An Expert's Guide to Drafting a Legally Sound Partnership Agreement in Ecuador

Establishing a business venture in Ecuador, particularly for expatriates, requires navigating a legal framework with its own distinct nuances. As an Ecuadorian attorney who has guided countless foreign entrepreneurs through this process, I know that the foundation of any successful partnership is not just a shared vision, but a robust, legally compliant agreement. This document—formally the Escritura Pública de Constitución de Compañía—is your primary defense against future disputes and the official charter for your business journey. This guide moves beyond generic templates to provide the specific, actionable advice needed to create a partnership agreement that is clear, compliant, and tailored to Ecuadorian law.

Choosing Your Corporate Structure: Beyond the Basics

Before drafting begins, selecting the correct legal entity is paramount. While several options exist, two structures are most relevant for new businesses, governed primarily by the Ley de Compañías.

• Sociedad por Acciones Simplificada (S.A.S.): Introduced in 2020, the S.A.S. has rapidly become the vehicle of choice for startups and SMEs. Its popularity stems from its flexibility: no minimum capital is required, it can be established by a single person, and its bylaws can be highly customized. The process is streamlined and can often be completed entirely online, a significant advantage. This structure is regulated by Resolución No. SCVS-INC-DNCDN-2020-0012 of the Superintendency of Companies.
• Compañía de Responsabilidad Limitada (Cía. Ltda.): The more traditional choice, this structure limits the liability of its partners (socios) to their capital contributions. It requires a minimum of two partners and a minimum capital of $400, which must be fully subscribed and paid upon incorporation. While less flexible than an S.A.S., its established reputation can be beneficial in certain industries.
• Sociedad de Hecho (De Facto Partnership): An informal arrangement lacking legal registration. This structure is extremely risky and strongly discouraged. It offers zero liability protection, meaning partners are personally responsible for all business debts, a situation that can have devastating financial consequences.

Essential Clauses of an Ecuadorian Company Constitution

Your Escritura de Constitución must be drafted in Spanish and meticulously address the following elements to be approved by a notary and the Superintendencia de Compañías, Valores y Seguros.

1. Complete Identification of Partners (Socios o Accionistas):

   • Full legal names, nationalities, and clear identification numbers (cédula for residents, passport for non-residents).
   • Hyper-Specific Detail 1: Critically, you must state each partner's marital status and the name of their spouse. Under Ecuadorian law, the default marital property regime is the sociedad conyugal (community property). This means business shares acquired by one spouse are generally considered joint property. Failing to correctly state this can create severe complications during a partner's divorce or upon their death. This must be declared accurately to the notary.

2. Corporate Name and Purpose (Razón Social y Objeto Social):

   • The official business name, which must be unique and reserved online through the Superintendency's portal.
   • A precise description of the company's activities. Avoid ambiguity. An overly broad objeto social can be rejected, while a narrow one may illegally restrict future business pivots. This clause must align with the activities permitted under Ecuadorian law.

3. Capital Contributions (Aportes de Capital):

   • Type and Value: Detail exactly what each partner contributes—cash (numerario) or assets (en especie). Per Artículo 102 de la Ley de Compañías (for a Cía. Ltda.), capital must be fully paid at the time of constitution.
   • Valuation of Non-Monetary Assets: If contributing assets like equipment or property, a formal valuation report may be required. Overvaluing assets is a serious offense. For S.A.S. companies, the rules are more flexible, but accurate valuation remains crucial for partner equity.

4. Profit and Loss Distribution (Distribución de Utilidades y Pérdidas):

   • The default is distribution proportional to capital contribution. However, your agreement can specify a different arrangement. This must be explicitly stated. Artículo 112 de la Ley de Compañías governs the distribution of profits for a Cía. Ltda., requiring a portion to be set aside for a legal reserve.

5. Management and Administration (Administración y Representación Legal):

   • Define the management structure. Will there be a single President/General Manager (Gerente General) or a board?
   • Crucially, define the powers of the legal representative. Can they take out loans or sell major assets without partner approval? The standard powers granted by law are broad; your agreement is where you establish specific limitations.
   • Hyper-Specific Detail 2: The appointed Legal Representative, if a foreigner, must have a valid visa that permits them to work and hold an administrative position (e.g., an investor, professional, or rentista visa). Attempting to appoint someone on a tourist visa is a common mistake that will halt the registration process and is a violation of the Ley Orgánica de Movilidad Humana.

6. Partner Exit, Expulsion, and Death:

   • Withdrawal: Outline the procedure for a partner to voluntarily exit, including the valuation method for their shares (e.g., book value, agreed-upon formula) and the payout timeline.
   • Expulsion: Specify the grounds for forcibly removing a partner (e.g., fraud, breach of contract). This clause must be carefully drafted to be legally enforceable.
   • Death or Incapacity: What happens to a deceased partner's shares? The default is transfer to their legal heirs. Your agreement can provide the remaining partners the first right of refusal to purchase the shares, preventing unwanted third parties from entering the business. This is addressed in Artículos 121 and 122 of the Ley de Compañías.

7. Dispute Resolution (Solución de Controversias):

   • Do not leave this to chance. Specify a clear mechanism. Stipulating mediation followed by arbitration at a recognized center like the Centro de Arbitraje y Mediación de la Cámara de Comercio de Cuenca is often faster and more private than litigation in the public court system.

The Formal Incorporation Process: From Draft to RUC

1. Reserve the Company Name: Done online via the Superintendency of Companies portal.
2. Draft the Minuta: This is the draft of your company's constitution and bylaws, prepared by an attorney.
3. Obtain a Digital Signature (Firma Electrónica): Hyper-Specific Detail 3: This is the most common and frustrating roadblock for expats. You cannot begin the online company registration process without a valid firma electrónica in a token or file format, obtained from an authorized entity like the Registro Civil or Security Data. The process to get one can take several days and requires an in-person appointment. Many entrepreneurs waste weeks trying to use the online portal before realizing this is a mandatory prerequisite.
4. Notarization: Your attorney submits the minuta to a public notary, who elevates it to an Escritura Pública. Hyper-Specific Detail 4: Notary and registration costs are not arbitrary. For a Cía. Ltda. with the minimum capital of $400, expect to pay a notary fee of approximately $180-$250.
5. Registration: The notary electronically submits the Escritura to the Registro Mercantil (Mercantile Registry). The registration fee is a fixed tariff, typically around $30-$40 for a new company.
6. Approval from Superintendency: The documents are reviewed and approved.
7. Obtain the RUC (Tax ID): With the approved documents, you can now obtain your company's tax ID (Registro Único de Contribuyentes) from the SRI (Servicio de Rentas Internas) using Formulario 01A.

⚠️ Legal Alert: When to Immediately Consult an Attorney

Do NOT proceed on your own if:

• You are forming a partnership with significant non-monetary contributions (real estate, intellectual property).
• Any partner is contributing capital from a foreign source, which may trigger anti-money laundering (UAFE) reporting requirements.
• You require a complex share structure or different classes of shares.
• Partners have different nationalities and tax residencies, creating complex cross-border tax implications.

Conclusion: Your Agreement is Your Armor

Drafting a partnership agreement in Ecuador is a formal legal process, not an informal arrangement. A well-structured Escritura de Constitución, grounded in the Ley de Compañías, provides the legal armor your business needs to operate confidently, resolve disputes efficiently, and build a sustainable enterprise. By addressing these critical details and engaging qualified legal counsel from the outset, you transform a legal requirement into a strategic asset for your business's success.