Empresas estatales

SOEs must adhere to an annual cash budget, which must be approved no later than December 31 of the year prior to its effective date, through a joint decree of the Ministry of Finance and the Ministry of Economy, Development and Tourism, which must also bear the signature of the ministry through which they are related to the government. This budget includes an operating budget, an investment budget and a budget for contracting, disbursement and amortization of credits (Art. 11 Law N° 18,196).

All indebtedness, direct or indirect, must be previously authorized by the Ministry of Finance (Article 44 D.L. Nº1,263, of 1975, on Financial Administration of the State, with the exception of Banco Estado, which is excluded from the application of this rule (44 DL 1263, final paragraph).

They may only place funds in the capital market with the prior authorization of the Ministry of Finance (D.L. No. 1,056 of 1975).

The SOEs are governed by the rules of open corporations and are obliged to submit their audited financial statements to the Financial Market Comission.

Likewise, Article 10 of Law N° 20,285, on access to Public Information, makes applicable to SOEs the same reporting obligations to the Financial Market Comission as those of publicly traded corporations. Consequently, the General Standard (NCG) No. 30 is applicable to them, which establishes these obligations, including the obligation to submit audited financial statements.

They are governed by International Financial Reporting Standards (IFRS), established by the Financial Market Comission. IFRS establish recognition, measurement, presentation and disclosure requirements that relate to transactions and economic events that are material to the financial statements.

The financial liabilities of SOEs are considered part of the public debt only when the debts of SOEs have the state guarantee established in Law N° 19,847, in which case such debt is considered direct public debt and, consequently, the amounts corresponding to its payment are included as part of the public debt service glossary in the Budget Law of each year.

The State can only be the guarantor of SOEs within the margins established by Law N° 19,847, which empowers the President of the Republic to do so, setting a maximum amount for such guarantee, which amount is established annually in the Budget Law. In addition, Article 2 of the aforementioned law provides that in order to obtain such guarantee, the companies must previously enter into a programming agreement with the SEP.

This power granted to the President of the Republic originates in 2002, according to Law N° 19,874 which empowered the President of the Republic to grant state guarantee for a specific amount. Then, since 2011, the legislative practice has been to grant such authorization in the Budget Law of each year.

The capital contribution of a SOE is made by its shareholders. In the case of the State as shareholder, this is done through Corfo or the Chilean Treasury or both, and in the case of companies with mixed capital (Zofri S.A.), such contributions may also be made by a private shareholder.

SOEs may increase their capital through contributions from their shareholders, for which authorization is required from the Ministry of Finance, and such contributions may come from seasonal cash balances or from funds approved for such purpose through the corresponding Budget Law; in the case of public companies created by law, to increase their equity a law authorizing a transfer to them by the Chilean Treasury is required, a law that may only be proposed by the Executive.

A distinction must be made between state entities and public companies created by law. In the case of the former, they are governed by the rules applicable to the type of company in question, i.e., in the case of corporations, the amount determined by the Ordinary Shareholders' Meeting will be paid as distribution of profits or dividends; and in the case of joint stock companies, the provisions of their bylaws will apply or, in the absence thereof, the rules of closely held corporations will apply.

In the case of public companies created by law, they are subject to a 40% tax (Article 2 of Decree Law N° 2,398), in addition to income tax.

This ultimately constitutes a form of payment of profits to their owner.

On the other hand, the minister of Finance, by means of supreme decree, may order the transfer to the general revenues of the Nation or other institutions or companies of the public sector of the net profits shown in the balance sheets of State institutions or State-Owned Enterprises (D.L. No. 1.263 of 1975, Article 29).

The State only has authority over the profits obtained by the State-Owned Enterprises when they are distributed. Previously, these profits are part of the equity of each company, and the State has no power over them.

Like private companies, state-owned companies may generate losses during the development of their economic activities. In such cases, they may resort to a capital increase made by the owner or to contracting loans with the private financial sector, as in the case of private companies, but subject to the rules previously mentioned.