Is it possible to create seizure-exempt shares in SAS-type corporations?

The shares of a company are the way in which the capital of limited partnerships, stock corporations and simplified joint-stock corporations (“SAS”, by its Spanish acronym) is divided, and represent the percentage in which the holder of these shares owns the company. These kinds of companies have the possibility to create various types and series of shares and, specifically for SAS-type companies, the law establishes that the kind of shares may include ordinary, privileged, with preferential dividend and without voting rights, with annual fixed dividend, and payment shares[1]. However, this ability to create different types of shares is not absolute and has certain limits set by law, including in case of SAS, which normally have broad autonomy in the drafting of their by-laws.

Therefore, the Superintendence of Corporations recently specified that the right to create different types of shares does not include the possibility of issuing or creating seizure-exempt shares. In this regard, bear in mind that the seizure-exempt assets are expressly and exhaustively established by law[2], and within these, shares of any kind are not included. In addition to the above, article 414 of the Colombian Commercial Code establishes that all shares, without any exemption, can be seized. Therefore, in the event that a SAS-type company (or any other type of company) establishes in its by-laws the seizure-exempt quality for its shares, this provision will be null and void.

In conclusion, in the event that the seizure of the shares of a company is decreed by the authorities, even if its status as seizure-exempt was established in the company’s by-laws, the legal representative is obliged to make the respective registration of the seizure in the company’s Shareholders Book in accordance with article 416 of the Colombian Commercial Code, since the seizure-exempt provision is understood to be null and void, as mentioned above. In the event that the legal representative does not proceed with this registration, it will be understood as a breach of administrators’ duties and will be liable, jointly and severally, for the damages caused to the company, to shareholders or to third parties.

At BéndiksenLaw we can help and counsel you in the drafting, revision and modification of your company’s by-laws in compliance with the obligations and requirements that the law imposes. Do not hesitate to contact us.

[1] Article 10, Law 1258 of 2008

[2] Article 1677 of the Colombian Civil Code and Article 594 of the Colombian General Code of Procedure

Source: Opinion 220-059925 of March 9th, 2022.

What Is the Registry of Beneficial Owners and Who Is Required to Register?  

The Colombian National Tax Authority (DIAN, by its Spanish acronym) recently regulated the modifications made to the Tax Statute[1] by Law 2155 of 2021 regarding the concept of beneficial owners and the creation of the Registry of Beneficial Owners or “RUB” (by its Spanish acronym). We explain what this Registry consists of, who is required to report this information and what information exactly must be included in said registry.

1. What is a beneficial owner?

Beneficial owners are (i) the individuals who finally own or control, directly or indirectly, a corporation or similar entity, or (ii) the individual on whose behalf a transaction is made. Likewise, this concept includes those individuals who have effective or final control over a corporation or other similar entities. In other words, the beneficial owners are the true owners or controllers or will be ultimately economically favored thanks to the operation of the corporation or other entities without legal personality[2].

2. Who are considered beneficial owners?

According to Resolution 164 of 2021, the following individuals are a corporations’ beneficial owners:

  1. The individual who holds, directly or indirectly, five per cent (5%) or more of the capital or voting rights of the corporation,
  2. The individual who benefits in five percent (5%) or more of the assets, income or profits of the corporation;
  3. The individual that exercises control over the corporation, by any other means other than those established in the previous points.
  4. When no individual is identified in the terms of the previous points, the individual who holds the position of legal representative must be identified; unless there is an individual who holds greater authority in relation to the management or direction functions of the corporation.

On the other hand, the beneficial owners of an entity without legal personality or a similar structure are individuals who hold the quality of: (i) trustees, settlors, constituents or similar or equivalent position;  (ii) fiduciaries or similar or equivalent position;  (iii) trust Committee, financial Committee or similar or equivalent position; (iv) trustees, beneficiaries or conditional beneficiaries; and (v) any other individual exercising effective and/or final control, or who is entitled to enjoy and/or dispose of the assets, benefits, results or profits.

3. What is the “RUB”?

The RUB is an integral part of the Tax Registry (RUT, by its Spanish acronym) and is the registry through which companies or similar entities that do not have legal personality, must provide information to the DIAN regarding their beneficial owners.

4. What information should be included in these reports?

The RUB reports must include, at least, the type, number and country of issuance of the document of identification, the tax identification number (NIT) or equivalent and the country of issue, the full names and surnames, the date and country of birth, the nationality, the country of residence along with the full address (department,  state, city, postal code) and email, the criteria used to determine the beneficial owner, the percentage of participation in the company, the percentage of profit in the income, results or profits of the entity, and the date from which the individual has the quality of beneficial owner.

5. When should the reports be made?

The initial report, for entities that were created before the first (1st) of January 2022, must be made no later than June 30th, 2022; for entities created as of the first (1st) of January 2022, this report must be made electronically and within the month following their registration in the RUT or the issuance of their Identification Number for Entities Without Legal Personality (“NIESPJ” by its Spanish acronym). In the event that this information is not provided, is done erroneously or incompletely or the information previously provided is not updated, the DIAN may impose penalties.

6. Who is required to report information through the RUP?

According to the DIAN, the following must report information in the RUB:

  1. National entities and corporations, with or without profit-making purposes. That is, those companies that have their effective place of administration or their main domicile in Colombian territory or that have been incorporated in Colombia in accordance with current laws, as specified by article 12-1 of the Colombian Tax Statute.
  2. Permanent establishments, understood as fixed places of business located in Colombia, through which a foreign company or individual or an individual without residence in Colombia, carry out all or part of its activity. Likewise, it will be understood that there is a permanent establishment when individuals act on behalf of a foreign company by virtue of proxy that allows them to execute acts or contracts binding on the company on a regular basis, in accordance with article 20-1 of the Tax Statute.
  3. Entities without legal personality or similar:
    • Created or managed in Colombia
    • Governed by Colombian standards
    • Whose fiduciary or similar or equivalent position are a national corporation or a tax resident in Colombia.
  4. Foreign corporations and entities without legal personality or similar whose value of assets located in Colombia represent more than 50% of their total assets, according to their financial statements.

We remind you the importance of having adequate legal counsel to ensure proper compliance with this and all the obligations of your company. Our professionals have the knowledge and expertise to help and counsel you. Contact us.

[1] DIAN. Resolution 000164 of 2021

[2] Article 631-5 of the Colombian Tax Statute.

Practical Guide: General Assembly of Shareholders or Meeting of Partners

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In accordance with the provisions of the Colombian Commercial Code (C.Co.), partners or shareholders of a company must hold an ordinary meeting at least once a year (Art. 181), without this preventing them from holding extraordinary meetings on more occasions whenever required. In this ordinary meeting, the situation of the company is analyzed and important decisions are made. Therefore, we answer frequently asked questions regarding its summons and celebration, for the most common types of corporations in Colombia.

1. When should the shareholders’ or partners’ meeting be held?

It must be held by the date established in the company’s by-laws. In case of silence, it must be held within the first three (3) months of the year, that is, until March 31st. However, in the event that the assembly has not been summoned prior to the meeting, it may meet by its own right on the first business day of April, at 10 a.m., in the offices of the main domicile where the administration of the company operates (Art. 422 C.Co.). The meeting of the assembly is also applicable in the case of SAS-type entities with a single shareholder.

2. How and who should summon it? 

In accordance with the provisions of the Commercial Code (Art. 181 C.Co.), the assembly must be summoned in the manner and by the person indicated for this purpose in the company’s by-laws. However, in case there is no determination in this regard, the requirements will vary depending on the corporate type:

2.1 Simplified Joint-Stock Companies (SAS)

It must be summoned by the legal representative through written communication addressed to each shareholder at least five (5) business days in advance. However, the shareholders of the SAS may waive their right to be summoned, in writing addressed to the legal representative of the company. Likewise, the waiver of this right will be presumed in cases where shareholders attend the meeting, despite not being summoned, unless they express their disagreement with the lack of summons before the meeting is held (Arts.20 and 21, Law1258 of 2008).

2.2 Stock Corporation

It must be summoned by the legal representative through a notice that must be printed in a newspaper published at the main domicile of the company. For meetings in which the end-of-year financial statements must be approved, as is necessary for ordinary meetings, the summons must be made at least fifteen (15) business days in advance. In other cases, five (5) calendar days in advance will suffice (Art. 424 C.Co.).

It is important to bear in mind that, according to article 190 of the Colombian Commercial Code, in case the requirements of the summons are not met, the decisions taken at the assembly or meeting will not produce effects. However, those meetings in which all associates are represented despite not being summoned, either because they attend personally or through a proxy, will be valid (Art. 182 C.Co.).

3. What information should be included in the summons?

In accordance with the Basic Legal Memorandum of the Colombian Superintendence of Corporations, the summon must include, at least, the name of the company, the name and type of the body being summoned, the date, time, city and address in which the meeting will be held. In the event that a merger, division, transformation or cancellation of the registration in the national securities registry or in the stock exchange is to be submitted for consideration, this information must also be included along with the express mention of the possibility that partners have to exercise the right of withdrawal. In addition to the above, although it is not mandatory, it is a good practice to indicate to the associates that they have at their disposal all the documents related to the approval of the financial statements so that they can exercise their right of inspection.

Additionally, in the case of SAS-type corporations, the agenda must be included, unless otherwise stated in the company’s by-laws. Additionally, the date on which the second meeting would be held in case the first one is not held due to lack of quorum, may be included. For this last point, bear in mind that the second meeting may not be set for a date prior to ten (10) business days following the date of the first meeting, nor later than thirty (30) business days from the date for the first meeting (Art. 20, Law 1258 of 2008).

Finally, in the case of non-face-to-face meetings, the summons must state that the meeting will be held by this method and indicate the means or tool through which it will be held as well as the way in which the members or their representatives will be able to access the meeting (Decree 398 of 2020).

4. Where should this meeting be held?

The meeting of the highest corporate body must be held at the main domicile of the company (Art. 186 C.Co.).  In SAS-type corporations, the shareholders may meet at the main domicile of the company or in other place, if the requirements of quorum and summons provided for in the law are met (Art. 18, Law 1258 of 2008). In case of non-face-to-face meetings, it will be sufficient to carry it out through any means that allows deliberation and decision through successive or simultaneous communication of all attendees (Art.19, Law 222 of 1995).

5. What topics should be addressed and what documents should be submitted?

The shareholders’ assembly or meeting of partners is held  in order to: (i) evaluate the situation of the company, (ii) study and approve  by-laws reforms (iii) designate the directors and other officials of their choice, which includes the statutory auditor in case the limits on income or gross assets established in Law 43 of 1990 are exceeded, (iv) analyze the reports of the directors, legal representative and statutory auditor, (v) determine the economic guidelines of the company, (vi) evaluate the accounts and financial statements  of the last financial year in order to approve or disapprove them, (vii) decide on the distribution of profits and on the constitution of occasional reserves, (viii) agree on all policies and measures aimed at ensuring compliance with the corporate purpose and, in general, with the by-laws provisions, and (ix)  other matters indicated by the company’s by-laws or Colombian law (Arts. 187, 420 and 422 C.Co.). Lastly, the assembly or meeting may discuss any other additional issue or matter it deems necessary.

Thus, in accordance with article 46 of Law 222 of 1995, the directors must submit the following documents to the assembly or meeting of partners for approval or disapproval: (i) management report, (ii)  general purpose financial statements, along with their notes, with cut-off date being the end of the respective year, (iii) the distributable profits project, (iv) the opinion on the financial statements, and (v) other reports issued by the statutory auditor or by an independent accountant.

6. What is the quorum needed to debate and the majority to make decisions?

In order for the meeting to take place and the attendees to be able to deliberate, a plural number of partners or shareholders must attend, however, this will depend on the type of company in question, as follows:

6.1 Partnerships

 In the absence of an express regulation in the company’s by-laws, deliberation can commence with a numerical majority of the partners, regardless of their contribution (Art. 302 C.Co.)

6.2 Limited Partnership

Deliberation can commence with the numerical majority of the managing-partners and with a plural number of limited-partners representing at least half plus one of the quotas or shares in which the company capital is divided (Art. 341 and 352 C. Co. – Art. 68, Law 222 of 1995.)

6.3 Limited-liability Companies

Deliberation can commence with a plural number of partners representing the absolute majority of all the quotas in which the company capital is divided (Art. 359 C.Co.).

6.4 Stock Corporations

Deliberation can commence with a plural number of shareholders representing, at least, half plus one of the subscribed shares, unless a lower quorum is agreed to in the company’s by-laws (Art. 68, Law 222 of 1995).

6.5 Simplified Joint-Stock Companies (SAS:

Unless otherwise stated in the by-laws, deliberation can commence with one or more shareholders that represent at least half plus one of the subscribed shares (Art. 22, Law 1258 of 2008).

For decision making, a simple majority is required, that is, half plus one of the shares or quotas present at the meeting, unless a different majority is established in the company’s by-laws. For certain decisions, the law establishes the need to have a special or qualified majority, such as to reform the by-laws or to change the corporate type (Arts. 186 and 427 C.Co.). In the event that the necessary quorum is not available and the meeting cannot be held, a new meeting will be summoned and will validly decide with any plural number of members attending, regardless of the number of shares or quotas represented. This meeting may not be held before ten (10) business days after the date of the first meeting nor thirty (30) business days after said date (Art. 429 C.Co. and Art. 20, Law 1258 of 2008).

Finally, bear in mind that decisions made with the number of votes required by the company’s by-laws or the law, will bind all members, including absentees or dissidents and must be recorded in minutes approved by the meeting or assembly, or by the individuals designated for this purpose by the meeting (Arts. 188 and 189 C.Co.).

7. Who must sign the minutes?

7.1 Face-to-Face Meetings

The minutes must be signed by the persons designated as president and secretary of the meeting, and express reference must be made to the date, time and place of the meeting, the form of summons, the list of attendees, the matters discussed and the votes that have been obtained in each case, the designations that have been made and the date and time in which the meeting has ended (Art. 431 C.Co.).

7.2 Non-Face-to-Face Meetings

In accordance with article 21 of Law 222 of 1995, when the meeting is not face-to-face, the minutes must be signed by the legal representative and the secretary of the company, or if the company does not have one, by one of the shareholders or partners.  Likewise, in accordance with Decree 398 of 2020, for these kinds of meetings, the legal representative must record in the minutes the continuity of the necessary quorum throughout the meeting and must verify the identity of the virtual participants to guarantee that they are in fact partners, shareholders or their proxies.

Lastly, all companies must record these minutes in chronological order in their duly registered book of minutes (Art. 195 C.Co.).

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Remember that BéndiksenLaw can help you comply with all the requirements for summoning and holding these assemblies or meetings, providing you with comprehensive legal counsel throughout this process. Contact us.

Do You Know When the Deadline to Designate a Statutory Auditor Is?

Law 43 of 1990 establishes the obligation of companies to have a statutory auditor when they meet both or any of the following criteria: (i) their gross assets as of December 31 of the immediately preceding year are or exceed 5,000 Colombian minimum wages (≈ $1,300,000 USD) and / or (ii) their gross income during the immediately preceding year is or exceeds 3,000 minimum wages (≈ $780,000 USD). Consequently, in accordance with the provisions of the Technical Council of Public Accounting[1], in the event that a company verifies that it exceeds the aforementioned income and/or asset ceilings with a cut-off date of December 31 of the immediately preceding year, it will be obligated to have a statutory auditor for the following year.

However, the Colombian Superintendence of Companies[2] found that the law does not mention the deadline to comply with this obligation. However, it considered that because Article 422 of the Colombian Commercial Code establishes that the ordinary meeting of the highest corporate body of a company must be held at least once a year within three (3) months following the end of each year and that one of the issues that must be addressed in these meetings is the designation of directors and other officials, it must be understood that the term for designating the statutory auditor will also be a maximum of three (3) months from the end of the year. However, companies may decide to convene an ordinary or extraordinary meeting and designate the statutory auditor beforehand.

In the event that after three (3) months the designation of the statutory auditor has not been made by the highest corporate body, the designation has not been registered in the commercial registry, or the Tax ID of the company has not been updated, the Colombian Superintendence of Companies may impose penalties.

Remember the importance of complying with all the obligations of your company and avoid the imposition of penalties. In case you have doubts regarding this or any other obligation, we can counsel you at BéndiksenLaw. Contact us

[1] Opinion 561 of September 16, 2021.

[2] Opinion 220-045838 of February 25, 2022.

New Decree to Guarantee the Protection of Personal Data Processed by Business Groups

The Colombian Ministry of Commerce, Industry and Tourism issued Decree 255 of 2022 which establishes the minimum conditions and requirements that the Binding Corporate Rules implemented in a business group must comply with. These rules consist of principles, policies and codes that impose duties and obligations to the members of a business group in charge of processing personal data, in order to guarantee the protection and respect of the data holders’ rights and compliance with all regulations. All companies that are part of the same business group and that transfer personal data to a member of the group located outside Colombian territory, who will be responsible for the processing of these data, must comply with these provisions. In this regard, according to Law 222 of 1995, a business group exists when there are several related companies with relation of subordination between them and have unity of purpose and direction. As such, there is a parent company that sets an objective and controls the other subordinate companies so that together they all pursue said objective.

This new decree establishes that Binding Corporate Rules must be aligned with the general obligations imposed on individuals in charge of the processing of personal data, and must implement mechanisms that guarantee the data holders’ rights and ensure fulfillment of their duties. In case of non-compliance with these rules, all companies that are part of the business group will be jointly and severally liable, in other words, the Colombian Superintendence of Industry and Commerce (SIC) may investigate and penalize any of the members for the actions of any other member.

Business groups must submit these rules for the approval of the corresponding corporate body as established in the by-laws or the business group’s agreements in order to formally submit them to the SIC who will verify compliance with all the requirements and issue a certification so that they may be applied. However, the SIC must first publish on its website the date from which it will begin to receive requests for this review and certification.

Remember that, in case your company is part of a business group and transfers personal data to a member located outside of Colombia, you must implement these Binding Corporate Rules; contact us to help you in this process and solve any doubts you may have.