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Foreign Company: What is it and how does it work and how to incorporate this type of company?

What is a foreign company?

These are agencies, groups or companies that have been constituted abroad in accordance with the laws and other regulations that articulate the process of consolidation within the country of origin and that, move their operation to a different country.

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A company created abroad and which carries out its activity in a different territory, requires a company domiciled abroad, from there it executes the control of all the labour and commercial activities that it carries out. It is of great importance to approach the corresponding entities to consult the conditions that regulate the process of incorporation of foreign companies and to know their procedures directly.

Characteristics of a foreign company

Let us know the most important characteristics of this type of company for its incorporation in a different territory:

Share capital: it is very important that in terms of accounting for foreign companies, these are carried out independently and are subject to the state comptroller of the place of location. The share capital is the first guarantee against third parties and can be increased or replaced freely, but it cannot be reduced if the operation requires a cash refund in contributions.

Administration: the scheme of this type of company is consolidated in a figure that becomes the legal representative and has a wide variety of powers. These include part of the management of the company, signing of contracts and personal hiring, as well as the election of a substitute legal representative.

Partners: foreign companies have a network of partners or investors who contribute to the capital of the company in the place of origin. The amount established may vary according to the country of origin.

Requirements: among the most important conditions to be able to incorporate in another country, we find that the company must be duly consolidated according to the laws of the country from which it originates, as well as it will be necessary to be authorized to exercise the trade according to the corresponding entities. There are other particular requirements that are established within international conventions and that involve the countries in contact.

In some countries, it is necessary for the company to have a legal representative in the country where it wants to establish itself and who is authorized to respond to the obligations that the company has in the place of operation abroad.

What is a foreign company

Steps to create a foreign company

It should be taken into account that the incorporation of a foreign company involves a series of processes that may vary according to the country in which it is planned to be installed. As well as part of its main characteristics and general procedures.

Registration: usually a certificate of legal representation of the company is required to proceed with the registration of the company. In addition, a document or power of attorney is required to allow a natural or legal person to initiate the activities of the company in the area where it is desired to operate.

Statute of the parent company: this is a document that involves all the partners of the company. Each of them is in a position to make decisions to set the course and general management of the company. They must be recognized by the Ministry of Foreign Affairs or the entity in charge according to the location.

Letters of acceptance of the positions: this is the acceptance of the documents, which must include the names of the persons who are present in the company’s bylaws, such as: the legal representative, the alternate for this position and those who are part of the board of directors. Letters of acceptance must contain the full name of each of the figures mentioned above, as well as their corresponding position, the identification number and their signature as a sign of acceptance of the position.

Bank account: as any other type of company, the foreign company must also open a bank account in the country where it starts its business activity. Once this is done, the share capital must be deposited there, which is made up of the partners or investors of the company. This process must have the presence of the attorney in fact or the assigned legal representative.

Public deed: the documentation mentioned above will be necessary for the incorporation of the foreign company. Once this is done, the public deed will be processed, which must have the signature of the representative of the foreign company in the place of location. This signature may generate the payment of notary fees.

Registration of the company’s books: it is essential that Every company outside its place of origin has its trade books, a book of minutes, a book of shareholders and a balance sheet ledger. The registration value for each of the books should be consulted according to the country.

Advantages of a foreign company

These types of companies allow foreign companies to find new markets and operate in different areas to increase their commercial activities. This is why it becomes a model that significantly promotes economic growth, as well as productivity through the introduction of human capital.

On the other hand, we cannot ignore that it facilitates more options for consumers in the area, promotes technological development, especially in developing countries. This is because foreign companies bring not only money, but also technological knowledge and extend it to the countries where they are located, which helps to facilitate knowledge of the country by having a direct approach to them.

Ultimately, investment by foreign companies helps to cover part of the financing needs that developing countries have as productive investments, since they tend to be more stable than other sources of financing.

To learn more about this company and its particular functioning according to the area in which you plan to set up, it is extremely important that you consult an expert who will guide you in the process.