Extinctive prescription of ownership of shares for non-exercise of rights

In the Official Letter of reference, the Superintendence of Corporations reiterates that it is possible for the extinctive prescription of ownership of the shares of a company to operate when the holder of such shares does not exercise the rights granted under article 379 of the Code of Commerce within a term of ten (10) years. The foregoing in relation to the provisions of Article 2 of the Code of Commerce, which states that commercial matters that cannot be regulated by the commercial legislation, the provisions of the civil legislation shall apply to them.

The mentioned Official Letter brings as a novelty, that the declaration of extinctive prescription of ownership of shares corresponds to the Civil Judge and not to the Superintendence of Corporations, since the jurisdictional faculties granted to the latter by virtue of article 116 of the Political Constitution are exceptional, precise and determined, and among those that have been conferred to the latter, the declaration of the extinctive prescription of ownership of shares is not included.

Now then, the aforementioned declaration of prescription implies an affectation to the value of the original contributions corresponding to the share certificates and the capital stock of the company. For such reason and with the purpose of normalizing such affectation, the Superintendence of Corporations recommends to carry out any of the following alternatives:

First: Carry out a decrease of the capital stock (or subscribed) in an amount equal to the amount corresponding to the securities subject to prescription, in which case the relevant amount "could be taken to the profit and loss account (sic) "1, but such decrease would necessarily be subject to prior authorization by the Superintendence of Corporations in compliance with any of the assumptions set forth in Article 145 of the Commercial Statute.

Second: To increase the nominal value of the shares in proportion to the subscribed capital, in order not to decrease it. For this purpose, it must be taken into account that, upon cancellation of the prescribed shares, the intrinsic value of the other shares is increased.

It should be taken into account that, as a consequence of the execution of any of the alternatives, the respective amendment to the corporate contract will be required, modifying the number of shares, their par value or the subscribed capital.