international employment law firm alliance L&E Global

Starting a business in Chile

1. Introduction

From a labour perspective, Chile offers a semi-flexible labour relationship system. Although employment contracts must comply with minimum regulations in relation to working hours, remuneration, among others, there are various forms of contracting that allow the labour relationship to be adapted to the economic sector in question. Likewise, our labour legislation tends to labour stability, so terminating an employment agreement must comply with the causes stablished by law, and in some cases, entail a year per service severance. Our labour legislation is protective of the fundamental rights of workers, such as life, health and integrity, private life, freedom of work and freedom of association, recognising and regulating labour union activity and collective bargaining processes. In accordance with an abundant labour legislation, we have a specialised labour justice system for these matters.

Cariola Díez Pérez-Cotapos is a full-service law firm with vast experience, both locally and internationally, and one of the leading law firms in Chile. We deliver value to our clients, with serious proposals and accurate and prompt responses in all the areas that are important when doing business in Chile. At Cariola Díez Pérez-Cotapos we have built a culture of teamwork, always seeking to consolidate teams of excellence, formed by specialist lawyers, committed at the highest level to offer creative, realistic and efficient solutions, always ensuring the best interest of our clients. We are convinced that our most important assets are people, our lawyers and our clients. We promote meritocracy and non-discrimination.

Regarding our labour and immigration practice, we advise companies from various economic sectors with presence in different regions of the country, both national and international, in matters of individual and collective labour law, focusing on the reality of their organisation and sector, to deliver a legal solution tailored to their needs, contributing to the construction of their strategy. Our lawyers are specialised in labour, social security, and immigration law with experience from different fields, which allows us to deliver solutions with a systemic approach. Our services can be advice on the day-to-day of the company, including collective bargaining processes advice in restructurings, before complex conflicts, and the legal defence of the employer. Periodically, we give lectures and seminars to clients to train their people management areas and we send labour alerts to our clients to keep them updated on new legal regulations, rulings of the Labour Department and relevant judicial jurisprudence.

2. Labour and Employment Law Requirements

a) Employer Policy Requirements

According to our labour legislation, employers must have in place the following main policies:

  • Internal Regulation of Order, Hygiene and Safety: this policy must stablish the general duties and restrictions for the employees, as well as the order, hygiene and safety measures that must be complied, as well as the proceeding in case of an occupational illness or accident.
  • Right to equal compensations between men and women: the Employer must comply with this principle and employees can claim to the administration of the company, which must investigate and respond within 30 days.
  • Labour inclusion for disabled people: Employers that have 100 or more workers hired, regardless of the line of activity to which they are dedicated and the fact that they pursue economic, social or charitable purposes, must comply with their obligation to hire 1% of people with disabilities or assigned to a disability pension. Also, these employers must have at least one “Inclusion Manager”, who has specific knowledge in matters that promote the labour inclusion of people with disabilities, and promote policies on inclusion matters within, which must be reported annually to the Labour Directorate.
  • Sexual harassment: Even though still it is not an obligation to have a specific prevention policy but an investigation protocol, it is recommended to establish anti-harassment measures and raise awareness about this topic, assure its dissemination and compliance, which will tend to a good work environment and safeguard the eventual employer’s responsibility by taking preventive measures.
  • Labour harassment: As with sexual harassment, even though still it is not an obligation to have a specific prevention policy but an investigation protocol, it is recommended to establish one to prevent the occurrence of this situations and safeguard the eventual employer’s responsibility by taking preventive measures.
  • UV Radiation protection: Employers whose workers are exposed in their workplace to ionising radiation must stablish a protocol for the evaluation of the occupational exposure to radiation ionising agents in workplaces.
  • Maximum height to be supported by employees: Because the employer must avoid permanent manual handling of the load and implement the necessary security measures when performing this function, is recommended to stablish a Protocol for the Evaluation and Control of Risks Associated with Handling or Manual Handling of Cargo.
  • Protocol for the prevention of psychosocial risks: It has been recently included in our regulation as a mandatory protocol which must be stablished and complied by employers.
  • Regulation of teleworking: Both remote work and teleworking are subject to the rules on working hours, and the employer must implement at its cost a reliable mechanism for recording compliance with the remote working hours, risk prevention measures, among others, reason why its regulation must be included in the Internal Regulation.

b) Employee Training Requirements

Employers are required to complete certain training activities. The following is statutorily mandated training that employers must provide:

  1. Teleworking training: Regarding the risks associated with that kind of work that could cause an accident or occupational disease, such as musculoskeletal problems derived from non-ergonomic work positions.
  2. Right to know: Duty to inform the employee of the risks associated with work (fire and earthquakes evacuations, etc.).
  3. Inclusion training regarding people with disabilities: Employers with 100 or more employers must prepare and execute annual training programs for their staff, to provide them with tools for effective labour inclusion within the company.

c) Employment Agreements

Labour Contracts

Our legislation recognises three categories of labour contracts: individual labour contracts, collective labour contracts, and special contracts.

(1)       Individual Labour Contract

This is a written contract between an employer and an employee whereby they are bound, the employee to render personal services under ties of dependence and subordination to the former, whereas the employer to pay compensation for those services.

Article 10 of the Labour Code states the minimum provisions that must be included in the individual labour contract, namely the date and place of the contract, the identity of the parties, the position of the employee and job description, the place of work, the remuneration to be paid by the employer, the terms of payment (at maximum 1-month intervals), workday, the duration of employment and the benefits in cash or in kind to be provided by the employer.

(2)       Collective Labour Agreements

The collective labour contract is understood as “the convention celebrated between employers and employees with the purpose of establish common labour conditions, remunerations or other benefits in kind or money, for a fixed period of time”.

The Collective Contract must be agreed in writing and must be registered in the Labour Inspection within 5 days since its subscription, besides; it cannot have a term of less than two years or more than three years. Also, the law stipulates the minimum clauses to be included in these instruments.

The Labour Code, also preview the possibility that the employer and one or more Unions freely negotiate a collective agreement, without being subject to a ruled legal proceeding, which is also considered a labour collective instrument.

(3)       Special Contracts

Our law also considers the existence of special labour contracts. Each of these contracts have their own characteristics and specifications, e.g. the apprenticeship contract which is restricted to individuals under 21 years of age; farm employees’ contracts; contracts for employees on ships or at sea and temporary dock employees and contracts for domestic help. Recently, was ruled the work on digital platforms, recognising the law two kind of bonds, an independent one, when the service is rendered freely, despite the terms and conditions of the platform, and a dependent one, in case the service is rendered under a subordination scheme.

3. Corporate Law Requirements

a) Compliance for Incorporation

There are several structures in which companies may be organised to undertake activities in Chile. From non-profit organisations to stock corporations, Chilean law sets forth different applicable regimes according to the different needs.

Generally, a foreign company may freely select one of the forms of organisation recognised by law. In the case of banks, insurance companies and fund managing companies (e.g., pension-fund, etc.), among others, the law sets out certain regulatory requirements to be fulfilled, i.e. prior authorisation by the competent local authority.

As a general rule, no particular structure is mandatory to undertake business in Chile, save for certain specific businesses, e.g. banking services, insurance companies, management of funds, etc. Therefore, the various considerations set out below must be carefully weighed to determine the most appropriate structure.

Business Organisations in Chile

  • Branch of a foreign legal entity: To establish a branch of a foreign legal entity in Chile, it is necessary that certain consul-certified and legalised, or duly apostilled, documents be registered with a local Notary Public. Thereafter, the agent must grant a public deed containing a statement of establishment for the branch. A summary of said statement must comply with certain publicity requirements. No prior official authorisation is required. The foreign entity is liable for all the activities and business carried out by the Chilean branch, and this liability is not limited to the assets located in Chile. Regarding capital, no minimum is required for the establishment of a branch of a foreign entity in Chile. Any amount of capital may be determined at the time of establishment of the branch, without being mandatory that said capital be paid-in on the date of establishment.
  • Corporations (Sociedad Anónima): In general terms, Chilean regulations on corporations do not differ much from those of other jurisdictions. Under Chilean law (basically, the Corporations Act -Law Nr. 18,046- and its Regulations), corporations may be either publicly-held or closely-held corporations. Publicly-held corporations are those whose shares are registered in the Securities. Registry held by the Financial Market Commission (Comisión para el Mercado Financiero or CMF), which include, among others, those corporations whose shares are subject to public offering, or those having 500 or more shareholders or in which at least 10% of the shares belong to 100 shareholders, excluding for purposes of calculation thereof those shareholders who individually or through other individuals or legal entities exceed such percentage, and those who voluntarily register their shares in such registry or who are legally obliged to do so. Closely-held corporations are basically those not falling within the above definition. Publicly-held corporations are subject to the supervision of the CMF, whereas closely-held corporations are not. However, if a corporation, due to particular regulations, is required by law to be supervised by the CMF, such corporation is not deemed per se to be a publicly-held corporation, but it becomes subject in any event to disclosure and publicity requirements applicable to such kind of companies (e.g., concessionaires of public works). Shareholders are only liable for the amount they have agreed to pay-in for subscribed shares. Capital must be paid within three years from the date of execution of the incorporation deed, or within such shorter period as provided in the by-laws, if any, indexed pursuant to Chilean inflation rates, or adjusted under other specifically-agreed mechanisms (e.g. exchange rate).
  • Simplified Corporations (Sociedad por Acciones): Under legislation enacted in 2007 to encourage -among other things – private entrepreneurship and investment in venture capital companies, a new kind of company structure was introduced in Chile (namely, “Sociedad por Acciones”, or “SpA”), which basically provides for a corporate structure similar to that of a closely-held corporation, although having some material differences to reduce formalities and administrative costs attached generally to corporations. Accordingly, the SpA is not an appropriate vehicle to raise capital from the public and if, as a matter of fact, it is held by 500 or more shareholders, or at least 10% of the shares belong to a minimum of 100 shareholders (excluding those shareholders who individually or through other individuals or legal entities exceed such percentage), over a period longer than 90 days, they become governed, as a matter of law, by the provisions applicable to publicly-held corporations. SpAs are governed by the Commerce Code, but in the absence of provisions therein (and in the relevant by-laws), they are governed by those provisions applicable to closely-held corporations. Some noteworthy peculiarities of the SpAs (as opposed generally to corporations) are the following: (a) Sole shareholder; (b) Incorporation and Amendments; (c) Capital; (d) Voting rights; (e) Management; (f) Distribution of profits.
  • Limited Liability Company (Sociedad de Responsabilidad Limitada): Under Chilean law, the interested parties may set up an unlimited liability company. Since limited liability companies are patterned on the same rules as those set out for unlimited liability companies, except mainly for this specific characteristic, we will now refer to rules that are commonly applicable to both. Partners’ liability is limited to their obligation to contribute a given amount as capital into the company, as indicated in the by-laws. There is no minimum capital requirement to incorporate a limited liability company in Chile. Partners may freely determine the terms and conditions for the payment they intend to contribute to the company.

b) Post Incorporation Registrations

Once the entity has been formed, there are some post formation registrations which are necessary such as must request its Unique Tax Role before the Internal Revenue Service. This Identification number is necessary to open a bank account and to hire employees, since the employer will need this information to pay the health and social contributions, as well as other payments regarding the employment agreements.

4. Payroll and Benefits Providers

In Chile, most of large employers outsource payroll and benefit responsibilities to third providers. This reduces the administrative costs and companies assure that all complex procedures related to payroll are managed by expert companies, reducing liabilities. A number of international payroll companies have subsidiaries in Chile, and we can support to reach some of them. As we are always looking forward, we have already planned the incorporation of a specific Human Resources software that will enable us to consolidate every single benefit that currently is available for each one of our collaborators.

Any questions

Ask our member firm Cariola Díez Pérez-Cotapos in Chile