Doing Business in Andorra, Andorra Business Conduct - Allo' Expat Andorra
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Doing Business in Andorra
 
 
 
 
 

General

The Corporations Act 1983 governs corporations formed in Andorra. There are three types of company, the Societat de Responsabilitat Limitada and the Societat per Accions both having shareholders with limited liability, and the Societat Colectiva, whose partners have unlimited liability.

Companies with commercial or profit-seeking goals must be owned at least two-thirds by Andorran citizens; this means, people born in Andorra, or Privileged Residents – those with more than 20 years' residence (in the case of Spanish and French nationals, the period of continuous residence is reduced to a minimum of 10 years). In practice, the Andorran majority owner of a business (called a 'titular' in Catalan) can be an Andorran individual or professional adviser who is willing to cede operational control of the business to the foreign 'owner', and sign a share transfer in blank, in return for a fee (called 'prestanom' in Catalan). In practical terms the titular is a nominee; but not in legal terms. Although this system is in everyday use in thousands of companies, and even though formal contracts are entered into between the parties, the inescapable legal fact remains that the titular can wield considerable power if he wants to. Presumably one is on fairly firm ground with a established, professional titular.

However, discussions have taken place on proposed changes to the law under which the limit on foreign participation would be raised to 40%, and non-Andorrans would be able to own 100% of certain types of company, including: audio-visual production and marketing, technological and scientific research, production of medicines, E-commerce, and broadcasting. Further sectors may also be opened up.

It has also been proposed that companies with turnover in excess of €5m annually will be subject to compulsory audit.

In early 2008, it emerged that the government was progressing proposals for legislation that will allow foreigners to control companies in certain business sectors. Government spokesman, Juli Minove announced that the legislation would be introduced shortly, and would allow foreign capital to control new local enterprises in sectors that are not currently served by existing Andorran businesses.

This process crystalised into the Foreign Investment Law, which came into effect on November 7, 2008, and allows the opening up of 200 economic sectors to entrepreneurs and businesses from other countries. As a result of the new legislation, foreigners can now hold 100% – until now the limit was 33% – of the capital of a business in one of the designated sectors.

The Foreign Investment Law completes the legislative package which also contains two laws that have already been adopted: The Law of Companies and The Law of Business Accounting. This package is intended to increase the international competitiveness of Andorra, attract foreign investors into high value added sectors and strengthen the legal framework for business.

The new Company Law regulates the behaviour of the companies in the Principality, regardless of whether they are Limited Companies or Plcs. A new Accounting Law establishes accounting requirements for Andorran companies and the associated responsibilities.

The government anticipates the adoption of two additional laws. One is intended to establish a tax rate on the profits of companies of between 5 and 10%. The other will create a value-added tax of around 4% that will replace all of the existing indirect taxes.

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