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Substantial change to the grounds for dissolution of a company

Law 2069 of 2020 – “Law of Entrepreneurship”, brought a major change to the grounds for dissolution due to financial losses that was established for companies based on Article 457 of the Colombian Code of Commerce. This rule has now disappeared in favor of a new concept regulating when a company is considered to be in a ground for dissolution.

The grounds for dissolution for “not complying with the hypothesis of undergoing business” is replacing the grounds for dissolution of financial losses that reduced a company’s equity that was established in the Colombian Code of Commerce. Therefore, a company may have severe financial losses that reduce its equity below 50% of its paid-in capital and not be considered to be in a ground for dissolution, since now the hypothesis of undergoing business prefers subjective and investigative criteria over the objective criterion that was previously established in Article 457.

Under Article 4 of Law 2069 of 2020 a company could undergo a dissolution when, in the foreseeable future, its financial statements reveal facts or conditions that can generate doubt about the continuity of business. Some of these facts could be: (i) high probability of events that risk liquidity, (ii) loss of important clients or suppliers, (iii) identification of obsolescence of products or business models.

If you wish to receive legal counsel for your company regarding the new regulations of Law 2069 of 2020, BéndiksenLaw can provide guidance and counsel in this matter.

Contact us for more information.