Colombia

5 Chapter Corporate Laws

    • Kinds of Corporate Systems

       

      Limited Liability Company (Sociedad de Responsabilidad Limitada, Ltda):

      Partners are liable up to the amount of their contributions. The number of partners is at least more than two partners and less than 25 partners that are jointly liable from unpaid debts. The management is carried out by the partner´s meeting and its legal representative.

      Corporation (Sociedad Anónima, S.A.)

      Liability of shareholders is limited to their capital contributions. The minimum number of  shareholders is five and there is no limit on the maximum number of shareholders. Management is centralized.  Administrations is performed by:

      1)The general Shareholders Meeting.

      2)The Board of Directors,

      3)The Legal Representative.

       

      Simplified Share Company (Sociedad por Acciones Simplificada S.A.S)

      This company form can be used by local and foreign investors. the size of the company doesn't matter due to its scheme that allows a simplified administration and management. Shareholders are liable for the sum of their capital contributions but not for labor, tax or any other types of obligations. It can be incorporated with one or several associates. This type of company does not need to have a Board of Directors, the management and representation is vested on the legal representative.

      Simple Limited Partnership (Comandita Simple)

       

      The share of capital is constituted by contributions from the partners and collectives. The regulations are adjusted to what is established in public limited companies. The transfer of shares is done by public deed, registering the cession in the mercantile registry, only by unanimous approval of all the partners.

      Limited Partnership with Share Capital (Comandita por acciones):

       

      The share capital is constituted by social contributions, limited partners and joint collectives under shareholding. The regulations comply with the provisions of limited companies. The transfer of shares is done according to the Bylaws.

      Branch

      Because a branch is a legal extension of the head office, they are considered to be the same legal person under the law so the branch cannot have a bigger or different legal capacity than the head office. A branch is subject to Corporate Income Tax Rate and remittance of foreign profits are exempted from withholding tax.

    • Corporate System

       The Corporation (Sociedad Anónima S.A.) is constituted with at least five shareholders and has a social fund divided into the divided shares among the shareholders. These companies are legal entities and must designate a legal representative. The capital of corporation is divided into shares of the same value made up of three types of contributions; one is the Authorized Capital (estimated value that the corporation calculates will have) Subscribed Capital (value that in no case may be less than the authorized capital , is the capital that the shareholders must pay compulsorily within a year after the company is constituted) and Paid Capital (amount of the subscribed capital already paid at the moment of establishing the company that must be superior to the third part of the value of each share of the subscribed capital).

       

      2.1 General Shareholders Meeting.

      General meeting of shareholders is the main ruling organization of the corporation and is established by the Bylaws. It is composed by at least five shareholders who are in  charge of approving an appointment of all executives and employees of the corporation, dividend distribution, reserves of capital, dismissal of administrators who did a malpractice action, issuing of shares, reorganizations, spin offs, merger and acquisition, amendment of Bylaws and any other resolutions in favor of the corporation.

       

       

      2.1.1 Obligation and rights of shareholders.

      Shareholders are obliged to:

      -Pay for their subscribed shares in the established manner.

       

      - Approve any change of provisions by the majority’s attending of 70%.

       

      -Execute at least once a year to hold the Annual Shareholders Meeting, within the first 3 months of every year.

       

      -Participate in the Extraordinary Shareholders Meeting.

      The Shareholders are obliged to pay up for the amounts of their shares in any adverse scenario for the Corporation.

       

       

       

      2.1.2      Process for holding GSM.

      Announcement for the general shareholder meeting; GSM must be established in the Corporation’s ByLaws, If there is no prescription about rule of announcement in ByLaws, it will have to be published in a local newspaper. The meeting shall be executed in the address of company, date, and hour established in the announcement. However if the total amount of shares are represented, all the shareholders are represented or in the meeting and the announcement would not be a requisite.

      The events that took place in the shareholders meeting must be recorded in a corporate minutes for its purpose, which mentions: place, date and time of the Meeting, number of subscribed shares, method of procedure and anticipation of the announcement, attendance list with the number of owned or represented shares, agenda, resolution, number of votes in favor, against and no-voting, the documents presented from the people who assisted to the Meeting, the assignments and the closing time and date.

       

      2.1.3      Requirement for resolution.

      Each share is one vote and the decisions are approved with a majority of the votes. To present a proposal, the minimum quorum must be met, which is usually the minimum of a majority of the subscribed shares.

       

      2.1.4 Minutes.

      The decisions of the General Meeting of Shareholders or of the Board of Directors must be recorded in minutes approved by the meeting concerned, or by persons who are appointed to present at the meeting for this purpose, and signed by the president and secretary of the meeeting concerned, in which must be indicated the persons that attended the meeting, what was discussed and the votes that took place within thirty days after the date on which the agreement was concluded. The law indicates that the corporation shall keep a book with the chronological order of the minutes of the General Meeting or of the Board of Directors. These shall be signed by the president or whoever takes his/her place and the secretary of the General Meeting of Shareholder or of the Board of Directors.

       

      2.2     Board of Directors.

      Board of Directors is in charge of the general management and direction of the corporation. It is a mandatory in corporations but not for other types of corporations such as the Limited Liability Company.

       

      2.2.1 Requirements of Directors.

      The Board of Directors is formed by at least three principals and alternates. No one can be appointed as a member of the Board of Directors in more than five simultaneous times. They do not necessarily need to be shareholders. The requirements can be stipulated with Bylaws.

       

      2.2.2      Election and Dismissal.

      Members of the Board of Directors must be appointed by the Electoral Quotient System that consists of division of the number of shares with voting right at the meeting by the number of directors to be elected to obtain the electoral quotient. It has to be in a period of time indicated in the Bylaws.  A member can resign at any time with a resignation letter to the corporation and the chamber of Commerce. The General meeting of Shareholders can change and reelect members of the Board of Directors at any time.

       

      2.3     Corporate Auditor.

      Corporation must have a mandatory statutory auditor who can understand Spanish as “Financial Reviser”. The Auditor is supervised by the superintendence of companies as long as there is no other supervision by the superintendence or their assets or revenues are higher than 30,000 Colombian pesos legal wages. In a Limited company the auditor is required only if the Bylaws requires so or when the assets are higher than 5,000 Colombian pesos at least or revenues higher than 3,000 Colombian pesos at least legal wages.

    • Shares

       3.1 The kinds of Shares.

      The capital of the corporation is divided into shares of equal value that will be represented in negotiable instruments. The types of shares are nominative shares or bearer shares, but must be nominative if they have not yet been paid in full. Shares are indivisible.

       

      Each share gives the following rights to its owners:

       

      1) Participate in the resolution of the general shareholders' meeting and vote on it.

       

      2) Receive a proportional part of the balance sheet at the end of the fiscal year.

       

      3) Right to freely negotiate the shares, unless there are restrictions of the Bylaws that give them preference in favor of the corporation or the shareholders.

       

      4) Right to freely inspect the company's minutes (Fifteen days before the general assembly).

       

      5) Receive a proportional part of the assets at the time of liquidation.

       

       

      -Industry Shares: They are created to compensate the contributions of services, work, technological knowledge, industrial or commercial secrets, technical assistance, etc.

      The holders of these shares may attend the general shareholders meeting with a voice, participate in the profits and if the company is liquidated they may participate in the accumulated reserves and valuations produced during the time in which the shareholder has the share concerned..

      -Common or Preference Shares: They give the essential rights to shareholders in addition to a preferential right such as the reimbursement in case of liquidation, right to a certain quota from utilities. They can be accumulated (The accumulation cannot be extended to a period greater than five years). But they cannot be granted privileges as a multiple vote. These shares must be approved by the General Shareholders Meeting before shares are subscribed.

       

       

       

      3.2  Dividend.

      Distributions of dividends are based form the financial statements of the last year, as long as the losses do not reduce equity below capital levels.

       

      3.3  Capital increase.

      Authorized capital

      The increase of capital must be approved by means of a notarization of the General Assembly of shareholders, it must indicate the approval form with the number of votes in favor and against or unanimously.

      It is necessary to indicate the new value of the authorized capital, the number of shares and the nominal value (it must be the same in all capitals)

       

      Subscribed capital

       

      The increase in subscribed capital occurs when the shares that establish the authorized capital that were not subscribed by the shareholders, when making the decision to do so by issuing shares, placed by means of rules that are called subscription regulations.

      The subscribed capital may increase when it originates from a share issue or when it is decided to capitalize the equity accounts. Also when the increase in subscribed capital is the result of a reform in the transformation, merger or split statutes.

       

      Paid Capital

      Paid capital increases through a private document presented in the Chamber of Commerce or recognized before a notary or court. The paid-in capital must result from the nominal value action multiplied by the number of shares.

       

      3.4  Capital decrease.

      For the reduction of capital, a notarization is required, the shareholders' meeting minutes with the approval of the capital reduction, authorization of a corporate superintendence when the operation involves a refund of contributions.

    • Dissolution

       The dissolution occurs when a corporation has losses that reduce the net worth below 50% of the subscribed capital or when almost 95% or more of the shares are held by a single shareholder.

    • Bibliography

       Código de Comercio Colombiano.
      Ley 222 de 1995.

    • Websites

       http://www.ey.com/Publication/vwLUAssets/ey-business-and-investment-guide-2016-colombia/$FILE/ey-business-and-investment-guide-2016-colombia.pdf

      https://www2.deloitte.com/content/dam/Deloitte/co/Documents/tax/DoingBusinessColombia2017Inglesl_US_Letter.pdf

       

       

      https://www2.deloitte.com/co/es/pages/risk/articles/responsabilidad-derecho-obligaciones-prohibiciones-y-deberes-de-los-admons.html

       

       

      http://www.camaramedellin.com.co/site/Portals/0/Documentos/2015/17%20Del%20aumento%20de%20capital.pdf

       

       

      http://www.changeboardmember.com/Country/colombia/en/stock-corporations-board-of-directors