FOUNDERS’ BONDS IN BOLIVIA
Individuals who sign the articles of incorporation of a corporation or who subscribe to the public offering program during the formation process are legally recognized as founders. To acknowledge this status, the company may issue founders’ bonds. These instruments do not represent equity capital or confer political rights; rather, they grant the holder a right to a share of profits under pre-established conditions.
LEGAL REQUIREMENTS FOR FOUNDERS’ BONDS
To be valid, founders’ bonds must include the following mandatory elements:
- An explicit mention of “founders’ bond” in the document text
- The company’s legal name, domicile, duration, share capital, date, and registration number with the Commercial Registry
- A unique bond number and the total number of bonds issued
- Terms of profit participation and duration of payments
- Place and date of bond issuance
- Signatures of the company’s authorized directors or administrators
Legally, these bonds cannot be converted into shares and do not confer any rights over the company’s capital. Their function is strictly economic, without involving any representation or administrative powers within the corporation.
HOW FOUNDERS’ BONDS ARE REGULATED
Although founders’ bonds are not shares, certain rules governing securities apply to them subsidiarily and as relevant. These include regulations on indivisibility, payment coupons, and representation in cases of co-ownership.
For instance, if a founders’ bond is jointly owned by several beneficiaries, the company will only recognize a common representative appointed by them—or, in the event of a dispute, one designated by judicial order—following the principles of co-ownership. Founders’ bonds may also include physical coupons for profit collection, similar to bearer share dividend mechanisms.
PARTICIPATION BONDS IN BOLIVIA
Participation bonds are another type of title that may be issued to employees of the company if authorized by the corporate bylaws or articles of incorporation. These bonds grant the right to share in the company’s annual profits, in accordance with the conditions internally defined by the corporation.
A key difference is that participation bonds are non-transferable and valid only while the employment relationship remains active. Once the employment ends—whether through dismissal, resignation, or retirement—the rights associated with the bond expire automatically.
For example, if an employee holding a participation bond is terminated midway through the fiscal year, they will no longer be entitled to share in the annual profits, unless the bylaws explicitly state otherwise.
CONCLUSION
In conclusion, founders’ bonds and participation bonds are legitimate mechanisms within the legal framework of Bolivian corporations for recognizing special contributions without altering the company’s share structure. While they confer economic rights, these instruments maintain a clear separation from ownership and management, thereby reinforcing corporate stability and governance.
Our law firm specializes in corporate structuring and participation instruments. If you have questions related to this topic or require legal assistance, feel free to contact us for professional support.
Frequently Asked Questions (FAQs)
Who can receive founders’ bonds in a corporation?
Those who take part in the formation of the corporation, either by signing the articles of incorporation or subscribing to the program in the case of public formation.
Can I convert a founders’ bond into company shares?
No. These bonds cannot be converted into shares and do not represent any stake in the company’s capital.
What happens to a participation bond when the employee leaves the company?
It automatically expires, as the rights granted are conditional upon an active employment relationship.
Do founders’ bonds allow participation in company decisions?
No. They do not grant voting rights or administrative participation in the company.
Is issuing participation bonds mandatory for all corporations?
No. They can only be issued if expressly provided for in the company’s bylaws or articles of incorporation.
The content of this article does not reflect the technical opinion of Rigoberto Paredes & Associates and should not be considered a substitute for legal advice. The information presented herein corresponds to the date of publication and may be outdated at the time of reading. Rigoberto Paredes & Associates assumes no responsibility for keeping the information in this article up to date, as legal regulations may change over time.
