Understanding the Costs of Incorporating a Company in Peru

A comprehensive guide for foreign entrepreneurs.

When clients ask about "the cost of incorporating a company," they often focus solely on legal fees. However, the real budget includes various third-party disbursements. These can encompass registry fees, notarial expenses, legalizations, translations, apostilles, and sometimes consular and courier costs. Since we include these expenses in our legal fees, it is crucial to note that as additional costs rise, legal fees will also increase.

This perulegalsetup.pe blog post compares three alternatives, focusing exclusively on out-of-pocket expenses. This means we will look at payments made to public entities or external providers, excluding legal fees:

• Incorporation of a company in Peru with final shareholders (often foreign) acting through powers of attorney.
• Incorporation of a company in Peru with initial local shareholders who later transfer the shares to the final shareholders.
• Registration of a branch in Peru of a company incorporated abroad.

Key variables influencing your budget

The final amounts depend on various factors that can change the mix of expenses.

1. Calculation base

Some public costs are determined by fixed rates, while others are variable and linked to share capital. For instance, in the registry incorporation process, there is usually a distinction between a qualification fee and a registration fee. The latter increases with the amount of the company's capital stock. Additionally, certain acts, like appointing representatives or attorneys-in-fact, incur extra charges per person registered.

2. Number of parties and documents

If there are multiple final shareholders, and a separate power of attorney is needed for each, costs can multiply quickly. This is especially true for consular powers, where each additional document means more issuance, legalization, and registration costs.

3. Authentication route for foreign documents

For registry purposes, foreign documents must be in Spanish or accompanied by an official translation. They must also comply with international formalities: apostille if the country is a member of the Convention, or a chain of consular legalizations if not.

4. Use of digitalization for consular and registry

In matters of consular powers, digital submission schemes can drastically reduce costs associated with physical shipment and in-person legalization.

Incorporation with powers of attorney

This alternative is popular for final shareholders, whether individuals or legal entities, located outside Peru. They can incorporate the company without traveling by granting powers of representation to sign incorporation minutes and public deeds, and to complete registration.

Consular costs of the power

Under the Peruvian consular fee schedule, the "Consular Sol" is roughly equivalent to US$ 1.00. A power of attorney granted by public deed before a Peruvian consulate typically has a base fee of around 45 consular soles. This can vary by office, with additional charges for extra grantors or attorneys-in-fact, as well as costs for copies or certified extracts.

Physical shipment of consular documents

If using a traditional paper-based scheme, international courier costs are added. A reference cost is around USD 150 per shipment. This can vary based on the country, urgency, weight, and courier provider.

Legalization of consular signatures in Peru

A common surprise for clients is that to use certain consular documents in Peru, mandatory legalization of the consular signature is required. This must be done physically before the Ministry of Foreign Affairs of Peru, with a published cost of S/ 33.00 per signature.

If the consular document contains more than one signature, the budget may increase based on the consular protocol and type of instrument. The public rate is published per signature, but the number of legalizations to be paid depends on how the document was issued at the Peruvian consulate abroad.

Additionally, if the document is not in Spanish, it must be translated by a sworn public translator. If it originates abroad, it must comply with apostille requirements or the chain of legalizations.

Registration of the power before the Public Registry

Besides having the power of attorney, it is mandatory to register it physically before the Peruvian Companies' Registry. This facilitates its enforceability and use. As a reference, the registry fee for powers granted abroad is approximately S/ 20.00.

Base costs of incorporating the company

These costs also exist in alternative two, but they are included here for a complete overview.

On the registry side, the incorporation fee includes at least a qualification fee of S/ 57.70, a variable registration fee based on share capital, and additional charges for appointments of representatives at S/ 32.00 per manager, president, attorney-in-fact, or registered power regime.

On the notarial side, public deed costs vary by notary office and commercial practice. Notarial fees can differ based on the case and each notary's internal criteria.

After incorporating the company, the representative must legalize corporate books before a Public Notary. The cost is approximately USD 30 per book. Every company will need a General Shareholders' Meeting Minutes Book and a Share Registry Book. If the company has a Board of Directors, it will also need a Board of Directors' Minutes Book.

Approximate registration and notary costs

• Name reservation: approximately USD 10.
• Public deed: approximately USD 500.
• Registry filing of the incorporation: approximately USD 200.
• Registration of each power: approximately USD 30.

Incorporating with local shareholders

This alternative aims to reduce time and costs associated with international representation documentation at the initial stage. The company is incorporated with local shareholders, and later, ownership is transferred to the final shareholders.

Base costs in notary and registry

For name reservation, the approximate cost is USD 10. The same components apply for incorporation registration: qualification and registration linked to capital, and charges for appointments.

The subsequent transfer

While this alternative reduces initial costs, a transfer of shares must still be executed according to Peruvian regulations and the company's statutes. The registry regulation for companies states that the transfer of shares is not a registrable act in the Peruvian Companies' Registry. However, under the General Corporations Law, a transfer of shares may be ineffective against the company if it does not comply with the corresponding rules. This typically refers to internal corporate formalities like notice and annotation in the company's books.

This results in typical market expenses that vary case by case:

• Notarial legalization of signatures on a private share transfer agreement, if required by the bylaws (usually not required).
• Opening and legalization of corporate books, such as the share registry book or minutes books, similar to alternative 1.

In summary, the local shareholder alternative is cheaper for starting a company.

Registering a branch in Peru

Registering a branch in Peru differs from incorporating a new Peruvian legal entity. Legally, a branch is a secondary establishment without independent legal personality. It has permanent legal representation and autonomy within its assigned scope, while the parent company is liable for its obligations.

Minimum documents required by law

The General Corporations Law requires that the public deed establishing a branch in Peru of a foreign company contain at least:

• A certificate of validity of the parent company confirming its capacity to establish branches.
• A copy of the articles of incorporation and bylaws or equivalent instrument.
• A resolution from the competent body approving the establishment of the branch, indicating assigned capital, domicile, permanent legal representative, powers, and submission to Peruvian law.

Each of these documents may generate issuance or certification costs in the country of origin and international formalization expenses to be effective in Peru.

Apostille or chain of legalizations

If the country of issuance is a member of the Apostille Convention, the process is simplified through a single apostille certificate issued by the competent authority of the country of origin. If not, the chain of legalizations must be budgeted before presenting the document in Peru.

Official translation in Peru

If documents are issued in a language other than Spanish, they must be translated, adhering to official standards. Peru maintains an official directory of sworn public translators for use in official procedures.

Shipment to Peru, notary, and registry

If physical apostilled or legalized documents are used, international courier costs are added. The branch is formalized by public deed and registration, generating notarial expenses and registry fees similar to other corporate acts. These vary according to assigned capital, with a minimum cost of USD 1,000.

Practical comparison and budgeting recommendations

The most useful comparison is not just which alternative is cheaper, but rather which cost categories appear or disappear and which variables multiply expenses.

Incorporation with powers of attorney increases costs mainly due to the multiplication of documents when there are several final shareholders. Incorporation with local shareholders reduces initial costs but requires budgeting for the second phase, the share transfer, which is not registrable but must comply with internal corporate formalities. This may involve notarial legalizations and book adjustments.

Branch registration depends less on the number of shareholders and more on the foreign document package, the number of required documents, apostille costs, the number of pages, and translation needs.