Regulatory Scope
"The State and its agencies may develop business activities or participate in them only if a law of qualified quorum authorizes them. In such case, these activities will be subject to the common legislation applicable to individuals, without prejudice to the exceptions established by law for justified reasons, which must also be of qualified quorum."
Article 63, No. 3 provides that the following are subject to law:
"Those that establish the rules according to which the State-Owned enterprises and those in which it has participation may contract borrowings, which, in no case, may be made with the State, its agencies or enterprises;".
Article 65, No. 2 provides that it is the exclusive initiative of the President of the Republic:
"To create new public services or paid jobs, whether fiscal, semi-fiscal, autonomous or State-Owned enterprises; to abolish them and determine their functions or attributions;"
Article 109 provides that "The Central Bank may only carry out operations with financial institutions, whether public or private. In no way may it grant them its guarantee, nor acquire documents issued by the State, its agencies or enterprises".
Article 115, penultimate paragraph states that "The Law may authorize regional governments and State-Owned enterprises to associate with natural or legal persons in order to promote non-profit activities and initiatives that contribute to regional development."
Of the 28 SOEs that present balance sheets and income statements as of 2022, in 26 of them the State or its agencies are the sole owners, being therefore 100% state-Owned. In two of them there is private participation: in ZOFRI S.A., in which a state agency, Corporación de Fomento de la Producción (Corfo), owns 71.28% of its property and the Treasury owns 1.40%, and in COTRISA S.A., in which Corfo owns 97.24%.
Yes, SOEs have their own legal personality and assets.
The Comité Sistema de Empresas – SEP is a Corfo Committee to which various functions have been delegated, such as the administration of the rights and shares that Corfo holds in different companies, the role of technical advisory body to the State in relation to the management control of certain companies in the state sector, and the power to appoint members of their boards of directors when required to do so.
Currently, 19 State-Owned Enterprises with income statements in 2022 are under the SEP's control, either because Corfo has delegated the administration of its participation in them to said Committee, or because it has been delegated the appointment and removal of the members of their Boards of Directors and/or because it provides advice to the Ministry of Finance in the evaluation of their management and/or to the Ministry of Transportation and Telecommunications in matters within its competence.
To these are added Empresa Nacional de Aeronáutica de Chile (ENAER) and Televisión Nacional de Chile (TVN), companies with which the SEP has Programming Agreements in force under Law N° 19,847 and subsequent public sector budget laws, with respect to which it has a limited role.
With respect to SOEs, the Ministry of Finance has jurisdiction over budgetary matters; the Office of the Contraloría General de la República in terms of limited legality control and as custodian and reviewer of the declarations of interests and assets of their directors and managers; the National Congress in terms of the power to request information from the companies and to periodically receive information from them; the Ministry of Social Development and Family, the Ministry of Finance and the Ministry of Economy, Development and Tourism in terms of the approval of the companies' investment projects; the competent bodies in matters of labor rights, such as the Labor Inspection; the Internal Revenue Service; the Comisión para el Mercado Financiero; the Comité Sistema de Empresas - SEP; the bodies of the institutional framework for the protection of the environment, such as the Superintendence of the Environment; and the ordinary and special courts of justice; and the Consejo para la Transparencia regarding compliance with the so-called Active Transparency by the public companies created by law.
Likewise, with respect to the SOEs that participate in activities in specific sectors, various sectorial bodies have jurisdiction, such as the Ministry of Transportation and Telecommunications, the Ministry of Mining, the Consejo Nacional de Televisión, the Comisión Chilena del Cobre, among others.
In the case of SOEs created by law (and which are not under the interference of the SEP), this role is generally exercised by the President of the Republic through the corresponding minister. For example, in Codelco this role can be delegated to the Ministers of Finance and Mining (Articles 11 A and 11 B of DL 1350). In the case of ENAP, this power is exercised through the Ministers of Finance and Energy (article 14 of DFL 1/1986).
In the case of State entities, the representation of the State is generally exercised by Corfo (through the SEP). In the companies created by law that are under SEP's interference (for example, port companies), the representation of the State is also exercised by Corfo through SEP.
In other words, the representation of the State's interests is exercised, in some cases in a decentralized manner; that is, by the sectoral ministries and in the case of the SEP companies, the representation of the State's interests is exercised in a centralized manner.
Law N° 20,285 on access to public information establishes, in its tenth article, certain obligations of Active Transparency for SOEs. Among other information, SOEs must publish information on the regulatory framework applicable to them, their organizational structure and internal organization, financial statements and annual reports, etc. This information must be published on their websites on a permanent basis, in a complete manner and in a way that allows easy identification and access. In addition, it makes applicable to these companies the same reporting obligations to the Financial Market Comission as those of open corporations.
Yes, all the provisions of D.L. No. 211 of 1973, which establishes rules for the Defense of Free Competition, whose consolidated, coordinated and systematized text is found in D.F.L. No. 1 of 2005 of the Ministry of Economy, Development and Reconstruction, are applicable to all State-Owned enterprises. Thus, SOEs are subject to the same rules as private companies.
According to article 19 No. 21, paragraph 2 of the Political Constitution of the Republic of Chile, if the State carries out business activities, these will be subject to the common legislation applicable to private parties, whether it is public law (health regulations, banking, etc.) or private law (rules on contracts, employment regime, etc.).
Some public law rules are applicable to public enterprises: for example, in matters of financial administration and control.
On the other hand, in the case of activities subject to sectoral regulation (e.g. Banco Estado, Codelco, ENAP), the same regime applies to these companies as to regulated companies, such as the LGB, or environmental rules.
Public companies created by law are one of the forms used by the State to develop business activities. They are those companies created by a law of qualified quorum that, in addition, authorizes the State to develop a certain business activity. This same law establishes the statute of the company through which such activity will be developed, defining its purpose, its administrative bodies, its attributions, duties and functions and the way in which such activity will be developed, i.e., directly or through concessions, among others.
State entities are another way used by the State to develop business activities. They are those companies that are created after a law of qualified quorum authorizes the State to develop a certain business activity and mandates two bodies of the State Administration, normally Corfo and the Chilean Treasury, to concur to constitute a company that will adopt the form of private companies (corporations, joint stock companies or other), The company will be governed by the rules applicable to the respective type of company in all matters relating to its corporate governance, i.e., in relation to the powers and responsibilities of the different levels of its administration, namely, shareholders' meetings, board of directors and general management.
The fundamental difference between the two is that public companies created by law are legal persons under public law and are part of the organs of the State Administration, as provided for in paragraph 2 of Article 1 of Law N. 18,575, Organic Constitutional Law of General Bases of the State Administration, whose revised, coordinated and systematized text is contained in D.F.L. No. 1 of 2001, of the Ministry General Secretariat of the Presidency.
In this context, public companies created by law are subject to certain public law rules that govern the Administration, such as the rules governing the manner in which they may dispose of their assets, the obligation to report to the Financial Analysis Unit any suspicious transactions detected in the course of their activities, the probity rules of the aforementioned Law of Bases, and the administrative liability of their directors and employees, among others.
Meanwhile, state entities are legal companies under private law and are not governed by the rules applicable to the State Administration bodies.
They also differ in terms of the scope of application of the control of the Comptroller's Office. In the case of State corporations, such control is limited to ensuring compliance with the purposes of the company, the regularity of its operations, enforcing the responsibilities of its directors and employees, as well as obtaining the information necessary for the formulation of the national balance sheet (Article 16 of the Organic Law of the Contraloría General de la República).
The creation of a SOEs requires a law with a qualified quorum that authorizes the State to develop a specific business activity, adopting any of the forms we have already mentioned, i.e., public enterprise created by law or state entity.
In the case of a public company created by law, it is dissolved by means of another law that so determines. In the case of state entities, they may be terminated in accordance with the rules of common law, i.e., by agreement of the shareholders, unless the law authorizing their creation establishes a different form.
As many States around the world do, the Chilean State can implement public policies through its companies. In the case of our country, it is necessary that their activities are developed subject to the rules governing the respective market in which they participate and to the rules of common law. In addition, they must do so in a transparent manner, i.e., explaining their public policy objectives (separate from their commercial objectives), as well as the resources associated with them.
Transparency in the performance of public policy objectives (and their separation from commercial objectives) is one of the OECD's guidelines for the governance of State-Owned Enterprises.
Public services are administrative bodies in charge of satisfying collective needs, on a regular and continuous basis, on a non-profit basis, collaborating with the President of the Republic in his task of government and administration.
SOEs, on the other hand, are entities created to develop economic activities, offering goods and/or services, activities that could be developed by a private operator in order to obtain profits, in which the State decides to participate for social, economic or strategic interest.