The Legal Nature of Capital Advances on Account of Future Increases in Chilean Law - Núm. 2, Febrero 2018 - Revista Latin American Legal Studies - Libros y Revistas - VLEX 774581981

The Legal Nature of Capital Advances on Account of Future Increases in Chilean Law

AutorPablo Román Gómez-Lobo
CargoUniversidad de los Andes, Santiago, Chile
Pablo Román Gómez-lobo
The object of this study is to present the legal nature and effects
of a corporate nancing practice, commonly known as “capital
advances on account of future increases”. Chilean corporate le-
gislation and doctrine do not refer to this mechanism, thereby
preventing the provision of well-dened elements for its secure
use by participating agents. To the preceding effect, this thesis
proposes to consider this form of nancing as a bilateral agree-
ment submitted to a suspensive condition, using the resources
provided by general legislation. The observations made by con-
tinental and Argentinian doctrine and case law have been taken
into account in this study, especially with regards to the topic of
its characteristics and, specically, its irrevocable nature, which
prevents the unilateral substitution thereof through other con-
tracts, such as a loan agreement.
Key wor ds: Capital advan ces on account of future increases, a dvances, anticipat ed dis-
bursements for future capitalizations, corporate nanci ng, suspensi ve condition.
Corporate nancing stems from both internal and external sources, destined
to endow the entity, whether in formation or constituted, with the necessary assets to
carry out its corporate purpose. Internal sources of business nancing are the result
of the operation and promotion of goods or services, the contributions of partners,
reinvested prots, depreciation and amortization of investments, and the sale of as-
sets, among others. On the other hand, external sources are resources provided by
third parties, namely suppliers, nancial institutions and investors (banks, factoring
companies, securities issuance, etc.).
However, there is another source of liquid and quick resources for companies,
a generalized commercial practice from ancient times, called cap ital advances on ac-
count of future increases, which is not considered in Chi lean corporate law. This practice
is examined i n an era in which the concept of social capita l is under constant review,
from legislative positions that, considering its f unction as a guarantee in favor of
*1 Universidad de los Andes, Santiago, Chile ( Article received
on October 11, 2017 and accepted for publication on December 11, 2017. Translated by Beatriz
Pablo Román Gómez-Lobo
owners and creditors, urge ex ante control of the effectiveness of an initial nominal
capital or of a determined increase (proportional to the business risk undertaken),
and corporate legislation which contemplates ample freedom in this matter, such as
our legislation, which does not regulate a minimum amount of statutory capital and
its effectiveness (except for the case of banks, insurers and other relevant companies),
replacing an a priori control of capital by promoting ex post controls, in terms of its
material aptitude for trafc.
Thus, in the Chilean legal system, the denition of value and the intrinsic
effectiveness of capital (considering all corporate assets) is transferred ex post upon
formation of the corporation or at the moment of capital increase, to the market
and economic agents that are contractually linked to the company, through the
observation and interpretation of accounting information (assets, liabilities, equity,
prots and reserves), nancial information (debt ratio) and commercial information
(cash ows), consolidated in the case of a company that forms part of a group of
companies.1 Professional creditors will have easy access and understanding of such
information, due to their relative power within society.2 However, other creditors,
small, casual or ignorant ones (SMEs, consumers and creditors of extra contractual
liability), have no economic capacity (transaction costs), or relative power over the
counterparty, in order to obtain reasonable access to nancial and accounting in-
On the other hand, capital advance on account of future increases, which aims
to provide more risk capital to the legal entity, can unfairly undermine the trust of
third parties, a situation that calls for a reasonable dogmatic framework to eliminate
doubt and conict with regards to this nancing mechanism, in whatever situation
it may be used, either in a corporate or in a bankruptcy scenario. Therefore, the
problems that might arise from this operation may be due to excessive delay of the
partners or shareholders in formalizing their capitalization, to the ambiguity of the
deed and/or of accounting, or to the unilateral will of either of the contracting par-
ties manifested after the agreement, trying to characterize the advanced money as a
loan agreement. Hence, in the present study, we will analyze the irrevocable essence
of this capital advance and the possibility (or impossibility) of it being returned by
the receiving entity.
(2013), pp. 149-150.
2 These creditors also better control over the risk of the entity, being able to demand guarantees from
the partners and / or charging the company a risk premium for the contracts they enter into.
3 In
(1983), pp. 1587-1639, and in
(1994), pp. 253-269, who, having expressed
some skepticism about the absolute virtues of advertising as a substitute for adequate capital,
attended to a number of practical situations that tend to under mine the trust of third parties,
particularly the so-called ignorant creditors, advocates for their protection through the institute of
the lifting of the corporate veil and the imposition of a duty of communication by the corporation
to creditors, about the state and composition of its capital with regards to the business risk that the
company is assuming at a given time.

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