguous mining areas cannot be created. The Mining Regulation and Control Agency (“ARCOM” by its Spanish initials) will see that the amount of the financial bid submitted for the different mining concessions is met. The sum of the committed investment should be met during the project, independent of the area to which the investment was allocated in the financial bids. In case of surrender, the investment will be reduced by 50% from the investment commitment corresponding to the surrendered area.We must recall that according to Ministerial Decree 2016-002 published in the Official Register of March 30, 2016 the Mining Ministry issued instructions for granting metallic minerals mining concessions which, among other things, determined procedures for granting mining concessions as well as the documents that the interested parties had to submit for that purpose. Subsequently, according to Ministerial Decree 2016-014 published in the Official Register dated July 11, 2016, and Ministerial Decree 2016-030 published in the Official Register dated October 13, 2016, Ministerial Decree 2016-002 was amended. Now, according to Ministerial Decree 2017-017 issued on May 5, 2017, which became effective as of that date without prejudice to its publication in the Official Register, the Mining Minister has again amended the instructions for granting mining concessions.  Ministerial Decree 2017-017 – Available at the Mining Ministry web page: http://www.mineria.gob.ec/wp-content/uploads/downloads/2017/06/ Acuerdo-No.-2017-017.pdf Warning: This newsletter by Pérez Bustamante & Ponce is not and cannot be used as legal advice or opinion since it is merely of an informative nature.
Banking: Indirect ownership of financial sector entities is regulated
The Monetary and Financial Policy Board has issued rules for determination of indirect ownership as set forth in the Organic Monetary and Financial Code. The following is established in the main aspects of the Resolution:It will be considered that indirect ownership exists if an individual or corporation has ownership rights over 6% or more of the securities representing the capital stock of private financing sector entities, financing entities abroad or commercial companies other than financial entities through other juridical persons, trusts, economic and corporate relations or other mechanisms, or through them by means of their spouses or common-law spouses. It is understood that an individual or corporation has ownership:a) If it holds 6% or more of the securities representing the capital stock of a corporation and also holds 6% or more of the securities representing the capital stock of the entity or enterprise being analyzed. b) If it is the trustor or beneficiary of commercial trusts that directly hold 6% or more of the securities representing the capital stock of the entity or enterprise being analyzed, or that, in turn, are beneficiaries or shareholders, as will correspond, of other trusts or corporations that hold 6% or more of the securities representing the capital stock of the entity or enterprise being analyzed. c) If a corporation, if there is a business relationship with the entity or enterprise being analyzed in excess of 50% of the latter’s equity, or vice versa. d) If a corporation, if its entire operations with the entity or enterprise being analyzed exceed 50% of the latter’s total active and contingent operations, or vice versa. e) If a corporation, if it has common administrators or directors with 40% or more participation of those holding those designations in both entities or enterprises. f) If a shareholder in a private financial entity, if the spouse, common-law spouse or relatives up to the second degree of consanguinity and first degree of affinity hold 6% or more of the securities representing the capital stock of the private financial entity, financial entity abroad or company other than a financial entity.If it is evidenced the existence of indirect ownership of an individual or corporation on private financial sector entities, financial entities abroad or commercial companies, the regulator will make known the existence of such indirect ownership by means of a resolution. If it is evidenced the existence of indirect ownership in a private financial entity, the regulator will request the entity to immediately apply for qualification as an identified indirect shareholder. If it is evidenced the existence of indirect ownership of shareholders having their equity with the influence of private financial entities into ancillary entities of the national financing system, the existence of a financial group will be determined according to rules issued by the Superintendency of Banks to that effect. If indirect ownership exists with financing entities located in tax havens or in jurisdictions having lower taxation than in Ecuador as determined by the Internal Revenue Service, the shareholder must proceed to disinvest. If it is evidenced the existence of indirect ownership of shareholders having an equity with the influence of private financing entities into companies other than those engaged in financing activities, this may be considered a very serious infringement according to the provisions of the Organic Monetary and Financial Code. If it is evidenced the existence of indirect ownership of shareholders with an equity having influence from private financial entities with individuals or corporations with which they or their shareholders undertake active, passive or contingent operations, the relevant sanctions may be applied. In the case of financial entities domiciled in tax havens or jurisdictions of lower taxation than Ecuador, the financial entities and their shareholders cannot hold any type of shareholding participation. If on the date of this Resolution it is determined the existence of indirect ownership according to the foregoing terms, disinvestment will take place, if applicable, and will be completed and notified to the Superintendency of Banks within 180 days after such ownership has been reported. We must recall that, as established in the Organic Monetary and Financial Code, private financing entities and the shareholders of a private financing entity who are persons having an equity with influence, cannot hold, directly or indirectly, shares or quotas in commercial enterprises, companies or corporations alien to financial activities. This prohibition is also applicable to shareholders of a financial entity that, even if individually considered, are not persons having an equity with influence, and that according to the regulator they have economic, corporate or business and/or family relationships and that, as a whole, exceed 6%, or that make up an economic unit. Failure to abide by this prohibition will be penalized as a very serious infringement with suspension of their rights as shareholders or partners of the relevant non-financial entity, and removal from office in the case of the administrators. The regulator will also order to seize the shares or quotas of the non-financial entity and its subsequent sale in a public auction.  Resolution No. 375-2017-F of the Monetary and Financial Policy Board published in the Second Supplement of Official Register No. 22 dated June 26, 2017. Warning: This newsletter by Pérez Bustamante & Ponce is not and cannot be used as legal advice or opinion since it is merely of an informative nature.
Family dependents are included in the labor profit sharing limit in Ecuador
The Labor Ministry has issued new instructions for labor profit sharing. The main part of the instructions has changed the limit for labor profit sharing and has determined that it will be applied to 15%; in other words, it has included the amount corresponding to family dependents into the limit, and not only into 10% as previously established. The new Decree provides for the following: Labor profit sharing limit: Every employer will calculate the amount corresponding to profits to be distributed among the workers and must apply the limit on the entire amount to be distributed, that is, on 15%. Therefore, each worker may receive up to a maximum twenty-four unified basic salaries. For this calculation, the value of the unified basic salary of workers in general in force during the fiscal year when profits were generated will be used (maximum $ 9,000 for profits generated in 2017). If the employer identifies that the amounts to be distributed to each worker exceed that limit, the employer must deposit that excess amount, not later than on April 30 of each year, into the Social Security solidarity benefits regime. The amount corresponding to each dependent – after applying the limit to labor profit sharing – will be proportional to the number of family dependents. Labor profit sharing in companies engaged in complementary activities: The user company will calculate the profits to be distributed among the workers and will use the payroll comprising its own workers and former workers as well as the workers and former workers of companies engaged in complementary activities that provided their services directly. After such calculation, the user company will deliver the profit sharing amount to the workers of the company that provides the services by applying the above limit. The excess will be delivered by the user company to the Social Security solidarity benefits regime.  Ministerial Decree No. MDT-2017-0093 from the Labor Ministry, published in Official Register No. 26 dated June 30, 2017.  Ministerial Decree 308 dated February 10, 2017, amended by Ministerial Decree No. 62 published in Official Register 14 dated June 14, 2017. Warning: This newsletter by Pérez Bustamante & Ponce is not and cannot be used as legal advice or opinion since it is merely of an informative nature.