The Transformation of Corporations into Simplified Corporation (S.A.S.)

Published on Feb 27, 2026

Rafael Burgos, Senior Counsel, and Cynthia Orellana, paralegal at ARIAS El Salvador and experts in Corporate Law, present this article on the feasibility of transforming existing corporations into Simplified corporation, highlighting the operational and economic advantages of such process. 

 

Simplified Corporation constitutes a legally suitable and strategically advantageous option for those enterprises that were originally incorporated under the traditional corporation regime that currently seek to simplify their administration, increase the flexibility of their internal structure, and reduce formal requirements without affecting the continuity of their legal personality. 

 

With the incorporation of Chapter VIII-BIS into the Commercial Code, by means of the Decree published in Official Gazette No. 234, Volume 441, on December 13, 2023, the Salvadoran legislature enabled a corporate reconfiguration mechanism that allows pre-existing companies to adopt a more agile and modern model, fully preserving their rights, obligations, and assets; in this context, the transformation of a corporation ("S.A.”) into a Simplified Corporation ("S.A.S.”) should not be understood as the creation of a new entity, but rather as the modification of the legal regime applicable to a juridical person that remains unaltered in its identity and continuity. 

 

The legal basis that authorizes this possibility is set forth in Article 305-Q of the Commercial Code, which provides that any company may adopt the form of a Simplified Corporation through transformation, provided that such transformation is approved by the general shareholders’ meeting or by the competent corporate body in accordance with the bylaws. This special provision must be interpreted systematically in conjunction with Article 323 of the Commercial Code, which stipulates that the resolution approving the transformation must be adopted in compliance with the same requirements established for the amendment of the bylaws, thereby entailing the formal convening of the General Shareholders’ Meeting, the observance of the deliberative and decision-making quorum set forth in the articles of incorporation, and approval by the corresponding qualified majorities. It is important to note that, pursuant to Article 325 of the Commercial Code, which embodies the principle of legal continuity, the transformed company shall succeed by operation of law to all rights and obligations of the former company, thereby ensuring the continued validity of contracts, employment relationships, tax obligations, and pending judicial proceedings. 

 

In order to formalize the transformation, the company to be transformed shall: (1) resolve upon the transformation at an Extraordinary General Shareholders’ Meeting, including all matters required by law; (2) complete the transformation form made available by the Commercial Registry, through the special agents appointed by the General Shareholders’ Meeting, which form shall incorporate all provisions governing the corporate existence of the entity; and (3) file and register said form with the Commercial Registry. The transformation shall acquire full legal effect upon its registration, in accordance with Article 324 of the Commercial Code. 

 

The analysis regarding the advisability of transforming a corporation (S.A.) into a Simplified Corporation (S.A.S.) shall always depend on the specific circumstances of each case; however, the following operational advantages may be identified prima facie. 

 

  1. Simplification of the corporate structure, permitting the existence of a sole shareholder, thereby allowing S.A.S. entities to operate as holding companies and eliminating the requirement to maintain nominal or nominee shareholders. 

 

  1. Greater flexibility of the corporate governance regime, inasmuch as the Commercial Code recognizes for S.A.S. entities broad autonomy to determine their internal structure, the powers of their governing bodies, and their mode of operation, including both sole and collegial management schemes, and expressly authorizes the use of technological means for the holding of meetings of collegial bodies and the adoption of resolutions, provided that the identification of participants and the preservation of information are duly ensured. 

 

  1. With respect to share capital, Article 305-D provides that the capital may be freely established from a minimum of one dollar, provided that it is fully subscribed, allowing payment to be made within a maximum period of two years if so agreed. Although Corporations (Sociedades Anónimas) already have a determined capital structure, the transformation into Simplified Corporation permits the reorganization of the shareholding structure under a more flexible regime, complemented by Article 305-E, which authorizes the issuance of different classes and series of shares, including shares with or without voting rights, or with special privileges, provided that their rights and limitations are expressly stated. This possibility broadens corporate structuring mechanisms and facilitates the incorporation of investors or the internal reorganization of capital. It is important to note that S.A.S. entities may maintain a variable capital regime, which facilitates capital contributions to the company in accordance with its requirements. 

 

  1. More flexible accounting regime. The Commercial Code exempts S.A.S. entities from maintaining formal accounting records when the company’s assets do not reach or exceed US$12,000.00. Likewise, S.A.S. entities may keep their corporate books in either physical or electronic form, thereby providing greater dynamism and flexibility. 

 

The foregoing advantages may be applied, in whole or in part, to companies that currently operate as corporations, by following the process previously described. The foregoing shall ultimately result in operational efficiency and a reduction in maintenance costs. 

 

At ARIAS, we possess the technical expertise to support the simplification of your corporate structures, which includes the implementation of Simplified Corporation (S.A.S.) within your corporate framework. 

 

The information provided by ARIAS® is presented for informational purposes only. This information is not legal advice and is not intended to create, and does not constitute, an attorney-client relationship. Readers should not act upon this information without seeking advice from professional advisers.