ORGANIC LAW ON SOCIAL TRANSPARENCY

ORGANIC LAW ON SOCIAL TRANSPARENCY

On August 28, 2025, the Organic Law on Social Transparency (hereinafter, LOTS) was published in the Third Supplement of the Official Registry No. 122. Its primary purpose is to promote transparency in the operations of non-profit social organizations operating in the country. Below is a summary of the key aspects of this law:

• Purpose: To safeguard financial integrity, foster an organizational culture based on ethical principles, responsible management, inclusive participation, and transparency for non-profit social organizations (hereinafter, OSSFL). These are defined as private legal entities established under Ecuadorian law or authorized to operate in Ecuador, which do not pursue profit and whose activities aim to achieve objectives of general or collective interest.

• Regulatory Authority: The Superintendency of Popular and Solidarity Economy will oversee the supervision, auditing, intervention, control, and monitoring of OSSFL.

• Classification: OSSFL will be classified as high, medium, or low risk based on criteria and processes outlined in the law.

• Differentiated Compliance Obligations: OSSFL must comply with transparency, integrity, and prevention obligations tailored to their risk classification. Regardless of classification, they must adopt reasonable and proportionate measures to prevent their use for illicit purposes.

• Core Principles of Integrity for OSSFL: The law establishes three pillars: a) Financial transparency and accountability; b) Prevention of misuse of funds; and c) Risk-based oversight, including knowledge of donors, beneficiaries, and due diligence procedures.

• OSSFL must promote an organizational culture based on ethics, integrity, risk management, and zero tolerance for corruption. Depending on their classification and risk level, they must establish, implement, and maintain Institutional Integrity Systems (SII), along with compliance policies, programs, and/or oversight mechanisms to ensure ethical and transparent management.

OSSFL have six months from the issuance of the LOTS regulation to implement the SII as stipulated.

• Responsibilities of Governance Bodies: Where applicable, in addition to their statutory duties, the governing and management bodies of OSSFL are responsible for approving, overseeing, and continuously improving the SII, as well as ensuring compliance with the LOTS and its regulation.

• Institutional Compliance Officers: High-risk OSSFL must appoint an institutional compliance officer. Additionally, all OSSFL, regardless of risk level, must implement proportionate alternative mechanisms, including: a) Adoption of a simplified compliance and integrity manual; and b) Designation of a responsible individual from their governing bodies to ensure the manual’s application.

The LOTS regulation will specify the requirements for compliance officers and the formats for alternative mechanisms for medium- and low-risk OSSFL.

• Active Transparency: OSSFL must implement an SII, the scope of which will depend on a methodology established by the regulatory authority through secondary legislation. This methodology will consider, among other factors, the organizations’ transactional activity.

The LOTS regulation will define differentiated obligations based on risk levels, which may include the publication of statutes, mission, vision, objectives, audited financial statements, annual management reports, funding sources, donors, donations, and significant expenses, among other relevant information.

• Accountability Obligation: Based on a risk assessment, OSSFL must submit a management and resource use report to the regulatory authority, including:

1. Income and expenses, detailing public funds, private donations, and international cooperation;
2. Executed projects and their beneficiaries;
3. Geographic location of projects;
4. Impact assessments;
5. Compliance with the Code of Ethics;
6. Corruption risk management report; and
7. Other information specified in the LOTS regulation and technical standards of the regulatory authority.

• Reporting Frequency: Medium- and high-risk OSSFL must submit reports annually, while low-risk OSSFL must do so biennially.

• Unified Information System for Non-Profit Social Organizations: A digital, interoperable, and publicly accessible platform, managed by the Ministry of Government, will be created to consolidate, process, and classify legal, financial, operational, and compliance information of OSSFL subject to the LOTS. This system will also record information about Institutional Compliance Officers.

Information must be updated within the deadlines, formats, and conditions set by the LOTS regulation, adhering to principles of accuracy, timeliness, and traceability. 

OSSFL must register in this system to commence operations, and failure to register will prevent them from operating in the country.

• Incentives: The LOTS regulation will establish mechanisms for public recognition and certification of compliance for OSSFL that implement best practices in transparency, due diligence, and accountability.

• The LOTS regulation will address all matters related to the establishment, merger, division, transformation, voluntary dissolution, and reorganization of OSSFL.

• To obtain or update the Taxpayer Identification Number (RUC), OSSFL must have an updated certificate of registration in the Unified Information System.

• Exclusions: Organizations of worship covered by valid international agreements are excluded from the scope of this law. Their regulation and oversight will be defined in the LOTS regulation.

Similarly, non-profit legal entities performing public functions or delegated governmental responsibilities, subject to specific sectoral regulatory frameworks, will be overseen by the relevant sectoral authority.

For workers’ and employers’ organizations, compliance will align with the International Labour Organization’s Convention on Freedom of Association and Protection of the Right to Organize, ratified by Ecuador.

• OSSFL operating in the Galápagos province, Amazonian provinces, or designated priority areas will be eligible for territorial recognitions and/or certifications, provided that the majority of their project-related expenses (e.g., hiring personnel, goods, or services) remain in those areas. 

Guidelines for these recognitions will be developed in the LOTS regulation.

• Issuance of the LOTS Regulation: The regulation must be issued within a maximum of 60 days from the law’s entry into force.

• Registration Obligation in the Unified Information System: Existing OSSFL as of the law’s entry into force must register within 180 days. Failure to comply will result in a temporary suspension of activities, and in case of repeated non-compliance, revocation of legal status, as outlined in the LOTS regulation.

• Transfer of Resources: Funds frozen, withheld, or immobilized in the national financial system by order of a competent authority, related to potential money laundering, terrorism financing, or fraud, prior to the LOTS’s entry into force, must be transferred to a single account at the Central Bank of Ecuador, managed by the State, as determined by the Ministry of Economy and Finance, within 30 days from the law’s entry into force.

Have questions about the Organic Law on Social Transparency? Contact us today! Our team of experts is ready to provide you with professional and clear legal guidance.