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Chile Practical Advice: What are the Possible Power Structures for a Company?

What are the Possible Power Structures For a Company?

When companies initially set up in Chile, their operations are generally quite small with very little thought put into the organisational structure and the way the company will operate on a day-to-day level.

With good reason, most international companies who start operating in Chile are not accustomed to a business environment where powers need to be granted to specific people in order for the company to operate.

What this means is that the Chilean company’s General Manager/“Gerente General” or equivalent, needs to be granted specific powers by the company in order to attend to day-to-day functions. Such functions include entering into employment contracts, leases of office space and/or buildings or business contracts as well as attending to the company’s banking needs.

As a company grows from just a General Manager and a few key staff, they will start looking at the intricacies of their organisational structure and how individual powers can be granted so that the company is operated in the most efficient and effective way.

There is no single formula for granting powers that ensures the company runs optimally. The best power structure will be the one that best fits the company’s activities and individual circumstances.

In short, the powers may be granted using all types of structures and with great flexibility.

It is important to note that powers can be granted in many different forms, such as empowering a person individually, two people to act jointly, or empowering two people to act interchangeably. Furthermore, you can empower a person to act individually but when a specific operation exceeds “x” amount of dollars, you can force him/her to act jointly with another person, who will normally hold a position of higher authority.

In large companies, the powers granted are generally classified into the following categories:

1) Powers of free disposal of movable property other than company rights.

These powers include all those that are related to the selling of movable property as well as the disposal of intangible rights. For example, buy and sell goods, sell and buy merchandise and signing contracts.

2) Banking and Financial Powers.

Banking and financial powers are granted for all types of procedures that are performed with banks.

3) Employment Powers and Related Legislation.

These are granted to hire workers, represent the company before labour authorities, issue internal regulations, etc.

4) Management Powers.

These powers usually refer to transactions such as sales contracts, leases, along with any other type of commercial contract that need to be executed on behalf of the company.

5) Judicial and Delegate Powers.

These are related to the powers of legal representation of the company before courts, entities, and government institutions, among others.

6) Authority to enter into Financial Contracts.

Conclude transactions of foreign exchange, forwards, swaps, importing contracts etc.

Conclusion

Which powers are granted and to who will depend on the position of the person and the activities that they will need to perform within the company. For example, the Human Resources Manager will have employment powers but a Finance Manager may have the banking and financials powers along with the power to enter into financials contracts.

The above is just an example on how powers can be distributed. It is important to note that there is almost an endless amount of possibilities for structuring a company. Therefore, the power structure chosen must be adapted to the specific needs of the company, without sticking to a pre-established structure proven to work for other companies. What may work for them, may not work for you.

Harris Gomez Group is accustomed to assisting companies with organising their power structures to minimise the risk of individual employees abusing their powers while ensuring the company can operate smoothly and efficiently.

Written by Jorge Tuane

Jorge is a corporate and commercial lawyer that specialises in employment law. Jorge advises clients on business and legal structures, and is able to provide cost-effective solutions to matters including relationships with public entities, negotiation of contracts and corporate governance.