With respect to the foregoing, we would like to highlight the regulation contained in Article 46J, incorporated by Law 21,440 to DL 3,063 on Municipal Revenues, referring to operations with related parties, a matter directly linked to the fiduciary duty of loyalty. This duty, in general terms, consists of the duty of directors, and those who hold other senior management positions, to place the interest of the organization in which they perform their functions above any other particular interest, whether their own or that of a related person or entity. Despite its vital importance, this duty is not developed in the organic regulation of corporations and foundations in the Civil Code.

The aforementioned article establishes the following requirements and prohibitions for registered entities: (i) prohibition to remunerate services of its members, associates, directors, executives or related persons thereof « at values higher than the normal market values or those normally charged in conventions of similar nature, considering the circumstances in which the operation is carried out »; (ii) obligation of the member, associate, director or executive contracting with the donee entity, or its related persons, to abstain from the execution or authorization of the respective act or contract; and (iii) obligation to comply with the same requirements and conditions on the occasion of any other economic benefit obtained by the aforementioned persons. Failure to comply with such prohibitions and obligations entails the elimination of the organization from the registry, and the impossibility to apply for registration again, for a period of two years.

The absence of such a rule in the Civil Code leaves a very important gap in terms of a fundamental standard for the good governance of corporations and foundations. This is because related party transactions can result in the improper extraction of resources from an organization by charging for goods and services in excess of their market value or what an unrelated party would charge under similar circumstances. Thus, these types of operations can be used as mechanisms for formally non-profit entities to operate in practice as for-profit entities.

Although Article 551-1 of the Civil Code addresses some aspects of the matter, this regulation is much less comprehensive and more lax than that of Law 21,440. It is less comprehensive because it only restricts the remuneration of board members, without establishing limits to what their related persons or other persons in influential positions (for example, an executive director) may receive. At the same time, it is more lax because it does not establish a procedure or objective criteria for adopting this type of decisions.

Based on the foregoing, we believe that Law 21,440 fills a very important gap in the configuration of the duty of loyalty in corporations and foundations, establishing an objective criterion to limit the remuneration and economic benefits for their directors, executives, members, associates and persons related to them, along with expressly establishing an obligation of abstention for those who have an interest in the decision, act or contract. However, it is insufficient to completely fill this gap, since not all these entities are financed through donations with tax benefits and there are also other alternatives to do so, other than Law 21,440.

This should call for a discussion on the relevance of extending this regulation to all corporations and foundations, incorporating a rule of this nature in the Civil Code, and, beyond that, establishing it as a minimum standard for all corporations and foundations that intend to receive donations with tax benefits. All this to put the duty of loyalty in the central place it should have in the governance of this type of organizations.

Para mas información:

Gustavo Cuevas Manríquez

Socio Asociado 

gcuevas@cuevasabogados.cl 

José Olbrich  

 Senior

jolbrich@cuevasabogados.cl 

Felipe González 

Asociado Senior 

fgonzalez@cuevasabogados.cl