Participation of Commercial Companies in Nonprofit Entities

Legal Recognition of Commercial Companies and Nonprofit Entities

The Civil Code provision governing legal entities recognizes as collective persons both civil and commercial companies regulated by the Civil Code, the Commercial Code, and the corresponding laws. In that sense, Bolivian law recognizes both commercial companies and nonprofit organizations as collective persons or legal entities.

This means that they:

• Have their own legal capacity
• May acquire rights and assume obligations
• Act independently from their members

Likewise, Law No. 351 defines nonprofit civil entities as a “group of private law persons” that carry out activities aimed at the common good. Since the term “persons” is not restricted only to human beings, this includes legal entities as well.

Therefore, from a legal standpoint, there is no general prohibition against one legal entity participating in another.

Specific Examples in the Financial Sector

Likewise, the law allows legal entities to form and establish institutional networks or other coordinating bodies with their own legal personality.

In the financial services field, there are nonprofit structures that expressly allow the participation of legal entities as members or founders:

• Development Finance Institutions (IFD): These are nonprofit organizations whose founders may be natural persons and/or legal entities with similar purposes.
• Communal Financial Entities (EFC): These are nonprofit entities created by one or more producer organizations or other legally constituted sectors.

For a commercial company to join a nonprofit entity, the following conditions must be observed:

• Bylaws: Participation in other entities must be compatible with the company’s corporate purpose and permitted by its bylaws.
• Bylaws of the nonprofit entity: The association’s or foundation’s bylaws must specifically determine the admission conditions for its members.
• Representation: As a legal entity, the commercial company must act within the nonprofit entity through its duly accredited legal representative.

Legal Capacity Limited by the Corporate Purpose

One of the key principles of the Civil Code is that every legal entity must act within the purposes for which it was created.

This means that:

• A commercial company may participate in an NGO.
• However, such participation must be compatible with its corporate purpose.

For example:

If an SRL has as its purpose consulting activities, social development, or corporate social responsibility, its participation in an NGO would be fully consistent.

If that connection does not exist, the validity of such participation could be questioned.

Accordingly, participation is valid, but it must be aligned with the company’s constitutive purpose.

Member Status Does Not Prevent the Participation of Companies

It is important to note that the Civil Code provision regulating associations states that member status is strictly personal, which is often used by authorities as grounds to deny registrations.

In our view, this principle must be interpreted correctly, because it does not mean that only natural persons may be members. Rather, it means that the rights and obligations attached to membership are not freely transferable.

In the case of a legal entity:

• The company acts as a single member.
• It appoints representatives to exercise its rights.

A Company May Not Obtain Profits Within an NGO

This is the most important point from a legal perspective.

Even though a commercial company has a profit-making purpose, when it participates in an NGO:

• It may not receive profits.
• It may not obtain economic benefits from the organization.
• It may not distribute surpluses.

The applicable rules require that:

• All resources generated by the NGO
• Must be allocated exclusively to its social purposes

This means that the company’s participation must have an:

• Institutional character
• Social character
• Strategic character, without direct profit-making intent

Legal Risks of an Improperly Structured Participation

Poor legal structuring may lead to problems such as:

• Objections during the legal personality registration process
• Administrative sanctions
• Loss of nonprofit status
• Liability of members

Especially if:

• Indirect distribution of benefits is detected
• The NGO is used as a commercial vehicle

Why Would a Company Participate in an NGO?

From a strategic perspective, there are several valid reasons:

• Corporate social responsibility (CSR) programs
• Access to international cooperation
• Development of social projects
• Institutional positioning
• Public-private partnerships

Practical Recommendation

Before integrating a commercial company into an NGO, it is advisable to:

• Review the company’s corporate purpose
• Analyze the NGO’s bylaws
• Design an adequate legal structure
• Clearly document the company’s role

In summary, commercial companies may participate in NGOs, foundations, and associations, provided that such participation is consistent with their corporate purpose, strictly respects the nonprofit nature of the entity, and does not generate economic benefits for its members. Proper legal planning makes it possible to use this structure safely and efficiently.