Converting a Company in Uruguay: Changing the Company Type Without Dissolving It
Over a company’s life, business needs change. A corporate structure that was ideal at incorporation can become insufficient, rigid or tax-inefficient over time. The good news is that Uruguayan law allows a commercial company to be converted from one type to another without dissolving or liquidating it, preserving its legal continuity, its RUT (tax ID) and its contractual relationships.
In this guide we explain what corporate conversion in Uruguay is, the most common types, the legal requirements, the costs involved and the implications with DGI and other agencies.
What Is the Conversion of Companies in Uruguay?
The conversion (transformación) of companies in Uruguay is the legal mechanism that allows a commercial company to adopt a different company type from the one it originally had, without being extinguished or creating a new entity. The company remains the same legal person: it keeps its RUT, its contracts, its debts, its assets and its commercial history. What changes is its legal form.
This mechanism is governed by the Commercial Companies Law No. 16,060 and its amendments. The law allows conversion between the different company types recognised in Uruguay: limited liability company (SRL), corporation (SA), general partnership, limited partnership, among others, with the specific rules that apply to the simplified joint-stock company (SAS).
Conversion does not involve a transfer of assets, does not require a new registration from scratch and does not require the novation of existing contracts. This makes it a very efficient tool compared with alternatives such as dissolving and re-incorporating, which are much more costly and complex.
Converting a Company in Uruguay Without Dissolving It: The Key Advantage
One of the most valued aspects of corporate conversion is precisely the ability to convert a company in Uruguay without dissolving it. This has very important practical consequences:
- The company keeps its RUT and its tax history with DGI.
- Contracts with clients, suppliers and employees remain in force without needing to be renegotiated or reassigned.
- Licences, permits and certificates obtained in the company’s name are kept.
- The company’s debts and obligations remain with the same legal entity.
- No taxable events for transfer of assets arise, except in specific situations discussed below.
This continuity is especially valuable for companies with a long history, long-term contracts or certifications that would be difficult to replicate in a new entity.
The Most Common Types of Corporate Conversion in Uruguay
Converting an SRL into an SA in Uruguay
Converting an SRL into an SA in Uruguay is one of the most frequent changes and usually responds to specific growth needs: opening up to new investors, issuing shares, accessing institutional financing or meeting the requirements of strategic partners or investment funds.
The SA offers greater flexibility for transferring ownership (shares circulate with fewer restrictions than the quotas of an SRL), the ability to issue different classes of shares and a more formal governance structure with a board of directors, which may be required by certain investors or international counterparties.
Converting an SA into an SAS in Uruguay: not permitted
A frequent question is whether an SA can be converted into an SAS in Uruguay to gain operational simplicity and stop paying ICOSA. The answer is no: Law 19,820, which created the simplified joint-stock company (SAS) in 2019, does not allow existing corporations to convert into an SAS. The reverse path — from SAS to SA — is possible.
For an SA that wants to reduce its costs or formalities, the alternatives must be analysed case by case with legal and tax advisers: for example, incorporating a new SAS for new activities and gradually winding down the SA, or reorganising the group’s structure. Each alternative has its own tax implications, so it should not be decided on the basis of cost alone.
Converting a Sole Proprietorship into an SRL in Uruguay
Converting a sole proprietorship into an SRL in Uruguay is a common step for entrepreneurs who started out on their own and, as they grow, need to limit their personal liability, bring in partners or access bank financing with a more formal structure.
Technically, a sole proprietorship is not a legal entity separate from its owner, so in the strict sense this operation involves incorporating a new SRL with assets contributed by the owner, rather than a conversion in the pure legal sense of the term. However, it is the equivalent process in practice and can be structured efficiently from a tax and asset point of view.
Requirements for Corporate Conversion in Uruguay
The requirements for corporate conversion in Uruguay vary depending on the original and target company types, but in general the process requires:
- Approving corporate resolution: the partners or shareholders must approve the conversion by resolution adopted with the majorities set in the bylaws or, failing that, by law. In many cases unanimity or qualified majorities are required.
- Conversion balance sheet: prepared by a certified public accountant, it shows the company’s financial position at the time of conversion and serves as the basis for adapting the capital to the new company type.
- New bylaws or articles of association: adapted to the requirements of the company type adopted, with all the mandatory provisions the law requires for that type.
- Public deed of conversion: the notarial instrument that formalises the transaction before a Uruguayan notary public.
- Legal publications: in the Official Gazette and a national newspaper, as the law requires for amendments to the bylaws that affect third parties.
- Registration with the General Registry Office (DGR): so that the conversion takes effect vis-à-vis third parties.
- Update with DGI: amending the RUT registration to reflect the new company type.
The Deed of Conversion of Companies in Uruguay
The central instrument of the process is the deed of corporate conversion in Uruguay. This document, executed before a notary public, must include:
- Full identification of the converted company (name, RUT, original type, registration details).
- A transcript of, or reference to, the corporate resolution that approved the conversion.
- The new bylaws or articles of association adapted to the company type adopted.
- The conversion balance sheet approved by the partners.
- The composition of the share capital under the new structure (quotas, shares, etc.).
- The appointment of the officers of the new company type (directors, statutory auditors, managers, as applicable).
- An express statement of the continuity of the legal entity.
The deed must be executed in the presence of all partners or their duly authorised representatives. Once signed, the legal publications and registration follow.
How to Change the Company Type in Uruguay: The Full Process
As a practical guide, the process to change the company type in Uruguay follows these steps:
- Preliminary analysis: assessing with a lawyer and an accountant whether conversion makes sense, the most suitable target company type and the tax implications.
- Preparing the conversion balance sheet: by the company’s accountant, dated the day before or the day of the conversion.
- Notice of meeting and corporate resolution: a partners’ or shareholders’ meeting approves the conversion with the required majorities.
- Drafting the new bylaws: the notary or lawyer prepares the bylaws adapted to the new company type.
- Executing the public deed: signing the deed of conversion before a notary.
- Publications in the Official Gazette and a national newspaper.
- Registration with the DGR: filing the deed and supporting documents for registration.
- Updates with DGI and other agencies: BPS, the BCU if applicable, and any sector regulator relevant to the company’s activity.
Corporate Conversion in Uruguay: Implications with DGI
The implications of corporate conversion with DGI in Uruguay are a critical aspect that must be analysed carefully before starting the process. In general terms:
- No taxable transfer of assets: since the same legal entity continues to exist, in principle there is no taxable event for transfer of assets. The RUT is kept, and so is the company’s tax history.
- Change in tax regime: if the target company type is taxed under a different regime from the original one (for example, if the company starts paying IRAE when it did not before, or vice versa), DGI must be notified and the changes take effect from the date of conversion.
- Possible IRAE adjustments: if there are revalued assets or accumulated results that remain within the new structure, accounting adjustments with tax impact may arise and should be assessed by the accountant.
- ITP and other taxes: depending on the assets involved and the structure before and after the conversion, it may be advisable to analyse in advance whether the property transfer tax (ITP) or other taxes apply.
- Formal obligations: the company must update its RUT with DGI with the new company type and, if applicable, change its chart of accounts, VAT method or other formal obligations.
The invariable recommendation is to involve the accountant from the start of the process, not just at the end to file the forms.
Costs of Corporate Conversion in Uruguay
The costs of a corporate conversion in Uruguay depend on the complexity of the transaction and the professionals involved. The usual components are:
- Notary fees: for executing the deed of conversion and the new bylaws. Generally calculated on the value of the share capital or as a fixed fee depending on the firm.
- Accountant fees: for preparing the conversion balance sheet and tax advice before and after.
- Lawyer fees: if a lawyer drafts the new bylaws or advises on the transaction.
- Registry fees (DGR): for registering the conversion.
- Legal publications: Official Gazette and a national newspaper; a relatively limited fixed cost.
In standard transactions, the total professional and registry cost can range from USD 1,200 to USD 3,500, depending on the type of conversion, the size of the company and each firm’s fees. Conversions with complex structures, multiple partners or high-value assets may exceed that range.
Conclusion
The conversion of companies in Uruguay is an efficient, secure and relatively accessible legal mechanism that allows a company’s legal structure to be adapted to its real needs without interrupting its activity or losing its legal identity. Whether you want to convert an SRL into an SA or adapt another company type within the limits the law allows, the process is well regulated and can be completed in a few weeks with the right professional team.
The key is to plan properly before starting: understand the tax implications with DGI, prepare the conversion balance sheet rigorously and draft new bylaws that truly fit the business’s objectives. At sociedadesanonimas.uy we support every conversion with comprehensive advice, from the preliminary analysis to final registration.
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